Fair Work Act 2009

s.394 - Unfair dismissal

Summary: section 394 - jurisdictional objection - high income threshold - whether covered by industrial instrument - whether management position - principal purpose test.

[1] On 30 October 2012, Mr Robert John De Jong ("the Applicant") made an application under s.394 of the Fair Work Act 2009 ("the Act") seeking an unfair dismissal remedy in respect of the termination of his employment by Ausenco Services Pty Ltd ("the Respondent") on or about 17 or 22 October 2012, ostensibly for reasons of redundancy.

[2] The Respondent has raised a jurisdictional objection to the above application being heard on the ground that the Applicant was not a person protected from unfair dismissal for reason that none of the requirements of ss.382(b)(i),(ii) or (iii) of the Act applied to the Applicant.

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.

[3] In relation to earnings, s.332 of the Act provides that:

(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;

(c) 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 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.

Does s.382(b)(i) of the Act apply to the Applicant?

[4] To determine whether or not a modern award applies to the Applicant it is necessary to determine the principal purpose for which the Applicant was employed by the Respondent. The test for determining industrial instrument coverage was articulated in the Full Bench decision of the Australian Industrial Relations Commission (as it then was) in R Brand v APIR Systems Limited. That decision, in turn, cited the decision of the Full Bench of the Australian Industrial Relations Commission (as it then was) in Carpenter v Corona Manufacturing Pty Ltd, which stated relevantly as follows:

"In our view, in determining whether or not a particular award applies to identified employment, more is required than a mere quantitative assessment of the time spent in carrying out various duties. An examination must be made of the nature of the work and the circumstances in which the employee is employed to do the work with a view to ascertaining the principal purpose for which the employee is employed. In this case, such an examination demonstrates that the principal purpose for which the appellant was employed was that of a manager. As such, he was not "employed in the process, trade, business or occupation of ... soliciting orders, obtaining sales leads or appointments or otherwise promoting sales for articles, wares, merchandise or materials" and was not, therefore, covered by the Award."

[5] The Applicant holds a Bachelor of Science degree from a South African university. Because it has relevance below, I add at this point that the Applicant does not hold a professional engineering qualification.

[6] The Applicant contends that he was employed on 21 February 2011 under a contract of employment to perform duties as a Senior Project Manager.

[7] The position description for this position set out the key accountabilities as including the following:

"Deliver each project or subproject work area according to contractual requirements by managing the scope of work, quality, budget, schedule, resources, risks and issues throughout the project life-cycle and maintaining operational lines of communication with all relevant stakeholders."

[8] The key responsibilities include - amongst numerous others:

• representing the Respondent in the delivery of the project in the administration of the head contract in discharge of delegated authorities;

• define project roles; responsibilities and accountabilities, and structure the senior Project organisation.

[9] The Applicant was further required to deliver accurate and meaningful project reports by tracking actual performance against planned performance, identifying, defining and closing out risk.

[10] The position also required the Project Manager to effectively manage scope changes and trends and actively identify quantity, cost and time trends and manage the change process. The position also required the Project Manager to define scopes of services and scopes of facilities/work across all disciplines including engineering, procurement and construction.

[11] The position also required that the Project Manager provide leadership and guidance to the project members and foster team spirit in accordance with the Respondent's core values and make recommendations for subordinate employees. The position also required the Senior Project Manager to understand and manage the various stakeholder and statutory relationships and expectations, which requires a combination of people and technical skills.

[12] The position was offered on the basis of being subject to clause 3 of the contract of employment, that "you may occasionally be required to perform other duties to suit business needs."

[13] The position description was signed and initialled on each page by the Applicant.

[14] At the time of his engagement the Applicant's fixed annual base salary exclusive of superannuation was $275,000 (or $299,750 inclusive of superannuation). On 1 January 2012 the Applicant's fixed annual base salary (inclusive of superannuation) amounted to $310,650.

[15] The Applicant's wage records show that the Applicant earned for the 12 months prior to his dismissal $296,871.13 (exclusive of superannuation). The Applicant's perspective on his annual earnings is set out further below.

[16] The Respondent contends, simply, that the principal purpose of the Applicant's position was managerial in nature and beyond the scope of any modern award. The Applicant contends otherwise.

[17] The Applicant argues that he never fulfilled the role of a Manager "as the various positions carried out (see above) during employment at Ausenco were not those of a "Senior Project Manager" but that of inferior non-management positions."

[18] The Applicant explained that after he had been employed initially (as of 21 March 2011) he performed duties putting together a tender submission or proposal for a West African project. It appears whilst in the course of that activity he was appointed as Area Manager for an upgrade project - the Kestrel Coal Mine Project near Emerald.

[19] In that position the Applicant claimed that he in fact reported to the Senior Project Manager for that construction project.

[20] Whilst performing the functions of Area Manager, the Applicant's evidence was that he was required to provide technical input into the construction and procurement packages and to assist and monitor project engineers. In the course of so doing he arranged meetings with the project engineers and identified problems in the various work packages. He then reported those problems to the project manager and the client and advised how the problems as identified would be rectified at a technical level.

[21] The Applicant also claimed that in the course of that project he provided a mentoring function in relation to project engineers.

The Respondent led evidence that the key accountabilities for an Area Manager included a wide range of matters such as developing and implementing construction practices, standards and planning processes for the project; executing the construction portion of project plans through detailed planning and day to day direction of the field activities; preparation and planning resources for a project and forecasting of costs; and establishing, authorising and implementing project plans and strategy, including controlling project expectations for labour, equipment, material and services and to ensure field operations are within budget, including the management of any scope, cost, time and schedule changes to a project.

[22] Thereafter (and that is from October 2011) the Applicant performed duties, he claims, as project engineer, on the Constancia copper mine project which is located in the Andes in South East Peru. The Applicant claimed that the position he filled was a position well below his substantial experience in both senior project and construction management. The Applicant contends that this was recognised by the Respondent (in the form of Mr Howard Carnew, Director, Project Delivery) and there were several undertakings given that the position would be rectified when a new project commenced.

[23] In the course of fulfilling this position, which essentially concerned closing out the project from its Australian end, the Applicant gave evidence that he liaised with the project engineers in order to collate the technical information to put into the procurement and construction packages. It appears also that he was a coordinator and a reviewer of the work and procurement packages to ensure they were properly designed.

[24] The Applicant explained that he subsequently was appointed into an area management role in respect of the same project. On the Applicant's own evidence at least he appears to have performed functions in relation to reviewing the Project Service Manager's responsibilities; ensuring resources were kept up on the project or else terminated as the case may be; and checking all reporting was done on time and that the project was properly scheduled.

[25] Generally the Applicant argued that the positions he held in the course of two projects as an Area Manager could not be deemed to be management positions, nor could his claimed position as a project engineer for the initial period of his involvement in the Constancia copper mine project.

[26] Given the above, the only Modern Award which could apply to the Applicant is the Professional Employees Award 2010 ("the modern award"). The modern award's coverage provisions do not apply to the Respondent (given that the modern award covers employers throughout Australia principally engaged in the information technology industry, the quality auditing industry or the telecommunications services industry and their employees). Further, the modern award makes provision for no classifications in Schedule B that bear any proximity or similarity to the functions of Project Manager, Area Manager or project engineer in the terms described by the Applicant. The Applicant is not a Professional or Experienced Engineer for the purposes of that modern award. The Applicant has no engineering qualifications. The source of his qualifications is excluded from the Academic Schedule. Nor does the Academic Schedule that applies to Professional Scientists accommodate the source of the Applicant's academic qualification.

[27] I add that the level at which the Applicant was remunerated is also strongly suggestive that the modern award was not intended to apply to his position(s).

[28] No modern award applies to the Applicant.

Does s.382(b)(ii) of the Act apply to the Applicant?

[29] The Applicant also appears to contend that an enterprise agreement applied to his position. In this respect he raised the existence of the Ausenco Queensland Coal Operations Enterprise Agreement 2012 ("the Agreement"), which was approved on 13 June 2012:

"No mention or reference is made of the existence of the "Ausenco Queensland Coal Operation Enterprise Agreement 2012", dated Brisbane, 13 June 2012 and how this will apply to any Ausenco "Coal" project staff member that may be appointed to site. No mention is made of the discussion between [myself] and [then] then Manager Mr Howard Carnew that they may be a need for [me] to be appointed to site."

[30] The Respondent contests the application of this agreement on a number of grounds.

[31] I make the point firstly that clause 1.6 of the Agreement expressly applies to coal operation employees who perform duties in the coal handling processing plant, process/laboratory technicians and plant operators. The agreement excludes such classes of employees as supervisors, management and executive personnel amongst others (including employees engaged in the installation of construction site buildings and related services).

[32] Clause 2.3 of the agreement sets out the three levels of classification of coal operation employees covered by the agreement. The first level is for new coal operation employees who are new entrants. The second level concerns coal operation employees who are competent to perform the tasks as required which include general labouring and elementary tasks as required. The third level includes coal operation employees who were assessed by the employer as being competent to perform the required tasks and operating above the level 2 coal operation employee classification. Level 3 employees may be required to train and coordinate the work of others. However, an employee at this level will perform general labouring and elementary tasks as required at levels 1 and 2.

[33] Demonstrably, the duties performed by the Applicant do not fall within these three classifications.

[34] An examination of the position descriptions in the agreement at Appendix 1 thereof shows that the duties carried out by the Applicant in this matter do not in any way align with position descriptions such as those applying to shift supervisors, process technicians, or laboratory technicians.

[35] The level at which the Applicant was remunerated is also strongly suggestive that the agreement was not intended to apply to his position(s).

[36] No enterprise agreement applies to the Applicant.

Does s.382(b)(iii) of the Act apply to the Applicant?

[37] The high income threshold was indexed to $123,300 from 1 July 2012 pursuant to Regulation 2.13 of the Fair Work Regulations 2009.

[38] The Applicant held that his earnings fell under the high income threshold.

[39] He claimed that his "annual earnings" for "the financial year starting 1 July 2012 to 22 October 2012" amounted to $103,316.78 (excluding 9% superannuation) and were "significantly below the high income threshold of $123,300.00 as applicable from 1st July 2012". The Applicant appeared to be claiming that the annual rate of earnings was referrable to the part of the financial year alone in which his employment was terminated.

[40] As is set out above, the Respondent contended that the Applicant's wage records show that he earned for the 12 months prior to his dismissal $296,871.13. The Respondent supported its claims in this regard by providing a copy of the correspondence directed to the Applicant on 9 January 2012 concerning his annual remuneration review, which stated that the Applicant's total fixed remuneration was $310,650 per annum (which included base salary and superannuation paid in accordance with the Superannuation Guarantee Administration Act 1992).

[41] The Respondent tended further payroll information to the same end.

[42] In view of the evidence in this matter, I find that the Applicant's annual rate of earnings exceeded that specified as the current indexed high income threshold.

[43] Whilst the Applicant is a person who was an employee who had completed a period of employment with the Respondent of at least the minimum employment period, he was not an employee who had been covered by a modern award for the purposes of section 382(b)(i) of the Act. Neither was he a person to whom an enterprise agreement applied for the purposes of section 382(b)(ii) of the Act. Nor was he a person whose annual rate of earnings was less than the high income threshold for the purposes of section 382(b)(iii) of the Act.

[44] It appears to me that the principal purpose of the position or positions the Applicant held with the Respondent were of a type that stand outside much of the modern award system and are not contemplated by the relevant enterprise agreement. They very much appear to be duties associated with a managerial level of activity. The Applicant's level of remuneration is arguably indicative of the same observation.

[45] As a consequence of my findings as set out above, the Applicant is not a person who is protected from unfair dismissal and able to make an application for relief under section 394 of the Act. Therefore the application to this end is dismissed.

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