Phillip Hearnden v Danihers Facility Management Pty Ltd

[2019] FWC 3570

[2019] FWC 3570

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Phillip Hearnden
v
Danihers Facility Management Pty Ltd
(U2019/1639)

COMMISSIONER MCKINNON MELBOURNE, 23 MAY 2019

Application for remedy in relation to unfair dismissal – high income threshold – value of company vehicle.

[1] Application has been made under section 394 of the Fair Work Act 2009 (the Act) by Phillip Hearnden in relation to the termination of his employment by Danihers Facility Management Pty Ltd (Danihers).

[2] Hearnden was employed by Danihers as Operations Manager from June 2017 until 11 February 2019.

[3] Danihers has raised a jurisdictional objection to the application that pursuant to s.382(b)(iii) of the Act, Hearnden’s earnings exceeded the “high income threshold” in s.333 of the Act. The high income threshold applying at the time of the termination was $145,400 per year.

[4] Section 382(b) of the Act provides that for a person to be protected from unfair dismissal, one or more of the following must 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.”

[5] Section 33 of the Act defines “earnings” and includes wages, amounts paid on an employee’s behalf and the agreed value of non-monetary benefits. It does not include employment benefits for which there is no agreed “reasonable money value”. In this matter, there is no agreement on the value of the fully maintained company vehicle provided to Hearnden. His contract of employment simply states that he will be provided with a fully maintained company vehicle.

[6] Regulation 3.05(6) of the Fair Work Regulations 2009 (the Regulations) provides as follows:

“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.”

Consideration

[7] There is no dispute that no enterprise agreement applied to the employment and that Hearnden was not covered by a modern award.

[8] Theissue that arises for determination in this case is whether Hearnden’s total annual earnings (that is, his annual rate of earnings and such other amounts calculated in accordance with the Regulations) were “less than the high income threshold” for the purposes of section 382(b)(iii)).

[9] It is agreed that Hearnden’s annual salary at the time of dismissal was $126,000. In addition, he had the benefit of a laptop and phone to the agreed value of $1000 per year, and was paid superannuation contributions at the statutory rate of 9.5% required by the Superannuation Guarantee Charge Act 1992. Superannuation contributions are excluded from the calculation of earnings for the purposes of the high income threshold. 1

[10] The value of earnings attributed to the fully maintained company vehicle supplied to Hearnden by Danihers is in dispute. The vehicle was a new Toyota Rav4, fully maintained and fuelled by Danihers and made available to Hearnden shortly after the commencement of his employment.

[11] Danihers says the value of the vehicle is $23,000 although no detailed breakdown of how it arrives at this conclusion has been provided. It says the annual distance travelled by the vehicle was 9500 kilometres, which it calculates proportionately to the total kilometres travelled in the vehicle between delivery and the termination of Hearden’s employment (total kilometres travelled / 20 months x 12 months). Initially it relied on a figure of 15,945 kilometres travelled during the 20 month period of employment. However, material furnished after the hearing indicated an odometer reading of 16,514 kilometres on 15 January 2019. On that basis, Danihers revises its estimate of total kilometres travelled in the vehicle to 16,945, or what I understand to be an annual distance of 10,167 (total kilometres / 20 months x 12 months). It says the percentage attributed to Hearnden’s private use of the vehicle should be 90%. It also submits that fringe benefits tax paid in relation to Hearnden’s vehicle should be considered part of his salary.

[12] Hearnden says the value of the vehicle is $3219, calculated as follows:

Annual distance travelled by the vehicle in question	9500 kms
Percentage of that distance that was for private use	50%
Multiply the above two figures to obtain the annual distance travelled for private purposes	4750 kms
Estimated cost per kilometre for a vehicle of that type (obtained from RACV)	67.78 cents per km
Multiply the annual distance travelled for private purpose by the estimated cost per kilometre.	$3219.55
Total estimated value	$3219.55

[13] In arriving at this figure, Hearnden did not cavil with Danihers’ initial submission that the total annual kilometres travelled in the vehicle was approximately 9500 or take issue with the later submission that the figure is slightly higher. He attributes travel to and from work to private usage and estimates his private usage of the vehicle was 50%, on the basis that he primarily used the vehicle for work purposes and only made limited private use of the vehicle beyond travelling to and from work because it did not have fitted child restraint, which meant he could not use the vehicle for family travel on weekends.

[14] There is no contention that the vehicle was a tool of trade. Danihers accepts that it was not. It says the vehicle was a “perk car” provided for Hearnden’s private use as part of his salary package. It was garaged at his private residence at all times. There is no dispute that all costs associated with the running of the vehicle were met by Danihers, including in relation to fuel, registration and insurance.

What is the value of the private benefit to Hearnden?

[15] As stated above, the personal value of the company vehicle does not form part of the applicant’s earningsas defined by s.332 of the Act because there has been no agreement as to the monetary value of this benefit. Nevertheless, the Commission has discretion to estimate the real or notional money value of the benefit in accordance with Regulation 3.05(6).

[16] I am satisfied that I should exercise my discretion to consider the benefit for the purpose of assessing whether the high income threshold applies to Hearnden. It was clearly a benefit provided in addition to his annual salary as part of an overall remuneration package.

[17] 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. 2 The approach in Fewings aligns with the approach adopted by Hearnden, above.

[18] Hearnden has correctly treated travel to and from work as private usage. There is no evidence that anyone other than Hearnden had the use of the vehicle for work purposes.

[19] As to the percentage of personal use, Hearnden travelled approximately 20 kilometres each day to and from work which accounts for 4800 kilometres each year (20 x 5 work days x 48 weeks) or more than half of the annual distance travelled. He was required to visit customer sites each week and often visited Werribee, which I have assessed as 32.6 kilometres from the workplace (or 65.2 kilometres return). A weekly visit to Werribee would involve travel of 3129.60 kilometres each year (48 weeks x 65.2 kilometres). Of the total 10,167 annual kilometres travelled, which I accept as a reliable figure based on the odometer reading provided and Hearnden’s access to the vehicle during his period of employment, that leaves 2237.4 unaccounted for, and to which I attribute personal use. The proportionately low level of usage aligns with Hearnden’s evidence that he only made limited private use of the vehicle beyond travelling to and from work, related to his family’s preference to use their other vehicle which had a child safety restraint. It results in a total of 7037.4 kilometres travelled annually for personal use, or 69.22 per cent of total kilometres travelled.

[20] Following the approach in Fewings, no account is made for Danihers’ separate obligation in relation to fringe benefits tax.

[21] I have assessed the value of the private usage of the motor vehicle as follows.

Annual distance travelled by the vehicle in question	10,167 kms
Percentage of that distance that was for private use	69.22%
Multiply the above two figures to obtain the annual distance travelled for private purposes	7037.4 kms
Estimated cost per kilometre for a vehicle of that type (obtained from RACV)	67.78 cents per km
Multiply the annual distance travelled for private purpose by the estimated cost per kilometre.	$4769.95
Value of the vehicle to Hearnden	$4769.95

[22] Accordingly, I find, for the purposes of s.382(b)(iii) of the Act, that the sum of Hearnden’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the Regulations was $131,769.94 comprising his salary of $126,000 together with $1000 for the laptop and mobile phone and $4,769.95 for the vehicle. His total annual earnings were less than the high income threshold of $145,400.

Conclusion

[23] Estimating the value of the private usage of the vehicle using the approach set out in Fewings and having regard to the evidence as to the usage of the vehicle, I find that the sum of Hearnden’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the Regulations, was less than the high income threshold.

[24] Hearnden is protected from unfair dismissal under s.382(b) of the Act. The jurisdictional objection is dismissed and the application will be referred for arbitration on the merits.

COMMISSIONER

Appearances:

B Cowling for the Applicant

R Alfarano for Respondent

Hearing details:

2019.

Melbourne:

May 3.

Printed by authority of the Commonwealth Government Printer

<PR708622>

 1   Fair Work Act 2009 (Cth), s.332(2) and (4)

 2 Print Q0675 [1998] AIRC 268 (2 March 1998) (Fewings); see also Sam Technology Engineers Pty Ltdv Bernadou[2018] FWCFB 1767