Mrs Rebecca Johnson v Benex Civil Pty Ltd
[2022] FWC 338
| [2022] FWC 338 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mrs Rebecca Johnson
v
Benex Civil Pty Ltd
(U2021/3143)
| COMMISSIONER SPENCER | BRISBANE, 18 FEBRUARY 2022 |
Application for an unfair dismissal remedy – jurisdictional objection – high income threshold – vehicle usage – jurisdictional objection upheld – application dismissed.
INTRODUCTION
Ms Rebecca Johnson (the Applicant) lodged an application to the Fair Work Commission for an unfair dismissal application pursuant to s.394 of the Fair Work Act 2009 (the Act) alleging that the termination of her employment by Benex Civil Pty Ltd (the Respondent) was harsh, unjust or unreasonable. The Applicant’s employment was terminated on 14 April 2021, for alleged serious misconduct.
The Respondent raised a jurisdictional objection to the application, on the grounds that the Applicant’s annual rate of earnings was in excess of the high income threshold of $153,600, as at the time of termination, and therefore, the Applicant was not protected under the unfair dismissal provisions prescribed in s.382(b)(iii) of the Act.
There were contested facts in relation to the matters applicable to the Applicant’s earnings against the high income threshold. A determinative conference (by consent) was held in accordance with s.397 of the Act, and Keira Fletcher v Little Darlings Early Development Centre.[1] The conference was conducted, via telephone. The Respondent was later granted permission for a solicitor to represent the Respondent, pursuant to s.596(2)(a) of the Act. One of the primary reasons of consideration for the granting of legal representation was that the cross-examination between the parties was raised as being problematic by the Respondent’s solicitors, as an Apprehended Domestic Violence Order (ADVO) was in place. Further, there was some complexity on the facts. A related decision, ([2022] FWC 339) deals with the Respondent’s application for a suppression order in relation to some of the material filed.
BACKGROUND
The following context to the application was set out in the parties’ submissions. In December 2007, the Applicant commenced a relationship with Mr Benjamin Johnson, who is the sole Director of the Respondent business (Benex Civil Pty Ltd). The Applicant and Mr Johnson then married on 20 December 2012 and have one child. These matters are mentioned as they are referred to, in providing the context of the vehicle usage and matters relevant to the jurisdictional objection.
The Applicant commenced employment with the Respondent on 9 October 2017 when she was engaged as an Office Manager (later renamed to be Commercial Manager). The Applicant was responsible for overseeing and supervising the Respondent’s commercial activities and employees, including to ensure that the Respondent met its financial goals, to assess overall company performance, perform human resource activities and other duties.[2]
On 1 February 2021, the Respondent replaced the Applicant’s Rav4 with a Toyota Landcruiser Prado (Prado) which was intended to be driven by the Applicant and was insured with the Respondent’s insurance company. The Prado was provided to the Applicant for use on 5 March 2021.
In late March or early April 2021, the Applicant and Mr Johnson separated on a final basis. It is Mr Johnson’s evidence that the separation occurred on 20 March 2021, whereas it is the Applicant’s evidence that the separation occurred on 6 April 2021, when she had informed Mr Johnson, that she had sought legal advice and that all of their joint assets, liabilities and finances are to be considered frozen.
On 6 April 2021, Mr Johnson emailed the Applicant advising that the inappropriate accessing of the Respondent’s email, Telstra and iCloud accounts will be under a full security check and upgrade. In the same email, Mr Johnson requested that the Applicant update their current management password register and return it to Mr Johnson by close of business, 7 April.
The Applicant responded shortly after, advising “no”, that she will fight to retain this business and will not offer her passwords. Mr Johnson replied to the Applicant’s email advising that he is issuing a direct order, which the Applicant must comply with. There was no response made by the Applicant, in the email chain provided.
At 12:06pm on 13 April 2021, Mr Johnson sent another email to the Applicant advising the following:[3]
“Afternoon Becky
Your lack of engagement and complaints regarding to the state issues above, are very concerning. The negative impacts on Benex’s ability to function and fulfil its responsibilities are at risk .
I take mater very seriously.
You are advised I require a formal reply as to why your employment should be continued by 12pm tomorrow 14/4/21.
Thanks
Ben Johnson
Director”
At 1:35pm on 13 April 2021, the Applicant received notification from the Commonwealth Bank, of the request to remove the Applicant, as an account operating authority for the Respondent’s account had been completed.
The Applicant was summarily dismissed at 8:16am on 14 April 2021 for alleged serious misconduct.[4] The letter of termination dated 14 April 2021, outlined the reason for the Applicant’s termination of employment and the alleged direct breaches of the Respondent’s People Policies. The letter, from Mr Ben Johnson, stated as follows:
“Dear Rebecca,
Termination of your Employment – Serious Misconduct
I am writing to inform you that your employment with Benex Civil has been terminated effective immediately, Wednesday 14th April 2021, due to Serious Misconduct.
You have been terminated for the following reasons:
· Inappropriately accessing Benex Civil email, Telstra and iCloud accounts. This action was deliberate behaviour by you that is inconsistent with Benex Civil People Policies and your role.
· You have refused to carry out a lawful and reasonable instruction that was consistent with the requirements of your role. I refer to my email dated 6th April 2021 where you were requested to update and provide a copy of the ‘Management Password Register’. To date you have not updated or provided a copy of the register and have in fact deleted the document. In these circumstances your continued employment during a notice period would be unreasonable.
Benex Civil considers that your actions constitute serious misconduct warranting summary dismissal.
You will be paid any outstanding pay up to and including your last day of employment including superannuation.
You may seek information about minimum terms and conditions of employment from the Fair Work Ombudsman. If you wish to contact them, you can call 13 13 94 or visit their website at type="1">
The Applicant filed an application for an unfair dismissal remedy on the same day at 11:27am on 14 April 2021.
The Applicant also considered it relevant to arranging the hearing in this matter, that an Apprehended Domestic Violence Order had been made against Mr Johnson. Both parties referred to this document and this matter became relevant to the granting of legal representation for the Respondent.
The Respondent submitted that the Applicant is precluded from the unfair dismissal protections under the Act, on the grounds that the Applicant’s income was above the high income threshold. The Respondent submitted that the Applicant’s total annual earnings are estimated to be $172,000. This decision considers these matters. The related decision ([2022] FWC 339) dealing with the Respondent’s application for the suppression of a range of documents, also deals with the granting of permission for the Respondent to be legally represented.
RELEVANT LEGISLATION
Section 382 of the Act relevant sets out when a person is 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.”
As outlined above, the high income threshold is currently $158,500 per year (having increased to this level on 1 July 2021). However, as the Applicant was dismissed prior to this date, on 14 April 2021, the relevant high-income threshold for the period 1 July 2020 to 30 June 2021 was $153,600. Accordingly, this threshold amount is applicable to the jurisdictional objection.
Section 333 of the Act defines high-income threshold as:
“333 High income threshold
(1) Subject to this section, the high income threshold is the amount prescribed by, or worked out in the matter prescribed by, the regulations.
(2) A regulation made for the purposes of subsection (1) has no effect to the extent that it would have the effect of reducing the amount of the high income threshold.
(3) If:
(a) in prescribing a manner in which the high income threshold is worked out, regulations made for the purposes of subsection (1) specify a particular matter or state of affairs; and
(b) as a result of a change in the matter or state of affairs, the amount of the high income threshold worked out in that manner would, but for this subsection, be less than it was on the last occasion on which this subsection did not apply;
the high income threshold is the amount that it would be if the change had not occurred.”
The term “earnings” is defined under s.332 of the Act to mean:
“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.”
The Respondent submitted that the Applicant was provided a company supplied vehicle. Shortly before the marital separation, a Toyota Prado (with a market value of $82,367) was leased in lieu of the Rav4 vehicle, that the Applicant had used for some time. In the absence of any agreed monetary value between the parties, for the private use of the vehicle, r 3.05(6) of the Fair Work Regulations 2009 (the Regulation) provides the Commission, with the discretion to estimate the real or notional money value of the benefit. Regulation 3.05 relevantly provides:
“FAIR WORK REGULATIONS 2009 – REG 3.05
When a person is protected from unfair dismissal—high income threshold
(1) For subparagraph 382(b)(iii) of the Act, this regulation explains how to work out amounts for the purpose of assessing whether the high income threshold applies in relation to the dismissal of a person at a particular time.
…
(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.”
The parties provided submissions on the value of matters relevant to the Applicant’s earnings and in relation to the high income threshold.
SUMMARY OF RESPONDENT’S MATERIALS
The Respondent submitted that its jurisdictional objection should be upheld, and the Application should be dismissed pursuant to s.382(b)(iii). In particular, the Respondent objected on the basis that the Applicant’s earnings exceeded the high-income.
The Respondent advised that the Applicant’s annual salary at the time of dismissal was $125,000 plus superannuation. Superannuation is not included in the calculation of earnings.[5] In addition to this, the Respondent provided a number of additional benefits as follows:
· The Respondent initially relied on the Applicant’s expenditure on a company credit card, but when legally represented this was not pursued. The expenditure (as agreed by the Respondent) was in the main for the family’s domestic needs. Mr Johnson later resiled from relying on this.
· Payment for private health insurance which the Respondent submitted is a benefit to the Applicant and is to be included in the Applicant’s earnings. The amount for the 2020 Financial Year was $3,864.41. The Respondent confirmed that this was health insurance for coverage of the family. The health insurance cover was for Mr Johnson, the Applicant and their child. However, this policy was not severable, and therefore the full amount was attributable to the Applicant.
· Mobile phone and data payments of up to $2,319.48 for the 2020 Financial Year.
· Vehicle costs for the Toyota RAV 4 vehicle. The total associated costs for the 2021 Financial Year were approximately $4,251.76. This cost is made up of:
· Car wash costs;
· Motor Vehicle service and maintenance;
· Motor Vehicle Registration;
· Tolls; and
· Motor Vehicle Insurance.
· The Company supplied vehicle, a new Prado, was provided to the Applicant on 5 March 2021. The Respondent submitted that the attributable value of the Prado is $36,593.92, this item is dealt with further in the decision.
The Respondent advised that the Applicant was provided with a laptop, however noted that it was used only for work purposes. As such, the Respondent made no allowance for it in the calculations.
The Respondent submitted that between 5 March 2021 and 14 April 2021 (40 days), the Applicant completed 4,000km in the Prado that was categorised as private use. The Respondent submitted that the Applicant’s private use portion of the Prado is to be annualised in order to determine the annual rate of earnings, and therefore calculated the attributable value of the vehicle as further outlined.
The Respondent submitted that the annual rate of earnings needs to be determined, as at the date of the Applicant’s dismissal and not an enquiry as to what the Applicant earned in the 12 months immediately preceding her dismissal.
In light of the above case law, in relation to the value of the Prado vehicle, the Respondent applied the approach as set out in Kunbarllanjnja Community Government Council v H.W. Fewings (Fewings),[6] which is as follows:
(a) Determine the annual distance travelled by the vehicle in question
(b) Determine the percentage of that distance that was for private use
(c) Multiply the above two figures to obtain the annual distance travelled for private purposes
(d) Estimated cost per kilometre for a vehicle of that type (obtained from RACV)
(e) Multiply the annual distance travelled for private purpose by the estimated cost per kilometre
In applying the Fewings formula, the Respondent submitted that the calculation for the attributable value of the Prado is as follows:
· The annual distance assessed to be travelled by the vehicle in question is 35,200km.
Given that the Applicant only commenced using the vehicle in the month prior to the termination. This figure is calculated by the Respondent by dividing 4,000km by 40 days, (in which the Applicant drove the vehicle) which is 100km per day. This is then multiplied by 352 days, which resulted in the below figure.
· The percentage of that distance that was for private use was 100%.
· By multiplying the two figures above, the annual distance travelled for private purpose is 35,200km
· The estimated cost per kilometre for the Prado, as obtained from RACV, is $1.0396 per km. The Applicant used an RACQ figure of $1.28 per kilometre.
· By multiplying the annual distance travelled for private purpose with the estimated cost per kilometre, the value of the vehicle to the Applicant is $36,593.92 (based on the $1.0396 RACQ figure)
Witness Statement of Mr Johnson
Mr Johnson confirmed that he is the sole Director of the Respondent. He holds the responsibility to run the Respondent’s business and to ensure it operates in accordance with the rules and policies of the Respondent.
Mr Johnson advised that the Applicant was an employee of the Respondent and also is his ex-wife, having separated on or around 20 March 2021. Prior to their formal separation, Mr Johnson is of the understanding that the Applicant had left Queensland and moved to their New South Wales residence.
On 28 June 2021, the Applicant filed an ADVO against the Respondent. The matter was resolved without admissions and by agreement on 19 July 2021 for a period of two years. The ADVO prevents the Respondent from having any contact with the Applicant unless it is through legal representation. The exception to this is in relation to the family law proceedings. However, all communication remains through a lawyer. This matter was referred to, in relation to the application for legal representation.
Background of the Respondent
Mr Johnson advised that the Respondent is a specialised business in civil works within the construction industry, throughout Southeast Queensland, operating since April 2008. At the time the Applicant was dismissed, the Respondent had 18 employees.
The Respondent currently does not employ dedicated Human Resources personnel. The Applicant stated that she developed and undertook a range of this work during her employment.
Applicant’s Employment
At the time of the Applicant’s dismissal, her annual salary was $125,000 plus superannuation. In addition to the Applicant’s base salary, she received the following benefits as part of her employment with the Respondent:
· Bupa Private Health Insurance paid by the Respondent in the amount of $3,864.41 (family cover);
· Payment for an iPhone and iPad in the amount of $2,319.48;
· Payment for costs associated with the Applicant’s personal car (Toyota RAV4) and maintenance prior to the Applicant being provided with a company vehicle in the amount of $4,251.76;
· Laptop purchase amount approximately $7,000;
· On 5 March 2021, the Applicant’s employment was varied, and she was provided with a leased company vehicle, a Prado, by the Respondent, which had a value of $82,367.13. The Respondent also paid for the maintenance and running of the company vehicle; and
· The Respondent also paid for the Applicant’s fuel, tolls, motor vehicle service, vehicle registration and insurance costs for both the company vehicle and the Applicant’s personal vehicle, which the Applicant used before the company vehicle.
Mr Johnson advised that the Respondent’s annual costs for the Applicant, including her base salary and benefits, totalled approximately up to $172,000 per year. The Applicant contested this.
In April 2021, Mr Johnson advised that he noticed that the Applicant did not have an employment contract. He noted that the Applicant generally prepares the contract and had asked that the Applicant prepare one for herself and update her position description accordingly. On 7 April 2021, the Applicant responded advising that an employment agreement was not required as she was managing the business and did not need to sign an employment contract.
Given that the Applicant’s responsibility includes to “ensure that the company is on track to meet its financial goals”, Mr Johnson advised that he trusted the Applicant to manage the finance side of the Respondent’s business. This meant the Applicant had access to all sensitive and confidential information of the Respondent’s business. Mr Johnson advised that he and the Applicant are the only two persons in the Respondent’s business who had access to the business accounts and any sensitive or confidential information.
Mr Johnson advised that he understood that the Applicant was not residing in Queensland from around 30 March 2021. From this time forward, most of his communication with the Applicant was via telephone or email. It was referred to that the parties had previously purchased another property in NSW and reference was made to the Applicant commuting to this property after the separation.
SUMMARY OF THE APPLICANT’S MATERIALS
The Applicant submitted that her annual salary at the time of termination was $125,000 plus superannuation. This was agreed by the Respondent. However, the Applicant disputed the calculation submitted by the Respondent in ascertaining her annual earnings with consideration of all other benefits. The Applicant stated that any additional expenses to her annual salary were authorised financial benefits of being a co-owner to the Respondent and wife to Mr Johnson and was not incorporated into her employment. The expenditure on the company credit card was later not relied upon by the Respondent.
The Applicant submitted that the private health insurance should not be included in the calculation of the annual earnings, as it was previously authorised by the Respondent. However, should it be found to be an earning, the Applicant then submitted that the private health insurance was not a benefit solely for herself. The health insurance covered the Applicant, Mr Johnson and their child. The Applicant is of the view that the most appropriate figure to be included to her earnings is by dividing the figure by three family members, resulting in an amount of $1,288.14.
The Applicant further submitted that the payment for the mobile phone should not be included in the Applicant’s earnings, as this was also previously authorised by the Respondent.
The Applicant disputed the inclusion of the payments to the Applicant’s personal vehicle (RAV4) in the earnings, as this vehicle was previously utilised by the Respondent’s employees during the period December 2018 to April 2021. The Applicant did not receive any financial compensation for the utilisation of her personal vehicle. Should it be found that the payment to the RAV4, is to be included in the Applicant’s annual earnings, then she disputes the inclusion of the cost to service and cost to replace the tyres. The Applicant submitted that without the other employees’ usage of this vehicle, the costs would not be required. These costs should also be calculated to exclude GST as the Respondent had claimed the GST component back via the BAS process.
The Applicant noted the costs related to the Prado from 5 March 2021 to 14 April 2021 based on a personal usage of 4000km. However, she argued the rate utilised by the Respondent’s representative is incorrect as the vehicle is only a 2.8L Diesel. The Applicant further submitted that the costs of the RAV4 for this period and the Prado costs annualised should not both be incorporated into earnings as this would be a duplication of expenses.
The parties’ marital home and the business were located at the same address, and therefore personal usage of the RAV4 had been at a minimal level; for taking the child to day care and grocery shopping.
The Applicant advised that there are two options shown in the salary calculations (Vehicle Option A and Vehicle Option B) which can be determined by the Commission. The Applicant does not agree with the kilometre calculations provided by the Respondent’s Representative as the initial kilometres utilised were outside of normal distance travelled, due to travelling back and forth from the property at Brooms Head, New South Wales after the separation. The standard kilometres were estimated to be 20,800km per annum (equating to 400km per week) which is reflective of the 20,000kms per annum noted in the insurance policy and the 125,000km per 60 months noted on the Prado order form with FleetPlus.
In light of the above, the Applicant submitted that the total earnings amounted to:
· For Vehicle Option A, $133,647.16
· For Vehicle Option B, $148,395.62
The Applicant stated that in January 2021, the Applicant purchased a holiday property in Brooms Head NSW and commenced occasionally working remotely from this residence. The Applicant advised that this had minimal effect, as the office staff were familiar with the Applicant working remotely, as this occurred regularly even when she resided in Brisbane due to parental responsibilities. It was stated that the Applicant and Mr Johnson’s marriage, around this time, was declining dramatically.
The Applicant advised that the marriage between herself and Mr Johnson further dramatically declined between 29 March 2021 and 6 April 2021, when the Applicant officially ended the marriage. The Applicant stated that the Applicant and the Respondent planned to visit Brooms Head NSW for the Easter break on 31 March 2021. However, due to a COVID lockdown being declared in Brisbane on 29 March 2021, the Applicant decided to leave this day and return to the office on 8 April 2021. Mr Johnson, however, did not visit Brooms Head NSW.
The Applicant continued to work remotely during this period, however also had parental responsibilities.
On 6 April 2021, when the marriage ended, the Applicant advised the Respondent that she had sought legal advice and that all their joint assets, liabilities and finances, including the businesses, are to be considered frozen until they decide further.
The Applicant filed a large number of documents accompanying her submissions.
The Applicant later filed additional submissions in respect to the mileage evidence. In her submissions, the Applicant advised that the Prado was offered to be transferred to the Applicant from the Respondent. The Applicant was sharing the responsibility of the day care drop off and collection of her child, and therefore submitted that 50% of this milage has been included into her mileage analysis.
The Applicant further provided that the usual mileage undertaken, (prior to relocating to NSW) as per Google Maps, on Monday and Tuesday for usage for day care delivery was approximately 8.6km one way from the home and business location (noting that they are at the same address). On Wednesday, the Applicant advised that for child related extracurricular activities and a fortnightly shopping trip, the milage was approximately 14km on way. On Thursday and Friday, the Applicant stated that the mileage usage was approximately 9.3km one way. The Applicant then identified, using Google Maps, that the distance travelled to the holiday home in NSW was approximately 292km one way.
The Applicant identified that the total annual expense for the RACQ Private Ownership Costs for the Toyota Prado was approximately $19,889.80. The Applicant submitted that the Fringe Benefit Tax should not be added to her income, due to the employer choosing to provide this benefit to her as an employee and was not required to fulfil employment obligations.
In consideration of these figures, the Applicant made the following calculation:
| Weekday Mileage – Determined from home and Business Location | ||||
| Day | Usage | Trip Mileage (km) | One way or Return | Total Trip (km) |
| Monday | Day Care | 8.6 | Return | 17.2 |
| Tuesday | Day Care | 8.6 | Return | 17.2 |
| Wednesday | Child Extra curricular activity | 14 | Return | 28 |
| Thursday | Day Care | 9.3 | Return | 18.6 |
| Friday | Day Care | 9.3 | Return | 18.6 |
| Total Weekday Mileage | 99.6 | |||
| Per week (Mon-Fri) Annualised Total Weekday Mileage | 5179.2 | |||
| Weekend Mileage | ||||
| Day | Usage | Trip Mileage (km) | One way or Return | Total Trip (km) |
| Saturday | Fortnightly Shopping Trip | 14 | Return | 28 |
| Sunday | ||||
| Total weekend mileage | 28 | |||
| Annualised Total Weekend Mileage | 728 | |||
| Holiday Mileage | ||||
| Holiday | Usage | Trip Mileage (km) | One way or Return | Total Trip (km) |
| Easter Break | Holiday Home | 292 | Return | 584 |
| Christmas Break | Holiday Home | 292 | Return | 584 |
| Labour Day | Holiday Home | 292 | Return | 584 |
| Queens Birthday | Holiday Home | 292 | Return | 584 |
| Total Holiday Mileage | 2336 | |||
Based on the above calculation, the Applicant calculated the total annualised mileage being 8243.2km. In consideration of the costs based on RACQ being $1.28 per kilometre, the Applicant submitted that the total costs would be $10,551.30. The Applicant acknowledges her changed circumstances in terms of living in NSW.
The Applicant provided three options in respect to the calculation of her total annual earnings. The calculations are as follows:
| Amount | Description | Comments |
| $ 125,000.00 | Annual Salary | Agreed and Pay Slips attached |
| Vehicle Expense Options (Annualised) | ||
| (Vehicle Option A) | ||
| $ 1,379.54 | Rav4 Expenses | Expenses detailed in Appendix A - Account Transactions_Rav4 |
| $ 5,120.00 | RACQ Cost per Kilometre Method | $ 1.28 per kilometre based on 4000kms personal usage |
| OR | ||
| (Vehicle Option B) | ||
| $ 10,551.30 | RACQ Cost per Kilometre Method | $ 1.28 per kilometre based on usage of 8243.2 kms per annum as per Mileage Spreadsheet |
| OR | ||
| (Vehicle Option C) | ||
| $ 19,889.80 | RACQ Private Ownership Costs | $ 19,889.90 per annum for Toyota Prado GX 2.8 T/dsl 6sp auto |
| Mobile Phone Expenses | ||
| $ 2,139.48 | (Number redacted) | All fees per month excluding bill error of international calls in latest bill provided 100% Personal |
| Private Healthcare Expenses | ||
| $ 1,288.14 | BUPA Private Healthcare | Total fees are for a family of three, therefore amounts have been split. |
| Total Income | ||
| $ 134,927.16 (Vehicle Option A) $ 138,978.92 (Vehicle Option B) $ 148,317.42 (Vehicle Option C) | ||
The Applicant submitted that all of the above options which include various alternatives to calculate the private usage of the vehicle and deems her annual earnings to be lower than the high-income threshold. The Applicant advised that the mileage being shown on the Toyota Prado is not consistent with the personal mileage that would be incurred during her employment with the Respondent.
The Applicant submitted that her payslips and Notice of Assessments that show only salary that had been classed as employment related. The Applicant noted that she is unable to provide a PAYG statement as this was sent to her business email, which she no longer has access to. She further advised that the business was jointly managed by herself and Mr Johnson. The Applicant stated that the business is classed as part of the Family property settlement, as in the separation proceedings of the Applicant and Mr Johnson, and the Applicant argued that the termination actions should not have been taken.
The Applicant advised that the Prado was only provided as of 5 March 2021, (shortly before the termination) and had completed 4,000kms for personal usage. Prior to this, the Applicant’s personal vehicle (being the Rav4) was utilised for business and personal usage with costs shown under Vehicle Option A. The Applicant submitted that should the expenses be calculated on an annualised basis for the Prado, this would be for 20,800kms per annum (400kms per week) which is reflected under Vehicle Option B. The Applicant advised that this was a family asset and not a business asset, therefore should not form part of her employment. The Applicant stated that this was due to cash flow of the business and personal finances being entangled. The Respondent had authorised expenses being paid out of company funds.
Furthermore, the Applicant advised that the private healthcare expenses were an expense paid by the business due to a directive being given by Mr Johnson. The Applicant submitted that this expense was not employment related. She noted also that the mobile phone expenses are also combined in the business and personal expenses. She stated that it can be demonstrated that the Applicant, her daughter and ex-husband all used the data with the iPad. Lastly, the Applicant argued that the Fringe Benefits Tax has never been paid for any of the claimed employment expenses, and it was an issue that only became payable after termination.
CONSIDERATION
Award or Enterprise Agreement coverage
To consider the jurisdictional objection, it must be determined if the Applicant’s employment was covered by a Modern Award, or alternatively, subject to an Enterprise Agreement. In these circumstances, in order to be a person protected from unfair dismissal, for the purposes of s.382 of the Act, the Applicant must earn less than the high income threshold amount, as per s.382(b)(iii). Both parties confirmed that the Applicant’s employment was not subject to an Award or Enterprise Agreement.
Motor Vehicle Usage
It has been accepted by the Commission that where an employee is provided with a fully maintained vehicle for use in the course of their employment, and that vehicle is also used for private purposes, the value of that private use can be included in the employee’s annualised earnings.[7]
In Zappia v Universal Music Australia Pty Ltd,[8] the Respondent referred to the following passage:
“Section 382 of the Act relevantly provides that a person is protected from unfair dismissal at a time if, at that time, 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. It is clear that the time at which the annual rate of earnings must be ascertained is at the time of the termination of the person’s employment. What needs to be ascertained is the annual rate of earnings at the time, not the annual earnings to that time (the amount earned in the 12 months to that time)” (emphasis added).[9]
The Full Bench decision in Maturu v Leica Geosystems Pty Ltd,[10] set out the reliance of the Regulation in calculating the monetary value where there is no agreement on the value of the benefit:
“In order for the Commission to make an estimate of the real or notional money value of a benefit pursuant to reg 3.05 and to have that estimate contribute to the calculation for the purposes of s.382(b)(iii) of the Act, each part of the cumulative test in reg 3.05(6) must be satisfied. Regulation 3.05(6)(a) requires that ‘that the person is entitled to receive, or has received, a benefit in accordance with an agreement between the person and the person’s employer’.”[11]
As referenced by the Respondent, the case of Phillip Hearnden v Danihers Facility Management Pty Ltd,[12] in which McKinnon C stated:
“The proper approach for assessing the value of the benefit of a car provided for private use where there is no agreed monetary value attributed to that benefit is that set out by a Full Bench of the Australian Industrial Relations Commission in Kunbarllanjnja Community Government Council v H.W. Fewings. The approach in Fewings aligns with the approach adopted by Hearnden, above”.[13]
The generally accepted formula to determine the value of the use of a company vehicle derives from Kunbarllanjnja Community Government Council v Fewings (Fewings).[14] The Fewings formula is as follows:
(1) Determine the annual distance travelled by the vehicle in question.
(2) Determine the percentage of that distance that was for private use.
(3) Multiply the above two figures to obtain the annual distance travelled for private purpose.
(4) Estimate the cost per kilometre for a vehicle of the type used. This information can be obtained from the RACV, NRMA or like monitoring organisations.
(5) Multiply the annual distance travelled for private purpose by the estimated cost per kilometre. The result is the value of the motor vehicle component of the remuneration.
The Full Bench in Sam Technology Engineers Pty Ltd v Bernadou[15] (Sam Technology) observed no issues, with the method of apportionment adopted in Fewings and considered it entirely appropriate in circumstances where an employee was provided with a fully maintained vehicle, in which they had derived a benefit, and a reasonable monetary value had not been agreed for its private use. The Full Bench continued noting that the Fewings method of apportionment was appropriate to enable the Commission to estimate the real or notional value of the benefit in accordance with Reg 3.05(6) of the Regulations.
The issues within this matter, however, concerns the provision of the company supplied vehicle (the Toyota Prado) which was only provided to the Applicant on 5 March 2021. This is 40 days prior to the Applicant’s termination on 14 April 2021. Before this date, the Applicant was expected to use her personal Rav4 vehicle, which the Respondent submitted it paid vehicle running costs for.
Whilst an apportionment approach has been considered against the Applicant’s proposed actual figures of usage, this has fully taken into account that the leased Prado, at the time of termination, was fully available to the Applicant, for her usage and formed a part of her employment contract at the time of termination, and therefore has to be considered on that basis. It is also relevant that at time of termination, the Applicant unilaterally retained the Prado, against objections of the business entity, for her personal use in NSW.
In a number of cases in which the Fewings formula was applied, the employee in those matters was provided with a fully maintained vehicle for at least 12 months. In calculating the figure, the Commission often looked at the available evidence that could assist in ascertaining the total distance travelled for private use within one year. An example of how this was calculated can be seen in Heath Morrison v Mabey Hire (Mabey).[16]
In Mabey, Mr Morrison was employed by the Respondent on 20 October 2016 and was terminated on 22 January 2021. His annual base salary at the date of termination was at $125,000. On 1 September 2018, Mr Morrison was issued a fully maintained job-related vehicle which he had possession of until the date of his termination (over 2 years). The Commission applied the Fewings formula and considered two approaches in determining the distance travelled for private use. The approach accepted by Clancy DP and was determined to be the most accurate and fair, by taking into account the odometer reading on 8 May 2020 (which was 74,332km) and the odometer reading at the date of termination on 22 January 2021 (being 96,941.67). This amounted to 37 weeks. The total kilometres travelled by Mr Morrison was found to be 22,609.67, which equated to an average of 611.072km per week. This was then converted into an annual figure of 31,775.75km. Upon calculating the kilometres travelled for private use, the Commission multiplied the total distance travelled for private purpose by the RACV weekly running costs.
The decision of Mabey demonstrated that there is flexibility in applying the formula set out in Fewings when ascertaining the notional value of the benefit. However, and perhaps more relevantly, the Fewings formula could be applied in circumstances where the vehicle was not in use for 12 consecutive months.
In Welk v SG Mining Pty Ltd (Welk),[17] Beaumont DP accepted the Fewings approach being applied to only 10 months rather than 12 months to counter, Mr Welk’s period of absence. The relevant facts of Welk, is as follows:
· Mr Welk commenced employment on 4 August 2014 and was terminated on 28 January 2020.
· At the time of Mr Welk’s termination, his base salary was $148,000.
· In addition of the base salary, Mr Welk was provided with a full serviced Hilux SR 2014 (Hilux) as a tool of the trade during work hours and for personal use outside of work.
· The Hilux was provided to MR Welk as a term of his Employment Contract.
· There was no agreed value between the parties for Mr Welk’s private use of the Hilux.
The Full Bench decision of Zappiav Universal Music Australia Pty Limited T/A Universal Music Australia,[18] suggests that the benefit derived from the company supplied vehicle would need to be considered to ascertain the annual rate of earnings. There is no doubt in the current matter, that the Applicant had the full personal use of the new Prado, in commuting to the NSW location.
The approach taken by the Respondent in this matter in determining the monetary value of benefit for the vehicle closely reflects that in Mabey. In the current matter, the Applicant was issued with the vehicle for 40 days. However, a flexible approach to the application of the Fewings formula has been taken in cases to establish a monetary value where there is no agreement. The Welk case suggests that a flexible approach can be taken to the Fewings formula to appropriately reflect the benefit the employee obtained from the company supplied vehicle.
In Welk, two months were excluded when ascertaining the annual distance travelled for the purposes of applying the Fewings formula, to accommodate the employee’s two months of absence. This is despite that the employee was issued with the vehicle for more than 12 months. This calculation was accepted by the Commission and the notional value derived from the 10 months, was included in the Commission’s consideration in determining whether the employee met the high income threshold.
A further example of a flexible approach to relying on the Fewings method, in Tolmachoff v Trustee for the Wingrain Trust AKA Grain Brokers Australia (Tolmachoff),[19] the Applicant was not in possession of the vehicle from 18 July 2019 to the date of termination on 12 August 2019. Commissioner Hampton found that although the Applicant was not in possession of the vehicle at the time of termination, the vehicle was a term of the Applicant’s employment contract. Therefore, Hampton C considered the annual distance travelled from 12 months preceding the time in which the Applicant was no longer in possession of the Vehicle.[20]
In consideration of the Fewings formula, the similar approach is to be taken in the current matter as in Welk, in that the annualization formula is to be applied from 5 March 2021. The Welk approach, requires that the formula only applies to the number of days / months in which the Applicant was issued the vehicle. The second approach, which would result in the same resulting figure, is taking into consideration the actual distance travelled in the whole of 12 months prior to her termination date. Given that there is evidence to demonstrate the exact figure of kilometres travelled once the vehicle was issued, it can be easily ascertained that the actual distance travelled in the 12 months is based on the 4,000km in the last 40 days, then apply the formula to this figure only. In Mabey, they determined the weekly average distance travelled from 37 weeks, then multiplied it to 52 weeks to find the annual distance, due to the limited evidence available, to ascertain the actual distance travelled in 52 weeks.
The Applicant and Mr Johnson formally separated their marriage, on 20 March 2021. As a result of this the Applicant stated that following the marital separation, she drove with her daughter to their other house located in NSW and cared for their daughter and worked from there. Prior to this, during her employment, the Applicant resided at the family home in Greenbank, QLD.
The car was leased through the Respondent company. The lease document estimated an annual kilometre usage of 20,800kms. The Applicant stated that she was involved in the business accounts and documents, and stated in evidence that an annual estimation of kilometres for a leased vehicle, would normally be set at an inflated level to ensure, additional costs for kilometre usage were not incurred, at the penalty rate, if the usage exceeded the annual estimate. The lease estimate in the current circumstances was conservative, as at the time of setting that annual figure, it was unknown between the parties that the Applicant would be residing in NSW.
The Fewings formula provides a reflection of the actual benefit the employee had obtained with the new company vehicle.
This approach is relevant to take account of the changed residential circumstances and associated personal usage, to assess the monetary value at the time of termination.
In applying the Fewings formula to the current circumstances, it is first necessary to determine the annual kilometres driven by the Applicant. It was confirmed between the parties that the Applicant travelled 4000kms in the 40 days that she had possession of the car: providing a figure of 100kms per day. This figure multiplied by 352 days is 35,200kms. It is then necessary to determine the percentage of this figure that represented personal use during this period. Both parties conceded that the milage accrued during this period was 100% personal. The next step requires this kilometre figure to be multiplied by the RACQ cost estimate of $1.28 per kilometre. This provides an annualised value of $45,056 for the Prado, attributable to the Applicant’s earnings.
Motor Vehicle (RAV4)
Section 332(2) of the Act provides that “reimbursement” is not an earning.
The Respondent argued that the total associated maintenance and running costs for the RAV4 in the 2021 Financial Year were approximately $4,251.76, and that this figure should be attributable to the Applicant’s annual rate of earnings. It was accepted that these running, and maintenance costs were paid for by the Respondent.
The Applicant noted in her submissions that the RAV4 was used by others as well for work related purposes. Neither party has clearly set out the particular kilometres for work related usage of the RAV4, but the Applicant has set out the private benefit, based on kilometres, for the RAV4.
Based on Zappia, the RAV4 was not a “benefit” she received at the time of her termination, as she was provided a significantly different, fully maintained new company supplied vehicle. The figure of $4,251.76 is therefore not attributable to her earnings, for the purposes of the high income threshold assessment.
Fringe benefit tax
The Respondent submitted that fringe benefit tax should be applied to the Prado’s use by the Applicant, and an amount of $16,105.97 should be included in the calculation of her total earnings. The Respondent’s representative argued that the Respondent was required to pay fringe benefit tax on the Prado, in the amount of $16,105.97 and that this should be attributed to the Applicant’s earnings.
It is noted that in accordance with Lynn Chang v Ntscorp Ltd,[21]a fringe benefit tax may be an amount dealt with at the employee’s direction, in a genuine salary sacrifice situation when an employee has forgone wages in return for a benefit. In those circumstances, the fringe benefit tax would be included in the employee’s earnings. However, in the present matter, there was no evidence put forward to suggest that the Applicant had forgone wages in return for the use of the Prado vehicle.
On this basis, the inclusion of the $16,105.97 in the Applicant’s annual rate of earnings cannot be supported.
Mobile phone and data
The Respondent submitted that the Applicant was provided with a mobile phone, iPad and data plan by the business, to the value of $2319.48 for the 2020 financial year. The Respondent submitted that the Applicant’s use of the devices was entirely personal, and that the whole amount should be attributed to her earnings. The Applicant argued that this figure should not be included in her earnings as the Respondent’s director had previously authorised the supply of the devices to the Applicant.
Whilst there was disparity in the submissions regarding whether the devices were wholly for the Applicant’s personal use, it is considered that in accordance with the decision of Dart v Trade Coast Investments Pty Ltd,[22] the whole amount of $2319.48 is attributable to the Applicant’s annual rate of earnings at the time of her dismissal. However, if this is incorrect, this amount does not change the overall outcome that the earning are above the high income threshold.
Superannuation
Any paid superannuation contributions that are at the statutory rate are excluded from the calculation of earnings for the purposes of the high income threshold.[23] Any superannuation contributions that exceeds the compulsory contributions, as required under the relevant Act, however, are to be included.
There are no submissions from the Respondent arguing that the superannuation contributions for the Applicant exceed the compulsory contributions. Further, the Respondent does not include superannuation in the Applicant’s annual earnings.
Private Health Insurance
In Savannah Nickel Mines Pty Ltd v Crowley,[24] the Full Bench held that the life insurance premium paid by the Respondent was found to be an amount applied or dealt with on the employee’s behalf. As per section 332(1)(b), the amount paid was included in calculating the employee’s income. Similarly, in Monteiro v Valco Group Australia Pty Ltd T/A Valco Group Australia,[25] the Full Bench held that:
“[31] In respect of the Commissioner’s determination of the private health insurance expenses as ‘earnings’ for the purpose of s.332(1) of the Act, we do not find any error. We consider this to be an appropriate conclusion despite the contract entered into between the parties labelling it as a ‘reimbursement’. It is not a reimbursement. The payment by an employer for an employee’s private health insurance is a benefit to an employee, and is not, unless agreed, an entitlement of employment for which an employee would need to reimburse an employee.”
The Respondent conceded that the health insurance was applicable to the family and the Applicant maintained that the costs were severable on that basis across the 3 family members. There was no evidence that the $3864.41 family cover was able to be divided and apportioned across the family members. Accordingly, that whole figure, as was paid for by the employer, has been attributed as a benefit, and is included in the Applicant’s total earnings.
Total earnings
The predominate issue between the parties in ascertaining the earnings is that of the value attributable to the new Prado vehicle, provided prior to the dismissal. The Applicant emphasised that in a regular employment situation, that did not involve a marital scenario, the employer would not normally have any detail of the post dismissal car usage. The period of personal usage prior to the dismissal has been extrapolated.
The earnings, on the case law, are calculated at the time of termination. This case is however complicated by the changed circumstances between the employer and employee and the business and employment circumstances of the husband and wife at the time of the termination.
The earnings are determined to be comprised of:
Wages: $125,000.00
Prado (annualised basis): $45,056
Health cover: $3,864.41
Mobile phone and data: $2,319.48
Total earnings: $176,239.89
In relation to the Prado, if the annualised figure derived from the Fewings formula, taken at the time of termination is incorrect, the alternative milage (proposed by the Applicant) of 20,800kms, adopted in consideration of the Fewings formula, would still place the Applicant’s earnings above the high income threshold amount.
In exploring this alternative, if the Applicant’s conceded figure of 20,800kms per annum (estimated annual usage from the Prado lease document) is applied to the Fewings formula, the result is still a figure that places the Applicant’s earnings in excess of the high income threshold. It is noted that this lease estimate is conservative, because it did not take into account the changed residential circumstances of the Applicant moving to NSW. In any event, this annual lease estimate, multiplied by the RACQ figure of $1.28 per km, would provide the attributable figure of $26,624. This figure, in combination with the health cover, mobile phone and the salary of $125,000 still exceeds the high income threshold.
The Applicant’s proposed actual kilometre usage (set out in [55] and [57]) are rejected, because they fail to take into account the personal usage of the Prado, in accordance with the case authorities. The $4,251.76 maintenance and running costs paid by the Respondent have also not been included. These could not have been considered to be a reimbursement.
Based on the case authorities, a flexible approach has been adopted to the annualization of the kilometre usage of the Prado. The annualization has been undertaken in accordance with the Fewings formula, at the time of the termination. As set out above, the alternatives to this have been considered, on the basis of the estimated kilometre usage from the Prado lease document, and on either calculation, the Applicant’s income exceeds the relevant high income threshold.
Suppression orders
The Respondent’s representative raised at the jurisdictional hearing that they sought suppression orders for approximately 60 documents, provided by the Applicant in her material. The Respondent also sought for the decision to be subject to a suppression order and not be published. This was later amended to seek an order to suppress the names of the parties and the Applicant’s daughter.
The application for the suppression order over documents was first raised during the determinative conference. The particularised matters had not been raised at any earlier stage of the proceedings by the Respondent, nor at the time the documents were filed. No explanation was provided in relation to the delay in raising the suppression matters. The jurisdictional, determinative conference proceeded as scheduled, and Directions were set for the filing of submissions in relation to the suppression orders. The suppression order is determined in a separate decision.
CONCLUSION
For the reasons set out above, the Applicant’s annual rate of earnings at the time of her dismissal exceeded the high income threshold of $153,600. The jurisdictional objection, pursuant to s.382(2)(b)(iii) of the Act is therefore upheld, and the s.394 application is dismissed.
I Order accordingly.
COMMISSIONER
[1] Keira Fletcher v Little Darlings Early Development Centre [2015] FWC 7556.
[2] See Witness Statement of Benjamin Paul Johnson, BJ-4 for Job Description of Business Manager.
[3] See Witness Statement of Benjamin Paul Johnson, BJ
[4] See Witness Statement of Rebecca Johnson, “V. Email re Termination Letter”.
[5] s.332(2)(c) of the Fair Work Act 2009; discussed in Ablett v Gemco Rail Pty Ltd[2010] FWA 8124 (Williams C, 22 October 2010) at paras 31‒32.
[6] Print Q0675 [1998] AIRC 268.
[7] Monteiro v Valco Group Australia Pty Ltd T/A Valco Group Australia [2019] FWC 2410. See also, Rofin Australia Pty Ltd v Newton Print P6855 (AIRCFB, Williams SDP, Acton DP, Eames C, 21 November 1997), [(1997) 78 IR 78 at p. 82]; citing Condon v G James Extrusion Company Print N9963 (AIRC, Watson DP, 4 April 1997), [(1997) 74 IR 283 at p. 288].
[8] [2012] FWAFB 6108.
[9] Zappia v Universal Music Australia Pty Ltd[2012] FWAFB 6108 at [9].
[10] [2014] FWCFB 6735.
[11] Maturu v Leica Geosystems Pty Ltd [2014] FWCFB 6735 at [13].
[12] [2019] FWC 3570.
[13] Phillip Hearnden v Danihers Facility Management Pty Ltd [2019] FWC 3570 at [17].
[14] Kunbarllanjnja Community Government Council v Fewings (Fewings) AIRCFB, Ross VP, Watson SDP, Bacon C, 7 May 1998, Print Q0675.
[15] Sam Technology Engineers Pty Ltd v Bernadou [2018] FWCFB 1767.
[16] [2021] FWC 2009.
[17] [2020] FWC 2513.
[18] [2012] FWAFB 6108.
[19] [2019] FWC 8027.
[20] Tolmachoff v Trustee for the Wingrain Trust AKA Grain Brokers Australia [2019] FWC 8027 at paras [66] to [75].
[21] [2010] FWA 1952.
[22] [2015] FWC 4355.
[23] Fair Work Act 2009 (Cth) s 332(2)(c). See also, Ablett v Gemco Rail Pty Ltd [2010] FWA 8124.
[24] 2016] FWCFB 2630.
[25] 2018] FWCFB 3280.
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