Fair Work Act 2009

s.394 - Unfair dismissal

Application for an unfair dismissal remedy - Jurisdictional objection - High income threshold - Jurisdictional objection upheld - annual rate of earnings not impacted by period of unpaid annual leave - Application dismissed.

[1] This decision concerns an application for an unfair dismissal remedy under s 394 of the Fair Work Act 2009 (the Act) by Ms Bolland (the Applicant). Solgen Energy Pty Ltd (the Respondent) has raised a jurisdictional objection to the Applicant's application proceeding on the basis that the Applicant was not a person protected from unfair dismissal at the time of her termination from employment with the Respondent, which took effect on 28 April 2020.

[2] For the purposes of this decision, the relevant objection is that the Applicant's income exceeds the high income threshold imposed by joint operation of ss 333 and 382(b)(iii) of the the Act. It was not contested that the Applicant's employment was not covered by a modern award (s 382(b)(i)) or by an enterprise agreement (s 382(b)(ii)). Therefore the Applicant must be able to prove that its income was below the high income threshold to be protected from unfair dismissal. The high income threshold is prescribed by reg 3.05(6) of the Fair Work Regulations. At the time of the Applicant's dismissal the threshold was $148,700.

[3] A hearing to determine this jurisdictional matter was listed for 12 August 2020. At the hearing the Applicant represented herself. The Respondent was represented by Ms Diana McDonnell, an employee of the Respondent. Prior to the hearing, the Applicant had provided submissions and the Respondent similarly had provided an outline of Argument regarding the jurisdictional objection. On the day of the hearing the Respondent was initially not contactable and so I decided to hear from the Applicant whilst my Associate endeavoured to make contact with the Respondent. The Applicant was duly sworn in and her evidence taken. Shortly after the conclusion of the hearing with the Applicant, the Respondent finally was available and so I took her evidence separately. My Associate attempted to re-contact the Applicant to be part of the hearing but she could not be reached. I do not consider that this impacted the delivery of each party's argument, as there was no relevant contest of fact regarding the jurisdictional objection.

[4] The Applicant had been hired as a Senior Project Manager on 14 October 2019. On 14 April 2019, the Applicant attended a meeting with the General Manager of Operations for the Respondent and was informed that due to changes in client requirements that there was to be a restructure with more senior support to be injected into the project. The outcome would be that her role was not required. They further stated that they had considered other roles in Queensland and interstate however they could not identify any opportunities within the organisation for the Applicant and therefore she would be made redundant.

[5] The Applicant was provided 2 weeks' notice with her last day being paid in lieu to assist with the employment search. Her last day was 28 April 2020.

[6] The Respondent submitted that the Applicant earned more than the high income threshold at the date of the cessation of his employment. It submitted that the Applicant's base salary was $150,000, without including compulsory superannuation contributions.[1]

[7] The Applicant submitted a grievance in relation to the termination on the following basis:

• That she felt that she had not been treated fairly or justly particularly as it related to other suitable employment within the organisation; and

• The Applicant felt that redeployment was not considered by the organisation.

[8] The issue of genuine redundancy is not relevant for the purposes of this decision. The pertinent question is whether the Applicant's income falls below the high income threshold.

[9] Section 396 of the Act sets out the initial matters to be decided before the merits of the Applicant's application can be determined:

396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.

[10] It is not contested that the Applicant filed within the 21 day statutory timeframe specified in s 394(2) of the Act. Therefore, the next step and the issue to be determined, which was raised by the Respondent, is whether the Applicant is protected from unfair dismissal under s 396(b) of the Act.

[11] Section 382 provides the relevant circumstances where the Applicant 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

(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] It is not contested that the Applicant has completed the minimum employment period in s 382(a). In regards to s 382(b), the Applicant is not covered by a modern award or an enterprise agreement, and therefore, the issue to determined is whether the Applicant's annual rate of earnings was less than the high income threshold.

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

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.

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

(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.

[15] It is significant to make a determination regarding how to calculate what the actual annual rate of earning is. Unlike many of the decisions of the Commission, the facts of this case turn to consideration of what the base rate of pay is, as opposed to including any other benefits other than the payment of money.

[16] In calculating the annual rate of earnings, the following extract from Zappia v Universal Music Australia Pty Limited T/A Universal Music Australia is often cited:[2]

[9] 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 that time, not the annual earnings to that time (the amount earned in the 12 months to that time).

[17] In Trezise v Universal Music Australia Pty Ltd, Commissioner Harrison encountered a similar question regarding whether a period of unpaid parental leave would be excluded in determining whether the applicant's earnings fell within the high income threshold.[3] The Commissioner relevantly stated the following:[4]

[4] At the time of the Applicant's termination the high income threshold was $113,800.

[5] It is not contested that the Applicant's annual rate of earnings (excluding superannuation) at the time of her dismissal was $125,000 in accordance with her contract of employment dated 26 February 2010.

[6] Counsel for the Applicant, however, argued that the annual rate of earnings were below the high income threshold because the Applicant was on unpaid parental leave for a period of approximately 5 months.

[7] It was submitted it would be impracticable and unfair not to take into account unpaid leave when determining the rate of earnings.

[8] Whilst counsel for the Applicant conceded that the Act and the regulations are silent on whether unpaid parental leave has an impact on the determination of a person's rate of earnings, he submitted that regulation 3.05(4) provides a formula that discounts days on leave without full pay.

[9] Regulation 3.05 states:

"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.

(2) Subregulations (3), (4) and (5) apply if part or all of the person's income at the time of the dismissal is paid as piece rates that are:

(a) set by reference to a quantifiable output or task; and

(b) not paid as a rate set by reference to a period of time worked.

(3) If the person was continuously employed by the employer and was not on leave without full pay at any time during the period of 12 months immediately before the dismissal, the total amount of piece rates paid or payable to the person in respect of the period of 12 months ending immediately before the dismissal is an amount for subparagraph 382(b)(iii) of the Act.

(4) If the person was continuously employed by the employer and was on leave without full pay at any time during the period of 12 months immediately before the dismissal, the total of:

(a) for the days during that period that the employee was not on leave without full pay - the actual piece rates received by the employee; and

(b) for the days that the employee was on leave without full pay - an amount worked out using the formula:

is an amount for subparagraph 382(b)(iii) of the Act. ..."

[10] It can be noted from the above that regulation 3.05(4) provides for persons who are paid piece rates and whilst the formula deducts unpaid leave, it is in the context of where there is no annual rate of earnings. That is not the situation in this matter and any reliance on a regulation related to piece work is irrelevant misconceived.

[11] The consistent use of the word "earnings" in ss332 and 382(b)(iii) as distinct from the term "payment" is no mere coincidence. Counsel for Universal submitted that if a period of unpaid leave such as parental leave was to be considered for the purpose of determining the annual rate of earnings, referred to in s.382, parliament would have said so plainly and expressly. I agree.

[12] In my view a period of unpaid leave does not affect the annual rate of earnings as referred to in s.328.

[13] I find that the applicant's annual rate of earnings exceeded the high income threshold and accordingly Fair Work Australia has no jurisdiction to deal with the substantive application. (emphasis added)

[18] The Applicant raised the matter that although she was only employed in October that she was required to observe the two week shutdown over Christmas. As she was not entitled to paid leave, she took unpaid leave during this period.

[19] In light of the case law cited above, I find that it is not necessary to make an adjustment to the annual rate of earnings for a period of unpaid annual leave. It is clear that the Act accounts for such alterations where an annual rate of earnings is not present, as in the case of piece rate workers. Drawing on the authority above, Commissioner Harrison drew upon the fact that Parliament used the language of "earnings" as opposed to "payment". While I adopt this analysis, I feel it is important to draw on the characterisation as an annual rate of earnings, as opposed to merely a singular instance. In the case at hand, a unique election to use unpaid annual leave, even during a mandatory shutdown, would not adjust the annual rate of earnings of the Applicant - the rate of earning remains $150,000.

[20] I am satisfied that Applicant's remuneration exceeded the high income threshold. A modern award does not cover her and equally an Enterprise Agreement does not apply. The Applicant's base salary of $150,000 exceeds the high income threshold of $148,700. Therefore, the Applicant was not a person protected from unfair dismissal and accordingly the Commission does not have jurisdiction to consider her unfair dismissal application.

[21] The application is dismissed. I Order so.

[1] Section 332(c) Fair Work Act 2009. Non-compulsory contributions are included: Roberts v High Professional Productions Pty Ltd [2010] FWA 3462.

[2] Francesco Zappia v Universal Music Australia Pty Limited T/A Universal Music Australia [2012] FWAFB 6108, [9].

[3] Tamara Trezise v Universal Music Australia Pty Ltd [2011] FWA 5960.

Printed by authority of the Commonwealth Government Printer