Mr Stephen Brian Batley v Cocos Islands Co-operative Society Limited
[2010] FWA 2289
•29 MARCH 2010
[2010] FWA 2289 |
|
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mr Stephen Brian Batley
v
Cocos Islands Co-operative Society Limited
(U2009/13674)
COMMISSIONER CLOGHAN | PERTH, 29 MARCH 2010 |
Unfair dismissal.
[1] On 11 November 2009, Mr Stephen Batley (“the Applicant”) made application to Fair Work Australia seeking a remedy for unfair dismissal from his employment at the Cocos Islands Cooperative Society Ltd (“the Employer”).
[2] Mr Batley has made the application pursuant to s.394 of the Fair Work Act 2009 (“the Act”).
[3] The application was unable to be settled in conciliation and subsequently referred to me for arbitration.
[4] On 25 January 2010, at the Directions Conference, Counsel for the Employer raised a jurisdictional objection that Mr Batley was not protected from unfair dismissal, because, at the relevant time, the sum of his annual earnings and other relevant amounts exceeded the high income threshold of $108,300 (calculated in accordance with the Fair Work Regulations 2009 (“the Regulations”)). Mr Batley disputes the Employer’s interpretation of the Act and Regulations.
[5] For the parties, unless and until the jurisdictional objection is determined, the merit of Mr Batley’s allegation of unfair dismissal should not be inquired into.
[6] The jurisdictional objection was heard in Perth on 12 March 2010 and having heard submissions and received a number of documents, I reserved my decision.
BACKGROUND
[7] Mr Batley and the Employer are parties to an employment agreement dated 12 June 2009 (“the employment agreement”).
[8] For the purposes of this Decision, the key elements of the employment agreement are:
- Mr Batley’s appointment is from 1 July 2009 to 30 September 2010, with the option to extend by negotiation;
- a gross salary of $95,000 for the first year of the employment agreement;
- Mr Batley is not entitled to any additional remuneration for work performed outside normal business hours unless agreed by both parties;
- the Employer is to provide Mr Batley a fully furnished house. The house is to be fully maintained by the Employer including payment of all utility charges and other rates and taxes. All telephone rental charges and local calls are to be reimbursed to the employee, by the Employer;
- Mr Batley and his spouse are entitled to one airfare per person to Perth during the “year of the contract” which is not redeemable for cash;
- Mr Batley is entitled to private use of a “suitable, fully maintained motor vehicle” after normal hours; and
- the contract constitutes the entire agreement of the parties in respect to the matters dealt with in the agreement.
STATUTORY FRAMEWORK
[9] Section 394(1) of the Act enables an employee who has been dismissed from their employment, to apply to FWA for an order under Division 4 of Part 3-2 of the Act, granting a remedy for unfair dismissal.
[10] Prior to determining the merits of the dismissed employee’s application, s.396 of the Act, requires the Tribunal, among other criteria, to decide whether the person “was protected from unfair dismissal”.
[11] Section 382 of the Act provides:
“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.”
[12] For the purposes of s.382 of the Act, it was uncontested that the Applicant fulfilled the minimum period of employment to comply with the provision of s.382(a) of the Act. However, for Mr Batley to be protected from unfair dismissal, he needs to meet one or more of the criteria set out in s.382(b).
[13] It was uncontested that the provisions of s.382(b)(i) and (ii) do not apply to Mr Batley.
[14] By virtue of the exclusion of sub-paragraphs s.382(b)(i) and (ii), the issue for determination by the Tribunal, is whether Mr Batley meets the criteria of s.382(b)(iii), and consequently, is protected from unfair dismissal.
[15] To meet the provisions of s.382(b)(iii), Mr Batley’s annual rate of earnings must be less than the high income threshold. The high income threshold, at the relevant time, was $108,300.
[16] To understand the meaning of earnings in s.382(b)(iii), the reader is referred to s.332 which provides:
“(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 292- 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.”
[17] Finally, for the purposes of s.332(1)(d), the relevant provisions of the Regulations contained in 3.05 at (6) are:
“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) FWA 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) FWA can estimate a real or notional money value of the benefit;
the real or notional money value of the benefit estimated by FWA is an amount for subparagraph 382 (b) (iii) of the Act.”
APPLICANT’S SUBMISSION
[18] The Applicant submits that, for the purpose of determining whether their annual earnings is less than the high income threshold, the only factor which should be taken into account is the annual salary of $95,000.
[19] In relation to accommodation and the private use of a motor vehicle, the Applicant’s primary position is that they do not fall within the definition of non-monetary benefits (which I will return to later), and secondly, if the Tribunal is to consider them non-monetary benefits, they were not agreed prior to, or subsequent to, the employment agreement being entered into. Further, for the purposes of s.332(2)(d) and Regulation 3.05(6), the Tribunal should not, or cannot, ascribe a real or notional value to the benefits but it intended to do so, in relation to the motor vehicle, it should be minimal.
[20] The Applicant submits that in relation to the provision of accommodation, it is uncontested that the Cocos Islands is an unusual place in the sense that employees simply cannot arrive and look for private accommodation at their own expenses. Further, rental properties, if available, are extraordinarily expensive. Finally, in the Applicant’s situation, he was required by the Employer to live close to his place of work for the purpose of attending to refrigeration failures, alarms and other operational issues.
[21] In relation to the private use of a motor vehicle, the Applicant makes the following observations:
- rental cars are not readily available and expensive;
- there are no taxis on the islands;
- the vehicle, of itself, was necessary for business purposes;
- it is not feasible to purchase a vehicle on the islands;
- the vehicle is old and not in a very good condition;
- due to the small size of West Island, little use could be made of private use of the vehicle, and finally;
- there is insufficient evidence, if any, to attribute either a real or notional value to private use of the vehicle, and if the Tribunal was to do so, it should attach a “very modest value”.
EMPLOYER’S SUBMISSION
[22] For the Employer, the Applicant’s earnings should take into account:
- the annual salary of $95,000 per annum; and
- pursuant to s.332(1)(b), the value of accommodation and the private use of a motor vehicle, or alternatively;
- in accordance with ss.332(1)(d) and Regulation 3.05(6), estimate a real or notional value associated with the provision of accommodation and the private use of a motor vehicle after hours.
[23] While the Employer provided, by way of documentation, some evidence regarding the costs associated with both the accommodation and motor vehicle, the inference I was to draw in the hearing is that these amounts would, self evidently, exceed the gap between $95,000 and $108,300. As a consequence, the Employer contends that Mr Batley exceeds the high income threshold, and therefore, is excluded from protection from any alleged unfair dismissal and any remedy from that dismissal.
RELEVANT ISSUES FOR CONSIDERATION
Is the Applicant’s earnings less than $108,300?
[24] To understand the meaning of earnings in s.382(b)(iii), the Act provides reference at s.332(1) of the Act which defines earnings in the following way:
“(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.”
[25] As can be seen, s.332(1) is arranged in such a way that “earnings” encompass four categories.
Employee’s Wages (s.332(1)(a))
[26] Both parties agreed that Mr Batley’s annual salary was $95,000 per annum.
Other amounts applied or dealt with in any way on the employee’s behalf or as employee directs (s.332(1)(b))
[27] Both parties made the submission that there is a paucity of precedent in relation to s.332(1)(d) but referred me to C v CLS P/L[2009] FWA 779 (23 October 2009) PR990147. Both parties agreed that it was not directly relevant to the issue before the Tribunal.
[28] A review of the Explanatory Memorandum to the Fair Work Bill 2008 is not of significant assistance.
[29] The derivation of the expression “on the employee’s behalf or as the employee directs” appears to have come from Rofin Australia Pty Ltd v Newton (1997) 78 IR 778 [Print P6855] where the Full Bench was required to determine the jurisdictional issue, “whether or not the rate of remuneration applicable to the employee immediately before the termination exceeded $64,000 per annum, so that, by virtue of s.170CC of the Act and Regulation 30BB of the Workplace Relations Regulations, he (the Applicant) was excluded from the operation of the relevant provisions of the Act” – that is, excluded from any relief from termination of employment.
[30] The Full Bench made the following comments which are apposite to this application:
“Prior to the amendments made to the Act by the Workplace Relations and Other Legislation Amendment Act 1996 (the WROLA Act), the "salary cap" for the purposes of excluding non-award employees from the operation of the termination of employment provisions was expressed in terms of "relevant wages". The term now used is "remuneration", a term which denotes a broader concept than salary or wages. "Remuneration", in our view, is properly defined as the reward payable by an employer to an employee for the work done by that employee in the course of his or her employment with that employer. It is a term that is confined neither to cash payments nor, necessarily, to payments actually made to the employee. It would include non-pecuniary benefits and payments made on behalf of and at the direction of the employee to another person out of moneys otherwise due to that employee as salary or wages.”
[31] The key point, as I understand the decision of the Full Bench, is that while remuneration has a broader interpretation than salary and wages, and can include non pecuniary benefits, and payments made to third parties, – the total amount is to be within the perimeter of what is due to the employee as, in my description, “cashable” salaries or wages.
[32] To better understand the construction of s.332(1)(b), I have divided the sub-section into two parts; the first part being:
“Other amounts applied or dealt with in any way on the employee’s behalf”.
Firstly, the word “other” is indicative of an amount different to what has already been mentioned – that is, the employee’s salary or wages in s.332(1)(a). Secondly, the amount “applied or dealt with” has a context, and that context is that it must be “on the employee’s behalf”; in other words, the amount is not any other amount, but an amount which is expended on the employee’s behalf and part of their “cashable” salary or wages. By a process of elimination, an amount which is not applied or dealt with on behalf of the employee and within their “cashable” salaries or wages, must be excluded from the definition of earnings.
[33] The Employer submitted that the provision of accommodation and private use of a motor vehicle after hours, is an “amount applied or dealt with on the employee’s behalf” because it was expended and is of benefit to the employee. For the Tribunal to accept this conclusion, I would also have to accept the proposition, if put to the Tribunal, that the cost of locating Mr Batley on Cocos Islands, workers’ compensation premiums, subsidised food and any assortment of other amounts, expended by employers in connection to employees is, for the purposes of the Act, “earnings”. For this reason, I am unable to accept the proposition put by the Employer.
[34] For s.332(1)(b) to be enlivened, it would be essential for the “amounts” to be distinguishable as a discrete amount expended on behalf of the employee as part of their total “cashable” salary or wages and not an amount which is indistinguishable from the normal operational costs of employing employees. In this particular case, it is all the more difficult for the Employer to persuade the Tribunal that the provision of accommodation and the use of a motor vehicle after business hours, is anything but, an attraction and retention cost associated with the position, particularly given its location and unique circumstances.
[35] While the Act has been framed in such a way to describe a benefit as something which an employee is “entitled” to in return for the performance of work, employers would probably cast many “benefits” as a cost of doing business. For example, most employers in the mining sector would see the provision of accommodation in remote locations as an essential prerequisite to having a workforce to undertake mining activity. Simply not to provide the accommodation, would be unthinkable. In such circumstances, the cost of travel, food and accommodation for workers is an expense incurred in bringing the stuff out of the ground. In my view, employees in the mining sector do not see such matters as a benefit, any more than office workers would see an air conditioned office, as a benefit.
[36] The second part of s.332(1)(b) reads as follows:
“or as the employee directs”.
In my view, this part of s.332(1)(b) is more straightforward, in that it relates to “amounts” within the total “cashable” salary and wages other than the specific payment of salary and wages, which the employee directs to be expended on his or her behalf. In this case, it was uncontested that the Applicant had not directed any amounts be expended on his behalf.
[37] In relation to the private use of a motor vehicle after business hours, the Full Bench in Rofin set out “general principles” in relation to where private use of a motor vehicle is part of the “salary package, not merely for business purposes”. My understanding of the principles which I have applied to this determination is that:
- where an employer foregoes part of their salary payment in return for the provision of a motor vehicle for private use – that monetary amount is included for the purposes of remuneration or earning; and
- where an employer chooses to provide a motor vehicle to an employee (and pay the Fringe Benefits Tax (FBT)) – the value of such an action is not included for the purposes of remuneration or earnings; and
- where an employee is permitted to use an Employer’s vehicle for private use incidental to its business purposes, such expenses incurred by the Employer is not included for the purposes of remuneration or earnings of the employees.
[38] From submissions and evidence received, I am satisfied that the Applicant’s use of the Employer’s vehicle was incidental to its business purposes and should not be included for the purposes of determining his earnings pursuant to the Act.
[39] I should point out that it was not put to me, nor could it have been put to me, that Mr Batley received accommodation or private use of a motor vehicle as part of a salary sacrifice arrangement. Should that have been the case, then it may, depending on circumstances, formed part of his earnings for the purposes of the Act. In my view, s.332(1)(b) is intended to accommodate situations where the employer and an employee enter into an arrangement whereby the employee foregoes part of their salary or wages, in return for the employer providing them with benefits of a similar value. In such cases, generally the amount foregone in salary or wages, is being applied or directed on behalf of the employee.
Agreed money value of non-monetary benefits (s.332(1)(c))
[40] It was uncontested that no agreement was reached, if any agreement was necessary, on the non-monetary benefits in the employment agreement.
Amounts or benefits prescribed by the regulations (s.332(1)(d))
[41] The Employer submitted that, if the Tribunal was to not accept its contentions that the amount ascribed to Mr Batley’s accommodation and private use of the Employer’s motor vehicle, fell within s.332(1)(b), I should estimate the real or notional benefit pursuant to s.332(1)(d) as set out in Regulation 3.05(6).
[42] For the reasons set out in paragraphs [20] and [21], the Applicant submitted that the accommodation and private use of the Employer’s motor vehicle did not fall within the definition of non-monetary benefits. However, if the Tribunal was to consider the private use of the company motor vehicle, I should ascribe little value to the benefit, pursuant to s.332(1)(d) as set out in Regulation 3.05(6).
[43] My understanding of s.332(1) is that it has been arranged in such a way to define “earnings” in a hierarchy of materiality and for aggregation effect. Hence, it is possible for earnings to be the employee’s salary and wages (s.332(1)(a)) and all, some, or none of the other categories of earnings. I am unable to accept the contention, put by both parties, that if the Tribunal does not accept the view that a particular “amount” does or does not fall into a particular category of earnings, such as s.332(1)(b), then I should consider that amount in the alternative “catch all” category within s.332(1)(d) and apply a real, reasonable or notional value to any non-monetary benefit. As I understand, Parliament has framed s.332(1) to have aggregate effect and not for the parties to seek to insert an amount by way of, if not s.332(1)(a), (b) or (c) then (d). To conclude, in my view, s.332(1)(d) is constructed to capture the lower end of materiality of value, which are determined on a case by case basis, and are amounts not ordinarily falling within the categories of s.332(1)(a), (b) and (c).
[44] In the circumstances of this application, having considered carefully submissions and the provisions of the Act, I am not satisfied that I should ascribe any real, reasonable or notional value to, the alleged non-monetary benefits provided to Mr Batley.
CONCLUSION
[45] For the purposes of s.382(b)(iii) of the Act, I find that Mr Batley’s “annual rate of earnings and other such amounts (if any) … is less than the high income threshold” and consequently, he is protected from unfair dismissal and can seek a remedy (if the dismissal is determined unfair) from the Tribunal.
The Employer’s jurisdictional objection is dismissed and Mr Batley’s application will now proceed to be determined on its merits.
COMMISSIONER
Appearances:
Mr S Heathcote, for the Applicant
Mr R Tan, for the Respondent
Hearing details:
2010
Perth
12 March
Printed by authority of the Commonwealth Government Printer
<Price code C, PR995232>
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