Fair Work Act 2009_

s 394 - Application for unfair dismissal remedy

Application for relief from unfair dismissal - high income threshold - whether commissions determined in advance - whether car allowance a reimbursement - applicant's earnings below high income threshold - jurisdictional objection dismissed.

[1] This decision arises from an application for relief from unfair dismissal, pursuant to s 394 of the Fair Work Act 2009 (the 'Act'). Mr Andrew Fitzhenry (the 'applicant') claims he was dismissed from his employment with Linde Material Handling Pty Ltd (the 'respondent') on 5 November 2014. The applicant lodged an application for an unfair dismissal remedy with the Fair Work Commission (the 'Commission') on 21 November 2014. Pursuant to s 382(b) of the Act, an applicant is prevented from seeking relief from unfair dismissal if he is not covered by an award or enterprise agreement and his earnings exceed the high income threshold. Pursuant to Reg 2.13 of the Fair Work Regulations 2009 (the 'Regulations'), the high income threshold, at the time of the applicant's dismissal, was $133,000. The applicant claimed that his earnings did not include a car allowance and commissions. He was therefore below the high income threshold. On the other hand, the respondent raised a jurisdictional objection, asserting that as the applicant was a 'high income employee', he was therefore not a person protected from unfair dismissal.

[2] In determining this application, the Commission has had regard to both the Form F2 Application for Unfair Dismissal and the Form F3 Employer's Response. In addition to the Form F3, the respondent also filed an outline of submissions and a witness statement. The Commission wrote to the applicant on 9 January 2015 asking him to provide a response to the jurisdictional objection raised by the respondent. The applicant provided an outline of submissions and a witness statement. After considering the material filed by both parties, the Commission issued an Order dismissing the application on 6 February 2015. However, after further review of the material filed by both parties, I proposed, pursuant to s 603 of the Act to correct an obvious error with my Order; See: Endeavour Energy [2014] FWC 198 and Cetin v Speedie Waste Pty Ltd [2014] FWC 6318.

[3] The error I identified was advised to the parties as follows:

'After receiving the request by the applicant's representative for reasons for the decision and reviewing the material in this file, Deputy President Sams has formed the view that he based his finding that the applicant's earnings exceeded the high income threshold on a factual misreading of the nature of the entitlement for costs associated with the use of a private vehicle as an extra benefit and therefore, 'earnings' within the meaning of s 332 of the Act.'

Given this conclusion, I invited the parties to make any further submissions they wished to put on the car allowance issue. Both parties did so, and I have taken those submissions into account in this decision. These are my reasons for dismissing the respondent's jurisdictional objection.

[4] Section 396 of the Act requires the Commission to be satisfied, as to a number of preliminary matters, before considering the merits of an application for a remedy from unfair dismissal. The section is set out below:

'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.'

[5] The respondent argued that the Commission did not have jurisdiction to entertain the merits of the applicant's unfair dismissal application, as the applicant was not a person protected from unfair dismissal, in accordance with s 396(b) of the Act. A person is protected from unfair dismissal, if the criteria set out in s 382 are satisfied:

'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.'

[6] It was not in contention that the applicant had satisfied the minimum employment period required by the Act. In any event, the evidence suggests that the applicant had been employed by the respondent for just over two years. There was no evidence that the applicant was covered by a modern award or an enterprise agreement. Accordingly, the jurisdictional objection raised by the respondent confines itself to s 382(b)(iii). The respondent claimed that the applicant's annual rate of earnings placed him over the high income threshold which, at the time of the applicant's dismissal, was $133,000 per annum. The Act outlines what constitutes an employee's earnings under s 332. The relevant section is set out below:

(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;

(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.'

[7] Section 329 of the Act defines a 'high income employee' as follows:

(1) A full-time employee is a high income employee of an employer at a time if:

(a) the employee has a guarantee of annual earnings for the guaranteed period; and

(c) the annual rate of the guarantee of annual earnings exceeds the high income threshold at that time.

(2) An employee other than a full-time employee is a high-income employee of an employer at a time if:

(a) the employee has a guarantee of annual earnings for the guaranteed period; and

(c) the annual rate of the guarantee of annual earnings would have exceeded the high income threshold at that time if the employee were employed on a full-time basis at the same rate of earnings.

(3) To avoid doubt, the employee does not have a guarantee of annual earnings for the guaranteed period if the employer revokes the guarantee of annual earnings with the employee's agreement.'

[8] The respondent claims that the applicant's earnings for the purposes of s 332 of the Act, included a base salary of $89,000pa, a car allowance of $20,600pa and commissions of either $26,400 or $29,527.70pa.

[9] In support of its submissions, the respondent relied on the Full Bench decision in Jenny Craig Weight Loss Centres Pty Ltd v Margolina [2011] FWAFB 9137. In that decision, some useful observations were made as to what constitutes earnings for the purposes of s 332 of the Act. The observations of the Full Bench are extracted below:

'[19] It seems clear enough that the legislature intended to exclude bonus payments which are contingent, either because they depend on performance in some way or because management reserves the right to modify or discontinue them. On the evidence in this case it seems that both the annual bonus and the one-off five year bonus are contingent in the relevant sense. In relation to the five year bonus, there is a specific reservation of the right to alter or discontinue the plan. It is unclear, although it is likely that the same reservation applies in relation to annual performance bonuses. This cannot be determined in advance because the remuneration policy provides that: "Management has the right to modify and discontinue the remuneration plan at its discretion".'

[10] In support of his position, the applicant cited a more recent authority, that of the Full Bench decision in Foster v CBI Constructors Pty Ltd [2014] FWCFB 1976 ('Foster'). The relevant observations of the Full Bench decision are set out below:

'[39] The explanatory memorandum makes it clear that s.332(a) is solely concerned with whether or not the payment can be determined in advance. Given the text of the s.332(a) and the guidance of the explanatory memorandum, it seems clear that the purpose of the legislative note is not to exclude all overtime payments as a broad category of payments except for overtime that falls within the terms of the exclusion explicitly set out in the note (that is, overtime that is guaranteed). Instead, it seems clear that overtime that cannot be determined (or ascertained) in advance is excluded from calculating an employee's earnings for the purposes of s.332. Conversely, overtime that is guaranteed can be determined in advance, and therefore is included in calculating an employee's earnings for the purposes of s.332.

[40] The proper test is, in accordance with the text of s.332(a), whether the overtime payments that Mr Foster received for attending the regular pre-start meetings were able to be determined in advance. Whether or not the payments were guaranteed in the sense that the Respondent had a legal obligation to allocate 2.5 hours of overtime each week to Mr Foster, or whether Mr Foster had a legal right to the allocation of that overtime is of no assistance in determining whether or not the payments for the pre-start meetings could be determined in advance.'

[11] The applicant submitted that the annual sum of his earnings was below the 'high income threshold' set out under s 382(b)(iii) of the Act. The applicant identified three components of his remuneration. The relevant submission by the applicant is set out as follows:

'At the time of termination the Applicant's base salary was $89,000.00 per annum plus superannuation. He also received $20,600.00 for reimbursement of the costs associated with his work use of his private vehicle, and use of a company Blackberry. He was also entitled to participate in the respondent's commission plans.'

[12] The applicant submitted that his base salary of $89,000.00 was the only form of remuneration which was relevant for the purposes of assessing the 'high income threshold'. The applicant contended that reimbursement for costs associated with the use of his private vehicle was excluded from this consideration. I accept that submission. The authorities make clear that remuneration received by an employee for the use of his/her private vehicle, for work purposes, constitutes a reimbursement, and therefore, cannot be included as earnings for the purposes of s 332 of the Act.

[13] In Davidson v Adecco Australia [2012] FWA 8393, Booth C said at para [27]:

'[that] allowance is not wages, because it was paid in contemplation of offsetting the employee's expenses in providing, running and maintaining his own motor vehicle for the purposes of Adecco's business. The allowance compensated him for these business related costs, and cannot be fairly categorised as a payment for the applicant's work or services.'

[14] Contrary to the respondent's position, I am fortified in my conclusion that the car allowance was a reimbursement of expenses, by relying on the respondent's Motor Vehicle policy itself and the reference to the Car allowance in the applicant's contract of employment, the latter of which is as follows:

You will be required to provide your own motor vehicle to assist you in carrying out the responsibilities of this position. The vehicle make and colour will need to be approved by the Company to ensure it is appropriately aligned with the professional image of the Company. You will be required to maintain this vehicle to be safe; in good working order; and to be kept clean in keeping with the image of the Company. You will be required to cover all the costs associated with this including petrol. To compensate for this, you will be paid a car allowance of $20,600 per annum.'

[15] As is patently obvious, the applicant was not able to freely choose the vehicle he preferred and he was required to obtain a vehicle which was in keeping with the Company's image. In other words, the purchase of a particular make or colour of vehicle was not at the sole discretion of the employee, but required the Company's express approval.

[16] In addition, at cl 3.23.4, the Policy provides as follows:

'3.23.4 "The amount of the car allowance will be set at the average annual total cost associated with the Company providing a Company car at the corresponding level."'

[17] Given the respondent's own Policy terms and the relevant terms of the applicant's contract of employment, I consider the car allowance is calculated on the basis of the costs of providing a Company car, rather than the more limited costs of only running and maintaining the car. When viewed in this light, it is immaterial that the applicant should have provided receipts to account for expenditure if this was truly a reimbursement for expenditure. Nor is it relevant that there was no requirement to calculate the proportion of business and private use of the vehicle. If the respondent had wished to make this distinction, the allowance would have provided for such an arrangement.

[18] For these reasons, I find that the car allowance was a reimbursement of the costs of purchasing, running and maintaining a Company approved vehicle and should not be included in the applicant's total earnings for the purposes of s 332 of the Act.

[19] That would appear to be the end of the matter. However, in deference to the other submissions of the respondent and accepting these submissions, I make the following further comments.

[20] The respondent argued that the commissions paid to the applicant should be classified as 'wages' and therefore be included in an assessment of the applicant's earnings. It was said that, in addition to the applicant's salary and car allowance, he was entitled to either of two substantial commissions of $26,400 or $29,727.70. The respondent argued that either of these figures were minimum commissions earned by the applicant which were 'not dependent upon performance, but rather, were guaranteed'. It was said that these commissions were 'guaranteed' to be paid because they were either paid on the basis of him satisfying minimum performance requirements of his employment, or were 'allocated client commissions' for which no performance assessment was required. When so described, the respondent asserted that these commissions could not be modified or discontinued by the employer. The respondent conceded that all other commissions obtained by the applicant from the processing of 'new business' ought not be included in an assessment of the applicants earnings.

[21] The respondent further submitted that commissions earned by the applicant in the order of $26,400 were a 'mandatory and pre-determined monetary amount'. The respondent argued that a failure to secure commissions in the order of $26,400 would have been a failure to meet 'pre-set key performance indicators'. Consequently, the applicant was guaranteed $26,400 in commissions because a failure to do so would have resulted in disciplinary action being taken against him.

[22] As to the second commission amount of $29,727.70, the respondent argued that no performance was required by the applicant because these commissions were from 'allocated client sales'. In this respect, it was submitted that the applicant was guaranteed these commissions because he acted in a 'passive' capacity, processing sales which were made on his behalf and merely collecting the commission.

[23] These two figures were put as alternatives as the following extract from the respondent's submissions makes plain:

'[16] The respondent submits that part of the commissions were able to be determined in advance because they were:

(a) not dependent upon performance, but rather, guaranteed by virtue of either:

(i) pre set performance indicators (KPIs) which the applicant was required to meet as a minimum, base-level of performance, such that would secure his job and avoid termination for underperformance (the respondent will show that commissions in this category amounted to $26,400), or

ii) 'allocated' client commissions which required no performance by the applicant but were provided to the applicant by the respondent (the respondent will show that commissions in the category amounted to $29,527.70), and

(b) not able to be modified or discontinued because they were agreed (by virtue of a contractual entitlement and an agreement about minimum KPIs).

[17] The respondent submits that the amounts in 16(a)(i) and (ii) above are alternatives, and if the commission accepts that either one of them met the test as set out in Jenny Craig, the applicant's earnings will be over the high income threshold.'

[24] Given that I accept that the car allowance was a reimbursement for the use of the applicant's private vehicle and was therefore not earnings for the relevant statutory purpose, the respondent's reliance on alleged 'guaranteed' commissions is academic. This is so, because on either basis the figures result in a total below the high income threshold. That is:

[25] Having regard to s 382 and s 332 of the Act, I am satisfied that the applicant's earnings were not above the 'high income threshold'. He is therefore a person protected from unfair dismissal. Pursuant to s 603 of the Act, I revoke my order of 6 February 2015 and determine instead that the jurisdictional objection of the respondent is dismissed. The application will be remitted to the Unfair Dismissal Unit for further programming according to the Commission's usual protocols.

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