Mr David Agnew v NCI Holdings Pty Ltd

[2019] FWC 7531

[2019] FWC 7531

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr David Agnew
v
NCI Holdings Pty Ltd
(U2019/7907)

DEPUTY PRESIDENT LAKE BRISBANE, 4 NOVEMBER 2019

Application for an unfair dismissal remedy – Jurisdiction – High income threshold – Jurisdictional objection – Jurisdictional objection upheld – Application dismissed.

[1] This decision concerns an application for an unfair dismissal remedy under s. 394 of the Fair Work Act 2009 (the Act) by Mr David Agnew (the Applicant). NCI Holdings Pty Ltd (the Respondent) has raised a jurisdictional objection to the Applicant’s application proceeding on the basis that the Applicant was not a person protected from unfair dismissal at the time of his termination from employment with the Respondent, which took effect on 11 July 2019.

[2] The jurisdictional objection arises because – it is claimed by the Respondent – the Applicant’s total rate of remuneration in the 12 months before his termination of employment exceeded the high income threshold, pursuant to s. 382(b)(iii) of the Act. As the Applicant’s employment was not covered by a modern award (s. 382(b)(i)) or by an enterprise agreement (s. 382(b)(ii)), it was mandatory that the Applicant be able to prove that its income was below the high income threshold to be protected from unfair dismissal. At the date of the Applicant’s termination of employment, the high income threshold was $148,700.00.

[3] A hearing to determine this jurisdictional matter was listed for 23 October 2019. At the hearing the Applicant was provided permission to be represented by Mr Brian Newman, pursuant to s. 596 of the Act as I determined that Mr Newman’s participation would allow the matter to proceed more efficiently. The Respondent was represented by Ms Danielle Turner, an employee of the Respondent. Prior to the hearing, the Respondent provided submissions which outlined its position regarding the jurisdictional objection. The day after the hearing, the Applicant provided its final submissions and further evidence disputing the objection. It was determined at the hearing that the matter could be decided on the papers, given the relatively straightforward nature of the objection.

Parties’ submissions

[4] The Respondent submitted that the Applicant earned more than the high income threshold at the date of the cessation of his employment. It submitted that the Applicant’s base salary was $149,189.15, without including amounts for leave loading ($2,008.32) and additional superannuation ($2,148.00). With leave loading and superannuation added to the Applicant’s salary, it was submitted by the Respondent that the Applicant’s total remuneration package was $153,345.47.

[5] The Respondent further submitted that the Applicant did not require a vehicle for work purposes and any travel requirements that the Applicant had to undertake were fully reimbursable. Further, the Respondent submitted that it paid for the monthly cost of a mobile phone for the Applicant (not including a charge for the handset as the Applicant supplied his own handset).

[6] The Applicant submitted that his income was less than the high income threshold on the final date of his employment. Specifically, the Applicant submitted that he had lease of a vehicle which had a monthly cost of $666.30, equating to some $7995.60 per annum of his pre-tax income. The Applicant contended that, in considering his salary, the costs of the vehicle including the novated lease, and the vehicle’s running costs for work purposes and other business related expenses relating to same, should be deducted from his salary, consistent with what he reported to the ATO for the financial year. The Applicant provided extensive material documenting his expenses for running the vehicle and other business related expenses. He contended that these expenses if taken into account would place his earnings below the threshold of $148,700.00.

The legislation

[7] Section 332 of the Act provides:

“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;

reimbursements;

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

(c) 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.”

[8] The Fair Work Regulations 2009 at 3.05(6) provides as follows:

“Benefits other than payment of money

(6) If:

(a) the person is entitled to receive, or has received, a benefit in accordance with an agreement between the person and the person’s employer; and

(b) the benefit is not an entitlement to a payment of money and is not a non-monetary benefit within the meaning of subsection 332(3) of the Act; and

(c) the FWC is satisfied, having regard to the circumstances, that:

(i) it should consider the benefit for the purpose of assessing whether the high income threshold applies to a person at the time of the dismissal; and

(ii) a reasonable money value of the benefit has not been agreed by the person and the employer; and

(iii) the FWC can estimate a real or notional money value of the benefit;

the real or notional money value of the benefit estimated by the FWC is an amount for subparagraph 382(b)(iii) of the Act.”

Consideration

[9] Consistent with the parties’ submissions, I regard the novated car lease (and the expenses associated with the running of the car) to be the principle question as to whether these amounts could be deducted from the Applicant’s overall salary so as to make his salary fall under the high income threshold.

[10] I have duly considered the facts of this case and the legislation.

[11] I find that that the novated car lease and the associated costs with running the car were matters of choice for the Applicant. On the evidence before me, it was solely the Applicant’s decision to choose this arrangement, ostensibly for better taxation concessions. In coming to this conclusion, I have taken the view that the Applicant was required to travel for work only on a limited basis and that there was no inherent requirement of the role for the Applicant to have a car. The Applicant was a plant manager and was therefore generally based at the plant. Travel, on occasion, included attending industry events. Where the Applicant was required to seldom travel for work, I accept the Respondent’s submission that it provided the opportunity for the Applicant to be reimbursed any travel costs. Alternatively, I accept that the Applicant could have borrowed one of the Respondent’s cars to perform this travel.

[12] I determine therefore that the novated car lease does fit into the earnings definition contained at s. 332(b) of the Act whereby the Applicant had total discretion to deal with his salary in any way it wished, specifically in a tax-efficient matter. Further, the Applicant, in my consideration, was unable to identify how this amount could be excluded from the definition of earnings, pursuant to s. 332(c) of the Act.

[13] For abundant clarity, the Applicant was a plant manager whose duties were contained almost exclusively on the site. There were some requirements to attend industry meetings, and when the Applicant did, or was required to, he could have chosen to utilise the company provided vehicle or take a taxi and request reimbursement.

[14] The other matters such as the phone expenses and other work related expenses do not require my determination apart from them not impacting the wage level as it is accepted that the definition of earnings is not the taxation amount but the amount as defined in the Act.

Conclusion

[15] The Applicant’s base salary of $149,189.15 exceeds the high income threshold of $148,700.00. I cannot find that there should be a deduction for his novated lease and the costs of running a vehicle. Tax-friendly arrangements do not prescribe that a salary is reduced for the purposes of assessing the high income threshold.

[16] The Applicant’s application for an unfair dismissal remedy is dismissed, and an Order to that effect will issue with this Decision.

DEPUTY PRESIDENT

Appearances:

Mr Brian Newman for the Applicant.

Ms Danielle Turner for the Respondent.

Hearing details:

23 October 2019 by Telephone.

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