Michael Carrington v Gumala Aboriginal Corporation

[2016] FWC 1433

[2016] FWC 1433

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Michael Carrington
v
Gumala Aboriginal Corporation
(U2015/15626)

DEPUTY PRESIDENT BINET PERTH, 11 MARCH 2016

Application for relief from unfair dismissal - jurisdiction - genuine redundancy – high income threshold.

[1] On 17 December 2015 Mr Michael Carrington (Mr Carrington) lodged an application pursuant to section 394 of the Fair Work Act 2009 (FW Act) in which he asserted that the termination of his employment with Gumala Aboriginal Corporation (GAC) was unfair (Application).

[2] The Employer’s Response (Form F3) to the Application, identified two jurisdictional objections to the Application. GAC’s first objection was that the termination of Mr Carrington’s employment was a case of genuine redundancy, and their second that Mr Carrington earned more than the high income threshold (Objections). The Objections have been referred to me for determination.

[3] In accordance with Directions issued on 22 January 2016 the parties filed and served outlines of submissions, witness statements and documentary evidence in relation to the Objections. Consideration of the Objections proceeded through a Determinative Conference convened on 26 February 2016. At this Determinative Conference Mr Carrington represented himself. Ms Laureen Floyd (Ms Floyd), the HR Manager of the Respondent, represented GAC.

Background Facts

[4] GAC is the second largest indigenous corporation in Australia and was created in 1996 to represent the collective interests of the traditional owners of the Pilbara region of Western Australia. GAC is the manager of the General Gumala Foundation which is a charitable trust, responsible for the distribution of compensation monies flowing from the Yandi Land Use Agreement between Hamersley Iron Pty Ltd (now Rio Tinto) and the traditional owners of the land on which the Yandicoogina Mine is located. 1

[5] The trustee of the General Gumala Foundation is Gumala Investments Pty Ltd (GIPL). GAC’s role is to develop programs and projects that meet the needs of the trust beneficiaries and submit requests for funding of those projects and programs to GIPL. GIPL is responsible for the supervision, direction and control of GAC. 2

[6] Gumala Enterprises Pty Ltd (GEPL) is a business entity of GAC through which GAC implements a number of programs and projects. GEPL’s primary businesses are contracting and mining services, facilities managment and tourism/hospitality. GEPL generates income to further fund the activities of GAC. 3

[7] In October 2013 Mr Carrington, who at that time was living in the United States of America, responded to a job advertisement placed by GAC on Seek. The advertisement was for the position of Senior Advisor, to the Chief Executive Officer (CEO) of GAC. As Mr Carrington was not a resident of Australia, GAC agreed to sponsor Mr Carrington’s employment under a Temporary Work (Skilled) (Subclass 457) visa (457 Visa).

[8] Mr Carrington commenced employment with GAC on 10 February 2014 as Senior Advisor to Mr Mav, the then CEO of GAC and Managing Director of GEPL. Mr Carrington’s duties as Senior Advisor involved high level analysis and advice as well as clerical tasks such as taking Board minutes.

[9] In late October 2014 Mr Mav warned employees by email that current expenditure levels were unlikely to be sustainable and that if ore prices continued to decline, then reductions in staffing may be unavoidable. In November 2014 twenty one employees were retrenched as a result of the changed financial circumstances in which GAC found itself and employees were warned that further staffing cuts were probable.

[10] On 1 December 2014 Mr Carrington was seconded to (GEPL) as Managing Director of Gumala Trades and Maintenance to commercialise the Gumala Home Renovations and Maintenance Program (GHRM Program) with the aim of making the program commercial viable by no later than 1 July 2015. The parties agreed that despite his secondment Mr Carrington was still required to complete his Senior Advisor duties detailed above.

[11] On 26 May 2015, as a result of funding for the GHRM Program ceasing, the Board of GAC resolved to make all members of the GHRM Program redundant. As a consequence there was no longer a Home Renovations and Maintenance Program for Mr Carrington to commercialise. In the same resolution the Board also resolved that Mr Carrington’s contract be terminated in accordance with its terms.

[12] On 3 June 2015 Mr Ryan verbally notified Mr Carrington that GAC was considering making Mr Carrington’s position with GAC redundant.

[13] As a result of the continuing reduction in income, GAC engaged in a further review of staffing levels and twenty one positions were abolished in August 2015.

[14] On 17 September 2015 GAC wrote to Mr Carrington confirming in writing the verbal notification that Mr Carrington received on 3 June 2015 that his position was among those proposed to be abolished.

[15] On 25 September 2015 GAC advised Mr Carrington in writing that his position would be made redundant effective 25 December 2015. Subsequently on 26 November 2015 GAC informed Mr Carrington in writing that it intended to pay him in lieu, the remainder of his notice period and that his employment would cease that day.

Statutory Framework

[16] Section 396 of the FW Act requires that the Fair Work Commission (FWC) decide four preliminary issues before considering the merits of an application of unfair dismissal.

“396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.”

[17] I am satisfied that the Application was made within the twenty one day period required by subsection 394(2) of the FW Act. As GAC’s evidence was that it has twenty employees was not contested, I am satisfied that the Small Business Fair Dismissal Code which applies to employers of fewer than fifteen employees does not apply to this matter.

[18] What is contested is whether Mr Carrington’s dismissal was a case of genuine redundancy and whether he was a person protected by the FW Act from unfair dismissal.

High Income Threshold

[19] Section 382 of the FW Act sets out the circumstances in which a person will be protected from unfair dismissal.

“382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(b) one or more of the following apply:

(i) a modern award covers the person;

(ii) an enterprise agreement applies to the person in relation to the employment

(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.”

[20] The parties agreed that Mr Carrington had been employed by GAC for more than twenty months at the time of the termination of his employment. I am therefore satisfied that Mr Carrington had completed the minimum period of employment required by subsection 382(a) of the FW Act.

[21] Neither party identified any award or enterprise agreement which applied to Mr Carrington’s employment. However, Mr Carrington says that he is entitled to be protected from unfair dismissal because the sum of his annual rate of earnings at the time was less than the high income threshold. GAC contest this assertion.

[22] Section 332 of the FW Act defines earnings as:

“332 Earnings

(1) An employee’s earnings include:

(a) the employee’s wages; and

(b) amounts applied or dealt with in any way on the employee’s behalf or as the employee directs; and

(c) the agreed money value of non-monetary benefits; and

(d) amounts or benefits prescribed by the regulations.

(2) However, an employee’s earnings do not include the following:

(a) payments the amount of which cannot be determined in advance;

(b) reimbursements;

(c) contributions to a superannuation fund to the extent that they are contributions to which subsection (4) applies;

(d) amounts prescribed by the regulations.

Note: Some examples of payments covered by paragraph (a) are commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed).

(3) Non-monetary benefits are benefits other than an entitlement to a payment of money:

(a) to which the employee is entitled in return for the performance of work; and

(b) for which a reasonable money value has been agreed by the employee and the employer;

but does not include a benefit prescribed by the regulations.

(4) This subsection applies to contributions that the employer makes to a superannuation fund to the extent that one or more of the following applies:

(a) the employer would have been liable to pay superannuation guarantee charge under the Superannuation Guarantee Charge Act 1992 in relation to the person if the amounts had not been so contributed;

(b) the employer is required to contribute to the fund for the employee’s benefit in relation to a defined benefit interest (within the meaning of section 291-175 of the Income Tax Assessment Act 1997) of the employee;

(c) the employer is required to contribute to the fund for the employee’s benefit under a law of the Commonwealth, a State or a Territory.”

[23] Mr Carrington’s contract of employment tendered as Annexure B to Exhibit R2 provides in Clause 5 that he will be paid the following remuneration:

“5. Remuneration

5.1 The Employee will be paid a total remuneration package of AUD$150,000.00 per annum (TRP) which takes into account:

(i) The requirement to attend meetings at various locations within Australia;

(ii) An acknowledgement that the SA's position is measured by performance and not the number of hours worked; and

(iii) All additional loadings and allowances.

5.2 The TRP comprises the following components:

(i) Cash $137,300.00

(ii) Superannuation $12,700.25 (to be adjusted annually to reflect the minimum employer Superannuation Guarantee Amount required by legislation).

(iii) Allowances (if applicable) as agreed.

(iv) The Cash and Superannuation components detailed at (i) and (ii) above shall apply until 1 April 2014 after which date the Employee may approach GAC about entering into a salary sacrifice arrangement in accordance with clause 6 below. Clause six of his contract of employment outlines the circumstances in which Mr Carrington is entitled to enter into a salary sacrifice arrangement.”

[24] Mr Carrington’s contract of employment at Clause 6 provides:

“6. ENTITLEMENT TO SALARY SACRIFICE

6.1 The Employee may approach GAC from time to time about entering into a salary sacrifice arrangement but GAC is not obligated to provide a salary sacrifice arrangement to the Employee and GAC may grant or refuse such an arrangement in its absolute discretion.

6.2 For the avoidance of doubt, a salary sacrifice arrangement between GAC and the Employee is one in which the Employee agrees to give up part of his future entitlement to salary. This is in return for GAC providing benefits of a similar value or cost to the Employee. Consideration is only given if the Employee has not yet earned the income. Such an arrangement, depending on the law at the time, may cause GAC to have to pay fringe benefit tax.”

[25] The parties agree that on 1 July 2014 Mr Carrington’s ‘cash salary’ for the purposes of Clause 5 of his contract of employment (that is his total remuneration package of $150,000 less compulsory superannuation contributions) reduced from $137,300 to $136,986 when the compulsory superannuation contributions levy increased from 9.25% to 9.5%.

[26] The parties agree that Mr Carrington exercised his right under his contract of employment to enter into a salary sacrifice arrangement and that it was Mr Carrington’s discretion as to how these sacrificed funds were applied. For example Mr Carrington gave evidence that in the 2014-2015 financial year at his direction portions of his cash salary of $136,986 were variously salary sacrificed to a meal and entertainment card, which allowed him to purchase food and drink for personal use, a debit card for personal expenses and an accommodation card, the balance of which he subsequently elected to take as cash.

[27] Mr Carrington asserted that his annual rate of earnings for the purposes of subsection 382(b)(ii) of the FW Act was limited to his cash salary and did not include any non-cash benefits taken in the form of salary sacrifice. Mr Carrington says that his cash salary was the sum of $119,348 as evidence by the gross payment figure on his PAYG Payment Summary for the financial year ending 30 June 2015 attached as Annexure A to Exhibit A1.

[28] At the hearing Mr Carrington submitted that any sick leave he was paid must be deducted from his cash salary for the purposes of calculating his annual rate of earnings for the purposes of subsection 382(b)(ii) of the FW Act because (according to Mr Carrington):

“… ‘Sick Pay’ is not a part of total wages as ‘Annual Leave’, Base Hourly’ and ‘Public Holiday’ are.”

[29] GAC say that Mr Carrington’s annual rate of earnings for the purposes of subsection 382(b)(iii) of the FW Act was $136,986 being the balance of his total remuneration package of $150,000 less the compulsory superannuation contributions made by GAC on his behalf. GAC tendered as evidence a payroll activity sheet for the 2014-2015 financial year 4 and a payslip dated 27 November 2015.5

[30] The payroll activity sheet for 2014-2015 indicated that Mr Carrington’s wages of $136,986.20 were made up of the following components:

“ Annual leave $11,591.14
Base hourly $118,018.88
Public Holiday $5,268.70
Sick Pay: $2,107.48”

[31] The payroll activity sheet for 2014-2015 indicates that from his wages deductions totalling $17,637.50 were made for items described as follows:

“ CBB – Meal Entertainment Card $3,900
CBB – Salary Packaging $15,537.50
CBB – VH & Accommodation -$1800”

[32] Mr Carrington explained that the negative amount recorded against the item ‘VH & Accommodation’ was an amount that he had originally decided to salary sacrifice but subsequently chose not to and was instead paid to him as cash salary. Mr Carrington did not dispute the veracity of the payroll activity sheet.

[33] Ms Floyd gave evidence on behalf of GAC that the sum of $29,998 was included on Mr Carrington’s PAYG Payment Summary for the year ending 30 June 2015 as the grossed up value of the salary sacrifice arrangements which Mr Carrington entered into with GAC and which were recorded on the payroll activity sheet.

[34] Subsection 332(1)(a) of the FW Act provides that ‘earnings’ include the employee’s wages. Sick leave pay is not among the items excluded from the meaning of earnings in subsection 332(2) of the FW Act. Mr Carrington was unable to identify any legal basis for the exclusion of sick leave pay from his wages for the purposes of subsection 332(1)(a). I therefore find that Mr Carrington’s wages for the purposes of subsection 332(1)(a) included the sick leave he was paid.

[35] Subsection 332(1)(b) of the FW Act provides that earnings include amounts applied or dealt with in any way on the employee’s behalf or as the employee directs. Pursuant to Clause 6 of his contract of employment, Mr Carrington could and did direct that a portion of his ‘cash’ salary be salary sacrificed at his discretion to non-cash benefits, namely debit cards which he could use to purchase items for personal use.

[36] It has previously been recognised that subsection 332(1)(b) was intended to capture salary sacrifice arrangements such as Mr Carrington’s: see Tuohy v Polyfoam (Aust) Pty Ltd [2010] FWA 9112 at [56] and Mr Stephen Brian Batley v Cocos Islands Co-Operative Society Limited [2010] FWA 2289 at [39]. I therefore find that Mr Carrington’s earnings for the purposes of subsection 382(b)(iii) included that portion of his salary of $136,986 that he salary sacrificed.

Genuine Redundancy

[37] GAC claim that Mr Carrington’s dismissal was as a result of a genuine redundancy and that therefore the FWC does not have jurisdiction to hear and determine Mr Carrington’s application of unfair dismissal. Mr Carrington says that the redundancy was contrived and instead his dismissal was the result of a ‘witch hunt’ against him.

[38] The evidence tendered by the parties reveals that as early as 28 October 2014 Mr Mav the CEO of GAC sent an email to a number of employees including Mr Carrington, warning them that current expenditure levels were unlikely to be sustainable and that if ore prices continued to decline, then reductions in staffing may be unavoidable. Subsequently, on 28 November 2014, Mr Mav sent an email noting the departure of twenty two employees as a result of the changed financial circumstances in which GAC found itself, warning that further staffing cuts were probable.

[39] On 7 May 2015 Mr Mav’s employment as CEO of GAC was terminated. The following day Mr Anthony Ryan was appointed Acting CEO. Mr Carrington alleges that he began to be left out of senior management meetings and discussions. He identifies this as the point in time which he says the ‘witch hunt’ against him commenced.

[40] Ms Floyd tendered as Exhibit R4 GAC Board Minutes which reveal that on 26 May 2015, as a result of funding for the GHRM Program ceasing, the Board of GAC resolved to make all members of the GHRM Program redundant. Mr Carrington acknowledged that as a consequence there was no longer a Home Renovations and Maintenance Program for Mr Carrington to commercialise.

[41] In the same resolution the Board also resolved that Mr Carrington’s contract be terminated in accordance with its terms. Mr Carrington gave evidence that he was unaware of the Board resolution however he did not contest the veracity of the Board Minutes which were tendered.

[42] GAC say that on 3 June 2015 Mr Ryan verbally notified Mr Carrington that GAC was considering making Mr Carrington’s position with GAC redundant but that consideration was being given to him being permanently redeployed to GEPL. Mr Carrington concedes this conversation occurred. GAC tendered as Attachment F to Exhibit R5, Mr Ryan’s file note in which he noted that the Acting General Manager of GEPL confirmed to him, shortly after Mr Ryan’s meeting with Mr Carrington that redeployment within GEPL was not possible because there were no vacant positions.

[43] Mr Carrington says that on 29 June 2015 he rang Mr Ryan to follow up from their meeting on 3 June 2015 and was told by Mr Ryan that the Board of GAC did not want him anymore and intended to remove him by any means. Mr Ryan was not called by GAC as a witness so Mr Carrington’s evidence on this point was unchallenged.

[44] Mr Carrington says that on 1 July 2015 he was advised that various allegations of misconduct had been made against him and that he would be suspended on full pay pending the outcome of an investigation. On 21 August 2015 he says he was advised in writing that the allegations had been substantiated only in part and that GAC proposed to issue him with a written warning on his return to work.

[45] A significant amount of evidence was tendered in relation to the allegations and the investigation process, throughout which Mr Carrington was represented by legal counsel.

[46] It was uncontested that as a result of the continuing reduction in income, GAC engaged in a further review of staffing levels and twenty one positions were abolished in August 2015.

[47] GAC tendered evidence establishing that on 17 September 2015 GAC wrote to Mr Carrington confirming in writing, the verbal notification that Mr Carrington received on 3 June 2015 that his position was among those proposed to be abolished, as part of a comprehensive organisational review and restructure triggered by a severe reduction in funding. In the same letter Mr Carrington was invited to raise any questions as well as suggest alternatives to his position being made redundant.

[48] The parties agreed that on 25 September 2015 GAC advised Mr Carrington in writing that his position would be made redundant effective 25 December 2015. Mr Carrington says that on 19 October 2015 he was advised that he would be required to work his notice period. Mr Carrington says that on his return to work his working conditions were reduced and he was not given work commensurate with his role and previous duties. This evidence was unchallenged.

[49] It is undisputed by the parties that on 26 November 2015 GAC informed Mr Carrington in writing that it intended to pay him in lieu, of the remainder of his notice period and that his employment would cease that day.

[50] Mr Carrington consequently ceased employment on 26 November 2015.

[51] Mr Carrington asserts that his dismissal was not a case of genuine redundancy that instead GAC sought to terminate his employment as part of a ‘witch hunt’ against him and that in fact GAC still requires his job to be performed. He also asserts that if his position was genuinely redundant then it would have been reasonable in the circumstances for GAC to redeploy him.

[52] The term ‘genuine redundancy’ is defined in section 389 of the FW Act as follows:

“389 Meaning of genuine redundancy

(1) A person’s dismissal was a case of genuine redundancy if:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.”

[53] Mr Carrington acknowledges that there was a genuine downturn in GACs financial circumstances which resulted in a restructure of the organisation, leading to a significant number of positions including his own being made redundant.

[54] Mr Carrington asserts that GAC still require someone to perform his job.

[55] Mr Carrington’s duties as a Senior Advisor are described in Clause 2 of his contract of employment tendered as Attachment B to Exhibit A1 as follows:

“2.1 The SA reports directly to and is accountable to the Chief Executive Officer of GAC (CEO).

2.2 The SA’s role is to provide high level strategic advice to the CEO of GAC and to support him in any other roles including as Managing Director of Gumala Enterprises Pty Ltd (“GEPL”).

2.3 The SA will undertake special research assignments, review high level reports, implement directives from the CEO/MD and handle the CEO/MDs day to day partnership relationships.”

[56] Mr Carrington described his duties in greater detail in his witness statement as:

“I was involved in drafting high level reports, reviewing highly confidential Board documentation to assist the CEO’s role on the Board and to brief and advise him in regards to the dealings of the Corporation. My role also involved implementing the directives of the CEO as they pertained to the GAC Board. I was expected to review Board meetings, draft Board minutes, review confidential documentation, and strategise with GAC managers to aid in advising the CEO. …

My high level resourcing to the CEO and GAC Board included attending Board meetings, recording Board Meeting minutes, and recording Board Committee meeting minutes.”

[57] Mr Carrington’s duties fall into two main types, firstly high level analysis and advice and secondly administrative duties such as minute taking. Ms Floyd gave evidence that Mr Carrington’s high level analysis and advice duties are no longer being performed by anyone and it is only low level clerical duties such as minute taking which continue to be performed.

[58] Mr Carrington conceded that his former position of Senior Advisor had been removed from the organisational structure and was unable to identify who among the remaining employees would be capable of performing his high level analysis and advice duties.

[59] As Ryan J observed in Jones v Department of Energy and Minerals (1995) 60 IR 304 at 308 a job involves “… a collection of functions, duties and responsibilities entrusted as part of the scheme of the employer’s organisation to a particular employee.”. An employee may still be genuinely redundant when there are aspects of the employee’s duties still being performed by other employees: see Dibb v Commissioner of Taxation (2004) 136 FCR 388, 404-405.

[60] I am satisfied that there was a change in the operational requirements of GAC arising from the reduction in income which lead GAC to no longer require Mr Carrington’s job of Senior Advisor to be performed, although some of his clerical duties are still being performed by other employees.

[61] I am also satisfied that the operational requirements which led to GAC no longer requiring Mr Carrington’s job to be performed, predated the allegations of misconduct made against Mr Carrington. I am also satisfied that the reason for Mr Carrington’s dismissal was the operational requirements of the business, not the allegations of misconduct, which were separately investigated and dealt with.

[62] As I have found that no award or enterprise agreement applied to Mr Carrington’s employment, then there was no statutory requirement for GAC to undertake consultation, however I would agree with GAC’s submission that it did in any event consult with Mr Carrington in a manner consistent with the standard consultation provisions contained in modern awards.

[63] Given the uncontested evidence as to the magnitude of the restructures and redundancies within GAC and GEPL, I am satisfied that Ms Floyd’s assertion that there was only one vacant position available in GAC or its related entities is credible.

[64] According to Ms Floyd the only vacant position available was the position of Workforce Development Officer. Ms Floyd gave evidence that this position involves the training and development of local indigenous people and serving as a mentor to them. She explained that this position was not offered to Mr Carrington because he did not have the necessary skill set and the salary was less than half his then remuneration. Mr Carrington did not contest that the position was not appropriate for him.

[65] GAC also say that its sponsorship obligations under the 457 Visa required them to ensure that Mr Carrington “participates in the nominated occupation program or activity” being that of Policy and Planning Manager. GAC submits that if Mr Carrington’s position was made redundant and no similar position existed in the new organisation structure, GAC could not redeploy Mr Carrington into another position and still comply with its sponsorship obligations.

[66] I am satisfied that it was not reasonable in the circumstances for Mr Carrington to be redeployed within GAC or any associated entity.

Conclusion

[67] In conclusion I find that Mr Carrington’s earnings for the purposes of subsection 382(b)(iii) of the FW Act exceed the high income threshold and consequently he is not protected from unfair dismissal. Although having made this finding, it is not strictly necessary for me to do so, I also find that Mr Carrington’s dismissal was a case of genuine redundancy and therefore the FWC is unable to consider the merits of his application for a remedy from unfair dismissal.

[68] An Order [PR577697] will be issued dismissing the Application.

DEPUTY PRESIDENT

Appearances:

Mr M. Carrington on his own behalf

Ms L. Floyd for the Respondent

Hearing details:

2016

Perth:

February, 26

 1   Gumala Aboriginal Corporation, viewed 10 March 2016, <   Gumala Trust website, viewed 10 March 2016, <   Gumala Enterprises Pty Ltd website, 10 March 2016, <   Exhibit R1, Payroll Details 17.2.2016

 5   Exhibit R8, Payslip

Printed by authority of the Commonwealth Government Printer

<Price code C, PR577696>