Mr Stephen Keays v ECS Instruments Pty Ltd

[2013] FWC 1211

[2013] FWC 1211

FAIR WORK COMMISSION

DECISION

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

Mr Stephen Keays
v
ECS Instruments Pty Ltd
(U2012/12551)

COMMISSIONER CAMBRIDGE SYDNEY, 22 FEBRUARY 2013

Unfair dismissal - jurisdictional objection - s.382 (b) whether sum of applicant’s annual rate of earnings is less than the high income threshold - objection dismissed - matter to proceed.

[1] This matter involves an application for unfair dismissal remedy made pursuant to section 394 of the Fair Work Act 2009 (the Act). The application was lodged at Sydney on 21 August 2012. The application was made by Stephen Robert Keays (the applicant), and the respondent employer has been identified to be ECS Instruments Pty Ltd (the employer).

[2] The application stated that the date that the applicant was notified of his dismissal was 17 August 2012. Consequently the application was made within the 14 day time limit prescribed by subsection 394 (2) of the Act.

[3] The employer did not initially raise any jurisdictional objection to the application and the matter was the subject of unsuccessful conciliation. The matter was programmed for arbitration scheduled for December 2012.

[4] However, on 25 November 2012, Dooley & Associates solicitors, filed a Notice of Representative Commencing to Act (Form F53) together with an Objection to Application for Unfair Dismissal Remedy (Form F4). Consequently the matter proceeded to a Jurisdictional Hearing before the Fair Work Commission (the Commission) conducted in Sydney on 25 January 2013.

[5] The Jurisdictional Hearing involved the employer’s assertion that the applicant’s employment was not governed by a Modern Award or an Enterprise Agreement and that his annual rate of earnings exceeded the high income threshold. Consequently, the employer said that the applicant was not a person protected from unfair dismissal because of the operation of sub-section 382 (b) of the Act, (the s.382 (b) objection).

[6] At the Jurisdictional Hearing the employer was represented by Mr M Campbell, a solicitor, and the applicant appeared unrepresented. The employer adduced evidence from one witnesses, Mr Ricardo Arturi, the employer’s National Manager. The applicant gave evidence as a witness on his own behalf.

[7] There was no dispute that an Enterprise Agreement did not apply to the applicant’s employment. The question as to whether a Modern Award covered the applicant was not argued in any depth and it appeared that the applicant may have conceded that a Modern Award did not cover the work that he performed.

[8] The s.382 (b) objection concentrated upon that aspect of the sub-section (s.382 (b) (iii)) involving the sum of the applicant’s annual rate of earnings and such other amounts not being less than the high income threshold of $123,300.00 per annum.

[9] Section 382 of the Act is in the following terms:

“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.”

The Employer’s Objection

[10] The employer based the s. 382 (b) objection upon a calculation which included various amounts which it said represented earnings as contemplated by s.332 of the Act. Section 332 of the Act is in the following terms:

“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 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.”

[11] The primary submission made on behalf of the employer by Mr Campbell was that the sum of the applicant's annual rate of earnings as comprehended by s.332 of the Act and Regulation 3.05 (6) of the Fair Work Regulations 2009 would be derived as follows:

a. Base salary of $115,000.00;

b. Provision of Meal Allowance $3,675.00;

c. Private use of company issued and maintained vehicle $10,957.48;

d. Private use of mobile telephone $390.00; and

e. Private use of home office equipment $446.16

Total: $130,468.64

[12] Mr Campbell referred to aspects of the evidence which he said supported the basis for the calculation which exceeded the high income threshold of $123,300.00 per annum. Mr Campbell submitted that the meal allowance should be included to form part of the applicant's earnings for the purposes of section 332 of the Act. Mr Campbell said that a Full Bench Decision of the Australian Industrial Relations Commission in Kunbarllanjnja Community Government Council v H. W. Fewings  1(Fewings), provided support for the inclusion of meal allowance as part of wages for the purposes of sub-section 332 (1) (a) of the Act.

[13] Mr Campbell also made detailed submissions about the appropriate method to determine the amount for inclusion as the benefit obtained by the private use of an employer provided motor vehicle. Mr Campbell referred to the Decision in Fewings as the relevant authority upon which to calculate a notional value for the private use of an employer provided motor vehicle. According to the submissions of Mr Campbell, by way of application of the method established in the Fewings Decision the applicant had used the employer provided motor vehicle for private purposes for 60.5% of the total number of kilometres travelled per year and this translated to an ascribed value of $10,957.48.

[14] Mr Campbell calculated that the applicant's private use of the employer provided mobile phone represented approximately 25% of the phone use. The mobile phone cost to the employer was $1560 per annum and 25% of that figure was $390 and this was the figure used as the notional earnings of the applicant as benefit obtained from the private use of a mobile phone.

[15] Mr Campbell acknowledged that the amount of $446.16 which had been allocated as a notional benefit for private use of home office equipment could be negated by evidence that the applicant had, on all but two occasions, not sought reimbursement for payment of his home phone and internet accounts which included a substantial amount of business use.

[16] In summary, Mr Campbell submitted that even if some deduction were made from the various components which comprised the calculation made for the applicant's total annual earnings, the amount would still exceed the high income threshold and therefore the applicant was not a person protected from unfair dismissal and the claim should be dismissed.

The Applicant’s Case

[17] The applicant made submissions which challenged each of the components which the employer said represented an annual rate of earnings greater than the high income threshold.

[18] The applicant submitted that his gross earnings for the year ending 30 June 2012 was $108,365 as opposed to the base salary figure of $115,000. The applicant acknowledged that the difference in gross salary payments occurred as a consequence of arrangement for him to take three weeks of underpaid leave shortly after commencing his employment.

[19] The applicant further submitted that it was not relevant to include meal allowance as part of any annual salary calculation. The applicant said that the amounts paid as meal allowance were in recognition for reasonable travel and other expenses associated with various business trips.

[20] The applicant also strongly rejected the amount that the employer had attributed to the private use of a motor vehicle. The applicant said that the use of a 2011 Citroen Berlingo Van did not provide him with a significant benefit as it was a two seat motor vehicle and had limited practical use compared to a five seat car. Further, the applicant challenged the basis for the employer's calculation of the benefit obtained from the use of the Citroen Van and he disputed the amount of private use as was asserted by the employer. The applicant advanced an alternative calculation that generated a total notional benefit of $5162 relevant to the private use of the employer provided Citroen Van.

[21] In summary, the applicant submitted that the correct calculation of his annual salary amounted to a total of $111,606 which was less than the high income threshold. The applicant rejected the basis upon which the employer had asserted that he was not a person protected from unfair dismissal and he requested that his application proceed to Hearing and determination of the substantive claim.

Consideration

[22] In this instance, the s.382 (b) objection taken by the employer has involved a contest about the applicant’s annual rate of earnings. The employer has made a calculation of the applicant’s annual rate of earnings. The applicant disputes the basis for that calculation by challenge to both the inclusion of some of the various components and also the quantum of components as advanced by the employer.

[23] Before consideration is made of the contested components and amounts used to calculate the applicant’s annual rate of earnings, it is appropriate to record some concern regarding the largely non-contested question of Award coverage. The applicant was engaged in a position described as “Technical Manager” and an explanation for the work that he actually performed was gained during the Hearing, particularly at transcript PN229 to PN236. The applicant’s employment agreement document 2 included reference to an “Applicable Award”. The evidence suggests that the work of the applicant may have been covered by a Modern Award probably, the Professional Employees Award 2010 [MA000065]. However in the absence of any developed argument about Award coverage no conclusive determination of this question can be made.

[24] The consideration of the applicant’s annual rate of earnings can logically be approached by an examination of the constituent components seriatim.

Base Salary

[25] The employer contended that the figure of $115,000 should be applied. The applicant said that in the financial year ending 30 June 2012 he was paid $108,365 and he produced tax records (a Group Certificate) to verify his actual annual salary payment.

[26] Evidence established that the annual figure of $115,000 was clearly established in documents regarding the offer of employment and the subsequent employment contract. The explanation for the actual payment being less than that which was understood to apply to the employment involved a 3 week period of unpaid leave taken, by agreement, shortly after the applicant had commenced employment and before he had accrued a sufficient entitlement to paid leave.

[27] Sub-section 382 (b) (iii) of the Act uses the words “annual rate of earnings” and, in my view, the terminology of a “rate” imports a prospect that the amount could be distinguished from an amount actually paid. In the context of a calculation for the purposes of determining a high income threshold it would seem that a period of agreed unpaid leave should not operate to impact on the rate that would otherwise apply. Consequently I believe that the appropriate base salary figure for calculation of the applicant’s annual rate of earnings should be $115,000.

Meal Allowance

[28] The employer’s calculation of annual rate of earnings included an amount ($3,675.00), which represented the total annual payment made to the applicant for what was described as meal allowance. The evidence established that the meal allowance was paid to the applicant on occasions when he was absent from his residence overnight for business purposes. The allowance was paid to recompense the applicant for meals and other incidental expenses associated with an absence from residence for business purposes. The meal allowance was paid without the requirement for production of any receipts.

[29] The employer submitted that because the meal allowance was paid without any requirement for receipts it was not a reimbursement and should be included in the annual rate of earnings. The applicant said that the amount paid was $46.55 less than a reasonable rate fixed by the Australian Taxation Office and was paid to compensate him for expenditure associated with business travel. Therefore the applicant said that the meal allowance should not be included as part of his earnings.

[30] In my view, the meal allowance paid to the applicant represents a reimbursement which would be specifically excluded from earnings by virtue of sub-section 332 (2) (b) of the Act. The issue of any requirement for receipts is a facet of the employer’s policy and does not alter the basis for the payment as reimbursement for expenditure, notional or actual, rather than as a payment made in respect of the performance of work. I have decided to remove any amount of meal allowance as being part of the annual rate of earnings of the applicant.

Company Provided and Maintained Motor Vehicle

[31] The quantification of the value that should be ascribed to the private use of an employer provided motor vehicle has occupied the central focus of the contest regarding the quantification of the applicant’s annual rate of earnings.

[32] The employer undertook an elaborate analysis of the applicant’s use of the Citroen Van that he was provided with and concluded that it was used for private purposes 60.5 % of the total annual distance travelled. This was calculated to provide an annual benefit to the applicant of $10,957.48.

[33] The applicant noted that the Citroen Van had only two seats and this meant that he had to retain another 5 seat sedan vehicle for private use in circumstances where more than one passenger required transportation. The applicant made some alternative calculations based upon a lower level of private use of the Citroen Van and he concluded that an annual amount of $5,162.00 should be fixed as benefit from the motor vehicle.

[34] There have been a number of Decisions of this Commission and its predecessors, concerning the value that should be assigned to the private use of an employer provided motor vehicle. The employer relied upon the method of calculation established in the Fewings Decision. In general I take no issue with the method of calculation established in Fewings. However, there is an important prerequisite that should be contemplated before moving to the calculation as set out in Fewings. This prerequisite involves an examination of the particular circumstances surrounding the actual provision of the motor vehicle.

[35] An important distinction can be made between a vehicle provided to an employee as part of a remuneration package as opposed to a vehicle provided as an integral component of the work required of the employee. The private use of a vehicle which is provided as part of a remuneration package should be assessed differently to private use of a vehicle which is a necessary part of the performance of work and for which there was no contemplation of a value as part of the remuneration package.

[36] The distinction that should be made regarding the different circumstances that may apply to the provision of a motor vehicle in the employment context has, quite helpfully, been summarised in a recent Decision of Watson SDP in the case of J McDonnell v Qube Ports 3 and the following extract from that Decision is directly relevant to this case:

“[30] In Rofin Australia Pty Ltd v Newton, (Rofin)24 a Full Bench of the Australian Industrial Relations Commission (AIRC) drew a distinction between the provision of a motor vehicle as part of a salary package and the provision of a motor vehicle as a piece of equipment supplied by the employer to enable the employee to perform the job. The AIRC stated:

“Where a motor vehicle is provided to an employee in lieu of salary that might otherwise have been paid, it is appropriate that the private benefit derived by the employee from the provision of the motor vehicle be counted as part of the employee’s remuneration. Where, however, the vehicle is provided for business purposes and the employee’s entitlement to private use is purely incidental, the provision of the motor vehicle should be treated no differently to the provision by the employer of any other tool or piece of equipment essential to the performance of the job.”25”

[37] There were a number of references to the basis upon which the applicant was provided with the Citroen Van. The letter of offer of employment mentioned “a fully maintained service vehicle”. Item 8 of the contract of employment stated “Service Vehicle (for business use only). The applicant was the sole New South Wales based employee and his work would have always required a considerable capacity for travel to the sites of customers and potential customers.

[38] In addition, it is relevant to have regard for the nature and type of vehicle that was utilised. The Citroen Van had only two seats and it would not represent a viable alternative to a five seat sedan. The applicant obviously obtained some benefit from the private use of the Van but it should not be considered as providing a benefit which represented a replacement to a private five seat sedan, indeed the applicant retained his own private vehicle in addition to the private use of the Van. The benefit of the private use of the Van must be offset against the fact that the applicant still needed a private vehicle and incurred the costs associated with continuing ownership of that vehicle.

[39] Consequently I have considered that the provision of the Citroen Van was integral to the applicant’s work and that the private use of that vehicle was incidental to the provision of the vehicle. The Citroen Van was provided as a “tool of trade” and the private use of that vehicle should not count towards the sum of the annual rate of remuneration.

[40] If I am incorrect in my treatment of the benefit gained by the private use of the Van then because of the particular nature of the vehicle whereby it could convey only one passenger, I believe that a reduced valuation of the amount calculated by the employer should apply. Therefore, at best, I would allocate only 2/5ths of the value as determined by the employer, and that would represent a figure of $4,382.99.

Mobile Telephone

[41] In much the same way as the Citroen Van did not represent a benefit which could relieve the applicant of ongoing costs associated with the need to retain his private vehicle, the provision of a mobile phone which also included private use did not operate so as to replace his personal mobile phone. The increasing propensity to purchase unlimited usage mobile phone plans has the effect of neutering the potential benefit that might have otherwise been obtained by making calls on a “business mobile”. In any event the employer calculated the benefit as $390 per year and for present purposes I am prepared to include that amount as part of the applicant’s annual rate of remuneration.

Private Use of Home Office Equipment

[42] During the Hearing the employer conceded that the applicant’s private use of company owned business equipment would have been negated by the applicant not regularly seeking reimbursement for the cost of his home internet service provider which was used for both business and private activities. Consequently no figure should be attributed to this component.

Conclusion

[43] Based upon the forgoing analysis of the various components that are aggregated in order to establish the applicant’s annual earnings, the following calculation is made:

a. Base salary = $115,000

b. Meal Allowance - not applicable = $0

c. Private use of company issued and maintained vehicle = $0 or, at best, $4382.99;

d. Private use of mobile telephone = $390.00; and

e. Private use of home office equipment = $0

Total: at best, $119,772.99

[44] Therefore the applicant’s annual rate of earnings was, at best, $119,772.99 which is an amount less than the high income threshold of $123,300.00. Therefore the applicant is a person protected from unfair dismissal. The s.382 (b) objection raised by the employer must be dismissed and the application for unfair dismissal is listed for further proceedings by way of Directions fixed for 10:00am on 18 March 2013.

COMMISSIONER

Appearances:

The applicant appeared on his own behalf;

Mr M Campbell,solicitor, appeared on behalf of the employer.

Hearing details:

2013.

Sydney:

January, 25.

 1   Kunbarllanjnja Community Government Council v H. W. Fewings, Appeal Decision of Australian Industrial Relations Commission [Ross VP, Watson SPD and Bacon C] 7 May 1998, Print Q0675.

 2   Exhibit 1, Attachment “B”.

 3   J McDonnell v Qube Ports & Bulk Pty Ltd T/A Qube Ports, Watson SDP, 6 February 2013, [2013] FWC 702.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR534322>