[2012] FWA 3614 |
|
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mr Warren McIIwraith
v
Toowong Mitsubishi Pty Ltd
(U2011/11162)
COMMISSIONER CRIBB |
MELBOURNE, 30 APRIL 2012 |
Application for unfair dismissal remedy – jurisdiction - high income threshold - objection dismissed.
[1] This decision concerns an application by Mr Warren McIIwraith (the applicant) for an unfair dismissal remedy under section 394 of the Fair Work Act 2009 (the Act). It is alleged that the termination of his employment by Toowong Mitsubishi Pty Ltd (the respondent) was harsh, unjust or unreasonable. The applicant is seeking a remedy in respect of his dismissal.
[2] The respondent lodged a number of jurisdictional objections to the application. These were on the grounds that the applicant was not covered by a modern award or enterprise agreement; the applicant’s annual rate of earnings exceeded the high income threshold and that the termination of the applicant's employment was a genuine redundancy. A conciliation conference that took place via telephone on 27 September 2011 was unsuccessful.
[3] A hearing took place on Tuesday, 17 January 2012 which dealt with, in part, the respondent’s jurisdictional objections. The first ground was heard, namely, that the applicant was not covered by a modern award or enterprise agreement. It was common ground between the parties that the applicant was not covered by an enterprise agreement. Following submissions regarding whether or not the applicant was covered by a modern award, the Tribunal determined in transcript that Mr McIIwraith was not covered by a modern award. 1
[4] There was witness evidence and submissions from the parties regarding whether or not the applicant's annual rate of earnings exceeded the high income threshold. This aspect of the matter was unable to be finally determined due to a lack of information. Therefore, at the conclusion of the hearing, it was agreed that the parties would reach agreement regarding the number of kilometres travelled by Mr McIIwraith in the last financial year and that this would be forwarded to the Tribunal by Friday, 27 January 2012. The parties were also able to provide short additional submissions.
[5] In accordance with the basis on which the hearing ended on 17 January 2012, the respondent filed further written submissions on 27 January 2012 together with two additional affidavits from Mr Rinkevich and an affidavit from Mr Craig Henderson, General Manager of Beaudesert Motors Pty Ltd trading as Scenic Motors Beaudesert. All three affidavits had numerous documents attached. Mr McIIwraith also filed written submissions on 3 February 2012. It does not appear from the material before me that the parties were able to reach agreement on the number of kilometres travelled by Mr McIIwraith.
[6] On receipt of this information, together with the submissions (written and oral) and the witness evidence, the Tribunal was to reach a decision regarding the high income threshold objection on the papers. This is that decision.
HIGH INCOME THRESHOLD
[7] The second limb of the respondent's first jurisdictional objection was that, pursuant to section 322(iii), Mr McIIwraith earned in excess of the high income threshold.
[8] It was agreed between the parties that the applicant’s ordinary income from 1 July 2010 to 30 June 2011 was $87, 500.39. 2
[9] The respondent also contended that Mr McIIwraith earned bonuses and commissions. These were on the basis of an agreement on 28 July 2008 that, from 1 July 2008, Mr McIIwraith would be paid a commission based on 5% of the bottom result per month after Managers’ commissions were paid. 3 Between 15 October 2008 and 17 August 2011, Mr McIIwraith was paid $114,716.28 in bonuses/commissions.4 It was agreed between the parties that Mr McIIwraith had earned $45,103.23 in bonuses and commissions between 1 July 2010 and 30 June 2011.5
[10] In addition, it was said by the company that Mr McIIwraith had 100% unrestricted private use of a motor vehicle and a fuel allowance of 500 litres per month. Between 1 July 2010 and 30 June 2011, it was common ground that Mr McIIwraith was supplied with five cars - a Ford Falcon XR6 sedan, a Ford Falcon XR6 Turbo sedan, 2 Ford FG Falcon G6 sedans - 50th anniversary edition and a Hyundai I45 sedan. 6 Mr McIIwraith disputed the company’s contention that a Ford Falcon GB sedan Limited Edition (925MTP) had also been provided to him during this period. He pointed to Mr Henderson’s affidavit to which was attached a sale contract for this vehicle which was dated 15 June 2010. It seems that the customer made a cash payment for the vehicle on 15 June 2010. Therefore it would not be probable that Mr McIIwraith was driving this vehicle two weeks later, on 1 July 2010.
[11] The company argued strongly that the approach set out by the Full Bench in Fewings v Kunbarllanjnja Community Government Council 7 (Fewings) should not be followed in assessing the real or notional value of the motor vehicle in this case. It was submitted that it would be unfair to allow the applicant to benefit from the unrestricted personal use of motor vehicle (at substantial cost to the company) without a corresponding entitlement to count the value of the vehicle towards the applicant’s income.8 Due to the respondent being a car dealership, accurate values of the various vehicles were able to be provided - both the wholesale price, the manufacturer’s list price and the RedBook valuations.9
[12] Additional arguments were put in the respondent's second tranche of written submissions 10 in support of the contention that the Fewings approach was inappropriate. It was argued that:
The respondent provided the following calculations:
Applicant’s ordinary earnings |
$87,500.39 |
Average cents per kilometre |
$18,033.04 |
Depreciation |
$8,000 (over one year as opposed to 5) |
Extra fuel allowance |
$6,150 (above RACQ guide ) |
Registration and insurance |
$1,400 |
Total annual earnings |
$121,083.43 |
[13] On the other hand, it was argued by Mr McIIwraith that the Caltex fuel card, with which he was provided, was limited to 500 litres per month and was not an allowance. 15 In the 12 months preceding his dismissal, Mr McIIwraith indicated that his fuel usage was 1417.43 litres.16
[14] Mr McIIwraith also submitted that, as the Ford Falcon G6 sedan (925MTP) should be deleted from the list, 4650 kms should therefore be removed from the respondent's estimate of the kilometres driven during the 2010/2011 financial year. This would result in a figure of 15,409 kms rather than 20,059 kms. It was contended that, even the revised figure could only be an estimate, as he was not the only driver for any of the vehicles and therefore was not solely responsible for the kilometres. 17
[15] It was contended that a more accurate method of calculating the kilometres travelled was based on his fuel usage over the previous 12 months. This was said to have been 1417.43 litres. 18 Based on published fuel economy figures for a 2011 Ford Falcon FG XR6 sedan19 of 9.9L/100km, Mr McIIwraith calculated that the distance travelled was 14,317 kms.20
[16] Mr McIIwraith submitted that demonstrator vehicles are trading vehicles and are not subject to depreciation. Therefore, the additional depreciation sought by the respondent, over and above the RACQ Guide provision, should not be considered. 21
[17] Mr McIIwraith’s calculations of his earnings was:
Applicant’s ordinary earnings |
$87, 500.39 |
Average cents per kilometre (89.90c/km x 14,317 kms) |
$12, 870.98 |
Total annual earnings |
$100,371.37 |
The Legislation
[18] With respect to the protection of a person from unfair dismissal, section 382 of the Act provides:
“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.”
[19] In relation to earnings, s.332 of the Act provides that:
“(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 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.”
Ordinary income
[20] The parties agreed that Mr McIIwraith’s ordinary income from 1 July 2010 to 30 June 2011 was $87,500.39. 22
Bonuses and commissions
[21] The company also argued that, over the same period, Mr McIIwraith was paid $45,103.23 in bonuses and sought that this figure be included in the calculations. This was on the basis that the 5% commission of the business’s monthly profit after Directors’ commissions had been paid, had been agreed in advance in writing.
[22] I have carefully considered the company’s submissions and have formed the view that these commissions should not be taken account of in establishing Mr McIIwraith earnings. The Note to section 332 (2) of the Act gives examples of payments which are not included - “commissions, incentive-based payments and bonuses...”
[23] Section 332 (2) (a) specifies “payments the amount of which cannot be determined in advance.” (Italics added) In this case, it was agreed in advance that 5% of the monthly profit after directors’ fees were paid, would be paid to Mr McIIwraith as commission. The amount of the monthly payments could not be determined in advance because the amount was dependent on the profitability of the business each month which could not have been known in advance. It can be seen from the commissions and bonuses paid to Mr McIIwraith in the last 12 months of his employment that the same amount of money was not paid twice. The monthly commission payments ranged from $88.62 to $1695.37. 23 The quantum of the bonuses also differed month-to-month and ranged from $347.89 to $9764.75.24
Non-monetary benefits
[24] The main disagreement between the parties was with respect to the non-monetary benefits, specifically the value of the motor vehicle and fuel card.
[25] As has been set out in paragraph 10, between 1 July 2010 and 30 June 2011, Mr McIIwraith was provided with a fully maintained vehicle (s). It was the company's contention that 100% of all of the kilometres travelled in the vehicles was for the applicant's private use. Mr McIIwraith argued that he was not responsible for all of the kilometres travelled. It was his evidence that the motor vehicles had generally been under factory sponsored demonstrator plans and that they had been used for demonstrations. For the period from 1 July 2010 to 30 June 2011, however, he said that the vehicles were not used for that purpose. 25 Therefore, I find that Mr McIIwraith had 100% personal use of the motor vehicles.
[26] At the end of the hearing on 17 January 2012, the parties were requested to reach agreement on a number of kilometres travelled by Mr McIIwraith. Unfortunately, no agreement was reached. In its additional written submissions, the company argued that, based on the odometer readings at the time of sale of the 6 vehicles provided to the applicant, the total kilometres travelled were 20,059. 26 As set out above, it is most probable that the Ford Falcon G6 sedan Limited Edition (925MTP) did not fall within the relevant period. Therefore, 4560 kms will be deducted from the company's total. This would result in a figure of 15,409 kms.
[27] Mr McIIwraith’s calculations were based on the number of litres of fuel used multiplied by the fuel economy figure which resulted in a total of 14,317 kms being travelled.
[28] Having considered the submissions put by both parties, and recognising that there are imperfections in both propositions, I accept the company's estimate of kilometres travelled - 15,409 kms.
[29] Central to the company submissions regarding the real or notional value of the motor vehicle and fuel allowance was the argument that the Fewings calculation method should not be utilised to determine the vehicle component of the applicant’s remuneration package. The other bases for this contention have been discussed in paragraphs 11 to 12 above.
[30] I have given great thought to the company’s submissions and the rationale for the position being put by the company has been understood. The Full Bench decision being challenged by the respondent is Fewings. This was preceded, in terms of the line of authorities on this issue, by the Full Bench decision in Rofin Australia Pty Ltd v Newton 27 (Rofin). In this case, the Full Bench was dealing with a situation where the applicant had used the vehicle 95% of the time the personal use. The Rofin Full Bench affirmed the principles enunciated by Watson SDP in Condon v G James Extrusion Company28 and noted that:
“These principles appear to reflect a distinction that has been made, in our view quite properly, between the provision of a motor vehicle as part of a salary package and the provision of the motor vehicle is a piece of equipment supplied by the employer to enable the employee to perform the job. Where a motor vehicle is provided to an employee in lieu of salary that might otherwise have been paid, it is appropriate that the private benefit derived by the employee from the provision of the motor vehicle be counted as part of the employee's remuneration......” 29
[31] Therefore, the private benefit of the motor vehicle that is provided as part of a salary package is counted as part of the employee's remuneration (earnings).
[32] The following year, another Full Bench established the principles by which the value of the motor vehicle component of an employee's remuneration (earnings) should be calculated - Fewings. In this case, the Full Bench was presented with two different calculation methods - the ATO formula and a variation of it. It found that the variation did not provide a reliable estimate and that the ATO formula did not cater for the actual circumstances of the particular vehicle and driver. Accordingly, the Full Bench developed a different calculation method which was subsequently affirmed, amongst others, by Full Benches in Hitchcock v Beverage Industry Environment Council 30 in February 2004 and N Anderson v STA Travel Pty Ltd31 in May 2005.
[33] I have not been persuaded that there is a sufficient basis for departing from applying the authoritative method (Fewings) for valuing the motor vehicle component of an employee's earnings. Rofin dealt with the issue of motor vehicles that were provided as part of a salary package and decided that they were to be included as part of an employee's remuneration. The Full Bench accepted the Commissioner at first instance’s calculation based on a cents per kilometre formula and business/personal use of the vehicle split. In developing its own approach to the calculation of the motor vehicle component, the Fewings Full Bench did not settle on an approach such as suggested by the company in this matter. Rather, the Full Bench said that its method would provide a more reliable estimate of the value of the motor vehicle and one more reflective of the actual circumstances. 32
[34] Accordingly, the Fewings method will be adopted in this case:
1. Annual distance travelled - 15,409 kms
2. 100% private usage
3. 15,409 kms travelled for private usage
4. RACQ estimate for Ford FG Falcon XT - 89.90 cents per km
5. $13,852.69 = the value of the motor vehicle component of the applicants earnings.
[35] In applying the Fewings method, account will not be taken of the additional depreciation nor the registration and insurance sought by the company over and above what is provided for by the RACQ Guide. The Guide specifically makes provision for depreciation and also the cost of registration and insurance. I have not been persuaded to include the additional amounts sought for the reasons set out in paragraphs 30 to 33 above.
Fuel allowance
[36] It was submitted by the company that Mr McIIwraith enjoyed the use of a fuel allowance by way of a fuel card. This was said to entitle him to a fuel allowance of 500 litres of fuel per month. As the value of this ($8100) was higher than the RACQ Guide provided for ($1950 per year), the difference of $6150 was to be added to the value of the non-monetary benefit received by the applicant. 33
[37] I have not been persuaded to add additional amounts to the components already taken account of by the RACQ Guide. In any event, the evidence before me is that, in the 12 months prior to his dismissal, the cost of the applicant’s fuel was $1913.53 which is lower than the RACQ Guide contemplates. 34
[38] Therefore, I include an amount of $13,852.69 as the value of the motor vehicle to Mr McIIwraith.
Conclusion
[39] Pursuant to section 382 (b) (iii) of the Act, I have assessed the sum of Mr McIIwraith’s annual rate of earnings and such other amounts in accordance with Regulation 3.05(6) as:
Ordinary income |
$87,500.39 |
Motor vehicle |
$13,852.69 |
Total |
$101,353.08 |
[40] At the time of Mr McIIwraith’s dismissal, 19 August 2011, the high income threshold was $118,100 per annum.
[41] On the basis of the above calculations, the sum of the applicant's annual rate of earnings together with all other applicable amounts worked out in accordance with Regulation 3.05(6), is below the high income threshold.
[42] The jurisdictional objection by the company is dismissed.
[43] The final jurisdictional objection - not a genuine redundancy - will be heard on Thursday 3 May 2012.
COMMISSIONER
1 Transcript PN 369
2 Ibid PN 402 - 407, Respondent's written submissions dated 21 December 2011 at paragraphs 4.31 - 4.33 and
Exhibit R2 at paragraphs 3.2 - 3.4 and attachment CB1
3 Exhibit R2 at attachment CB3
4 Ibid at attachment CB4
5 Ibid at attachment CB2 and Transcript PN 408 - 413
6 Respondent's written submissions dated 27 January 2011 at paragraph 7 and Applicant's response to the respondent’s
written submissions dated 3 February 2012 at paragraph 7
7 Print Q0675, 7 May 1998
8 Respondent's written submissions dated 21 December 2011 at paragraph 4.50
9 Ibid at paragraphs 4.51 - 4.62
10 Respondent's written submissions dated 27 January 2012
11 Ibid at paragraphs 9 - 12
12 Ibid at paragraphs 13 - 17 and Affidavit of Craig Henderson dated 27 January 2012 at paragraph 5.5
13 Ibid at paragraphs 18 - 21
14 Ibid at paragraph 22
15 Applicant's response to respondent's written submissions, dated 3 February 2012, at paragraphs 2, 18 - 21
16 Ibid at attachment WM1
17 Ibid at paragraphs 7 - 10
18 Exhibit R2 at attachment CB6
19 Second affidavit of Stewart Rinkevich dated 27 January 2012 at attachment SWR1
20 Applicant's response to respondent's written submissions, dated 3 February 2012, at attachment WM1
21 Ibid at page 2
22 Transcript PN 402 - 407, Respondent's written submissions dated 21 December 2011 at paragraphs 4.31 - 4.33 and Exhibit
R2 at paragraphs 3.2 - 3.4 and attachment CB1
23 Exhibit R2 at attachment CB4
24 Ibid
25 Transcript PN 414 - 441
26 Respondent's written submissions dated 27 January 2012 at paragraph 7
27 Print P6855, 21 November 1997
28 Print N9963, 4 April 1997
29 Print P6855 at page 5
32 Print Q0675 at page 5
33 Respondent's written submissions dated 27 January 2012 at paragraphs 18 - 21
34 Applicant's response to respondent's written submissions dated 3 February 2012 at attachment WM1
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