Dec 1416/97 M Print P6855
AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
Workplace Relations Act 1996
s.45 appeal against a decision [Print P2132] issued by Commissioner Deegan on 30 June 1997
and
(C No. 34602 of 1997)
s.170CE application for relief re termination of employment
K J Newton
and
Rofin Australia Pty Ltd
(U No. 30034 of 1997)
SENIOR DEPUTY PRESIDENT WILLIAMS
DEPUTY PRESIDENT ACTON
COMMISSIONER EAMES MELBOURNE, 21 NOVEMBER 1997
Appeal re jurisdiction
On 9 January 1997, Mr Newton, (the employee) lodged an application pursuant to s.170CE of the Workplace Relations Act 1996 (the Act) claiming relief in respect of the termination of his employment by Rofin Australia Pty Ltd (the employer) on 20 December 1996 on the grounds that the termination was harsh, unjust or unreasonable and that the termination contravened s.170CM of the Act.
On its notice of appearance, filed on 22 January 1997, the employer indicated that it objected to the Commission hearing the application on jurisdictional grounds but did not object to conciliation before determination of the jurisdictional issue. Conciliation was unsuccessful and the matter was referred to Commissioner Deegan for hearing and determination of the jurisdictional issue. This decision concerns the application by the employer for leave to appeal against the decision [Print P2132] of Commissioner Deegan issued on 30 June 1997 in which the Commissioner found that the Commission had jurisdiction to hear and determine the matter.
The jurisdictional issue was whether or not the rate of remuneration applicable to the employee immediately before the termination exceeded $64,000.00 per annum so that, by virtue of s.170CC of the Act and Regulation 30BB of the Workplace Relations Regulations, he was excluded from the operation of the relevant provisions of the Act.
At the outset of the hearing before us, counsel for the employee submitted that the application for leave to appeal should be struck out for non-compliance by the employer with the requirements of Rule 11(6) of the Commission's Rules. The employee's counsel also queried whether in fact an appeal had been instituted on the ground that the employer may not have complied with the requirements of Rule 11(1).
It is apparent from the Commission's file, and it was not denied by the employer's counsel, that, at the time the notice of appeal was lodged, it was not accompanied by any copies of the documents referred to in paragraphs (b) and (c) of Rule 11(1). Copies of such documents were not subsequently lodged nor was any application made for an exemption from any of the requirements of Rule 11(1) or for an extension of time within which to comply with any of those requirements.
Shortly after the notice of appeal was lodged, the employer's solicitors appear to have served a copy of the notice of appeal and a copy of the Commissioner's decision upon the employee's solicitors. However, it was not contested that a copy of the transcript of the original proceedings was not so served until 3 October 1997 and that a copy of the exhibits was never so served. From the material tendered at the hearing before us, we are able to conclude
· that the employer's solicitors were, at all relevant times, aware of the requirements of rule 11(6), and
· that, despite an assurance given to the employee's solicitors in a facsimile dated 12 August 1997 and repeated verbal and written requests from the employee's solicitors, the employer's solicitors made no serious attempt to comply with those requirements until threatened with the likelihood of an application being made for their client's appeal to be struck out.
This somewhat cavalier attitude to the Commission's Rules adopted by the employer's solicitors is, to say the least, disturbing. The partner in that firm of solicitors responsible for the carriage of this appeal is experienced in this jurisdiction and it is reasonable for the Commission to expect that he is familiar with the requirements of those Rules. No real or acceptable explanation has been offered to the Commission for his or his firm's lack of compliance. The Rules are made for a purpose. Such apparently deliberate and flagrant disregard for them deserves the severest reprimand. In this instance, as a result of such behaviour, the employer's opportunity to be heard in respect to the appeal was seriously jeopardised.
In our view, there is a considerable substance in an argument that the result of a failure to comply with the requirements of Rule 11(1) is that no appeal has been instituted. We are conscious, however, of the statutory injunction that proceedings before this Commission be directed to the merits of a case rather than legal technicalities. There are issues raised in this appeal that warrant consideration. Further, the employee's counsel was unable to demonstrate that the employer's failure to comply with the requirements of the Rules had caused the employee any real prejudice in respect of the preparation and presentation of his case.
Upon completion of the submissions of the parties in respect to the employee's application, we stated that we would not rule immediately on that application but would deal with it after hearing the parties as to the merits of the appeal. Having heard the parties as to the merits, we are prepared to exercise our powers under Rule 6 and dispense with compliance by the employer with the requirements of paragraphs (b) and (c) of Rule 11(1) and treat the appeal as validly instituted. For the same reasons, we also refuse the employee's application to strike out the appeal on the ground of non-compliance with the requirements of Rule 11(6). We would emphasise, however, that we do so with considerable reluctance. The approach of the employer's solicitors to the question of compliance with the Commission's Rules leaves a lot to be desired. In other circumstances, the Commission may not be so lenient.
S.170CC(1) of the Act provides that the Regulations may exclude from the operation of specified provisions of Division 3 of Part VIA of the Act certain classes of employees including:
(e) employees in relation to whom the operation of the provisions causes or would cause substantial problems because of:
(i) their particular conditions of employment; or
(ii) the size or nature of the undertakings in which they are employed.
S.170CC(2) provides:
(2) Without limiting, by implication, the class of persons that may be prescribed for the purposes of paragraph (1)(e), the regulations may identify as a class of employees for the purposes of that paragraph employees not employed under award conditions and to whom subsection (3) or (4) applies.
S.170CC(3) applies to an employee if:
(a) the employee's remuneration immediately before the termination of employment was not wholly or partly determined on the basis of commission or piece rates; and
(b) the rate of remuneration applicable to the employee immediately before the termination exceeds a rate specified or worked out in a manner specified, in the regulations (the specified rate).
One of the categories of employees excluded by Regulation 30B(1)(f) from the operation of Subdivisions B, C, D, E and F of Division 3 of Part VIA of the Act is an employee:
(i) who is not employed under award conditions; and
(ii) to whom subsection 170CC(3) or (4) of the Act applies.
Regulation 30BB prescribes that the "specified rate" for the purposes of ss.170CC(3)(b) and 170CC(4)(b) of the Act is $64,000.00 per year, subject to indexation in accordance with Regulation 30BF.
The employee in this matter was not employed under award conditions and was an employee to whom s.170CC(3) applied. As the termination of the employee's employment had occurred before 1 July 1997, indexation in accordance with Regulation 30BF was not relevant. As stated earlier, therefore, the issue is whether or not "the rate of remuneration applicable to the employee immediately before the termination" exceeded $64,000.00 per annum.
Prior to the amendments made to the Act by the Workplace Relations and Other Legislation Amendment Act 1996 (the WROLA Act), the "salary cap" for the purposes of excluding non-award employees from the operation of the termination of employment provisions was expressed in terms of "relevant wages". The term now used is "remuneration", a term which denotes a broader concept than salary or wages. "Remuneration", in our view, is properly defined as the reward payable by an employer to an employee for the work done by that employee in the course of his or her employment with that employer. It is a term that is confined neither to cash payments nor, necessarily, to payments actually made to the employee. It would include non-pecuniary benefits and payments made on behalf of and at the direction of the employee to another person out of moneys otherwise due to that employee as salary or wages.
It was common ground in the hearing before the Commissioner that, for the purposes of s.170CC(3), the employee's rate of remuneration included the annual salary of $52,000.00 and superannuation of $3,200.00, making a total of $55,120.00. What was in dispute was whether there were any non-pecuniary benefits that should have been taken into account and, if so, whether the sum total of those benefits amounted, in dollar terms, to more than $8,880.00 per annum.
The employer contended that non-pecuniary benefits arising out of the provision of the motor vehicle should be taken into account. These benefits consisted of $3,405.00 for fringe benefit tax, $7,738.00 for depreciation, $2,748.00 for finance charges, $750.00 for insurance charges, $440.00 for registration, $47.00 for RACV membership and $3,206.00 for fuel and repairs. The employer estimated that the employee used the vehicle for 95 per cent of the time for personal reasons. On this basis, it contended that the employee's rate of remuneration exceeded the specified rate.
The employee contended that not all the claimed expenses relating to the provision of the motor vehicle were relevant, queried the employer's calculations of some of those expenses and submitted that his personal use of the vehicle accounted for only 20 to 25 per cent of the time. In addition, the employee contended that an appropriate method for calculating the private benefit to him of the provision of the vehicle was to apply the kilometre rate paid to commercial travellers to the number of kilometres attributable to private use.
The employment arrangement in this case was that the employee be paid a specified annual salary and be provided with a fully maintained motor vehicle. The motor vehicle was provided as part of the total salary package, not merely for business purposes. We agree with the Commissioner's conclusion, however, that this was not a "salary sacrifice" situation. There was no suggestion in the negotiations for or the terms of the employment arrangement that the employee would forego payment of part of his salary so that he could be provided with a motor vehicle at the expense of the employer.
There are, of course, employment arrangements whereby the employer pays, on behalf of the employee or at the employee's direction, specified amounts out of the salary payable to the employee to a person other than the employee. Examples of such payments would be the payment of union and health fund subscriptions. "Salary packaging" may also include the payment of education expenses for the employee or the employee's children. In such cases, generally those payments, although not paid directly to the employee, would be considered to form part of the employee's remuneration.
Fringe benefits tax is, however, a tax imposed upon an employer and is payable by an employer, not by the employee. It is imposed upon a fringe benefit provided by an employer to an employee. The employer is free to choose whether or not to provide a particular fringe benefit to an employee. If it does so, it incurs the tax liability. Such liability is to pay an amount other than to the employee. Generally, where an amount is paid by an employer other than to an employee and other than on behalf of or at the direction of the employee, such an amount would not fall within the ordinary meaning of the word "remuneration".
In a genuine "salary sacrifice" situation, the payment of fringe benefits tax would still nominally be a payment by the employer of a tax imposed upon the employer. However, it might possibly be viewed as the payment by an employer, at the direction of and by arrangement with the employee, to a person other than the employee of an amount that would otherwise be part of the employee's total salary package. If that were the case, then such a payment may arguably be included in calculating the "remuneration" for the purposes of s.170CC(3).
However, as we have stated earlier, the employment arrangement between the employer and the employee in this case did not constitute such a situation. In our view, therefore, Commissioner Deegan was not in error in concluding that, in the circumstances of this case, any fringe benefit tax paid by the employer in relation to the provision of the motor vehicle should not be included as a non-pecuniary part of the employee's "rate of remuneration" for the purposes of s.170CC(3).
In dealing with the question of the motor vehicle, Commissioner Deegan adopted the principles enunciated by Senior Deputy President Watson in Condon v G James Extrusion Company1, namely that -
1. the private benefit derived by an employee through the provision to such an employee of a fully maintained motor vehicle will constitute remuneration for the purpose of section 170CC(3) and (4), and
2. for the purposes of determining remuneration, the focus should be upon the private benefit derived by the employee and the provision of a motor vehicle for business purposes would not form part of the remuneration.
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 a motor vehicle as a piece of equipment supplied by the employer to enable the employee to perform the job.2 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. Where, however, the vehicle is provided for business purposes and the employee's entitlement to private use is purely incidental, the provision of the motor vehicle should be treated no differently to the provision by the employer of any other tool or piece of equipment essential to the performance of the job.
The Commissioner's adoption of these principles did not constitute any error on her part. Nor did she fall into error in dealing with the matter on the basis that the real dispute between the parties was as to the level of private benefit to be taken into account. In doing so, in our view, she clearly acted on the basis that the motor vehicle was, in this case, provided as part of the employee's salary package. As we have stated earlier, the employment arrangement was that the motor vehicle was provided as part of the total salary package, not merely for business purposes.
In relation to the provision of the motor vehicle, the questions for determination, therefore, were:
· what expenses incurred by the employer in the provision of that vehicle should be taken into account, and
· what percentage use of the vehicle should be attributed to the employee's private or personal use.
"Depreciation" is defined in the Macquarie Dictionary as -
1. a decrease in value due to wear and tear, decay, decline in price, etc.
2. the notional amount of money involved in such a decrease, viewed as a cost.
The second of these meanings reflects the fact that taxation authorities often allow the owner of capital equipment used for the purposes of obtaining income to claim a deduction from that income in respect to the depreciation of that equipment. The amount claimed by the employer in this case was the amount claimed by it for taxation purposes. The Commissioner rejected that contention in so far as it included the full amount claimed for depreciation. We agree with the Commissioner's statement that such an amount -
is not necessarily related to the amount of benefit [the employee] might receive as a consequence of avoiding the depreciation of a vehicle he may have been required to purchase had [the employer] not provided the car.
The Commissioner clearly recognised that there may be some benefit to an employee arising out of the avoidance of depreciation of a vehicle that, but for the provision of a vehicle by the employer, that employee may have been required to purchase for private use. However, there was no evidence before her as to the value of that benefit. Nor was there any evidence that would justify a conclusion that the employee would have been required to purchase a motor vehicle if the employer had not provided him with one. In the circumstances, it was reasonably open to the Commissioner not to take into account the amount claimed by the employer in respect to depreciation either in whole or in part.
The Commissioner also found that the costs of fuel and repairs claimed by the employer were disputed by the employee and were "not substantiated by documentary evidence". We are satisfied that this conclusion was reasonably open to her.
In relation to this aspect of the matter, the Commissioner accepted the contention of neither party but did conclude that the vehicle "was used for business purposes for a significant part of the time". Again, we are satisfied that this conclusion was reasonably open on the evidence. The Commissioner also concluded that the application was within jurisdiction as, using either the employer's or the employee's contentions about the ratio of business/personal use of the vehicle and the cents per kilometre formula suggested by the employee, the personal benefit derived by the employee from the use of the vehicle was less than $8880.00. In the circumstances of this matter, we are satisfied that this conclusion was reasonably open to the Commissioner.
In this case, Commissioner Deegan reached her conclusions on the basis of the evidence before her. She was entitled to do so. If such conclusions are reasonably open to her on that evidence, it is not appropriate for a Full Bench to intervene on appeal, even if it might have formed a different conclusion. If the party seeking to establish a contention fails to support that contention by appropriate and relevant evidence, it runs the risk of having that contention rejected.
Having considered the manner in which the case was conducted before her and the nature and content of the evidence, we are satisfied that the conclusions the Commissioner reached were reasonably open to her and that there are no grounds for interfering with her decision. Leave to appeal is therefore refused. The application will now be referred to Commissioner Whelan for the issue of a certificate in accordance with s.170CF of the Act.
BY THE COMMISSION:
SENIOR DEPUTY PRESIDENT
Appearances:
A. Lindemann for Rofin Australia Pty Ltd.
J. Brassil and A. Winnett for K. J. Newton.
Hearing details:
1997.
Melbourne:
October 6.
Decision Summary
Termination of employment - unfair dismissal - unlawful termination - appeal - jurisdiction - whether remuneration exceeds $64,000 - "salary cap" - "remuneration" defined - salary packaging - genuine salary sacrifice - fringe benefits tax (FBT) - motor vehicle expenses - depreciation - fuel and repairs - percentage of private use - current statutory framework for salary cap - compliance with Commission's Rules in lodging appeal - at hearing at first instance Commission determined that employee's rate of remuneration did not exceed $64,000 - "remuneration" denotes a broader concept than salary or wages - in Full Bench's view remuneration is properly defined as the reward payable by an employer to an employee for the work done by that employee in the course of his or her employment with that employer. It is a term that is confined neither to cash payments nor, necessarily, to payments actually made to the employee. It would include non-pecuniary benefits and payments made on behalf of and at the direction of the employee to another person out of moneys otherwise due to that employee as salary or wages - employer contended that non-pecuniary benefits arising out of provision of motor vehicle should be taken into account, comprising amounts for FBT, depreciation, finance changes, insurance charges, registration, RACV membership and fuel and repairs. Employer argued that employee used vehicle for 95 per cent of time for personal reasons, thereby exceeding specified rate of remuneration - Full Bench concluded motor vehicle provided as part of total salary package not salary sacrifice - observations as to other types of salary packaging generally considered to be part of employee's remuneration - scenarios where FBT would and would not be included as remuneration - Commission not in error in concluding in this case that FBT not part of employee's remuneration - general principles on ascertaining private benefit derived by an employee through provision of fully maintained motor vehicle - Condon v G James Extrusions Company [Print N9963] applied - question of what expenses should be taken into account - depreciation - rejected contention that full amount claimed for depreciation be included in expenses provided to employee - the costs of fuel and repairs claimed by employer as expenses were not substantiated by documentary evidence - it was reasonable for Commission to conclude that fuel and repairs not part of remuneration - accepted Commission's conclusion that the vehicle was used for business purposes for significant part of time and application within jurisdiction - non-compliance with Commission Rules in lodging appeal - consequences of non-compliance - waiver of rules - leave to appeal refused - matter referred to Commissioner for issue of certificate | ||||
s45 appeal by Rofin Australia P/L against decision [Print P2132] of Deegan C on 30 June 1997 | ||||
C No 34602 of 1997 |
Print P6855 | |||
Williams SDP Acton DP Eames C |
Melbourne |
21 November 1997 | ||
Printed with the Authority of the Australian Industrial Relations Commission
<Price code C>
** end of text **
2 Magagna and another v FAI Workers' Compensation Vic. Pty Ltd Unreported, Industrial Relations Court of
Australia, Millane JR, 21 September 1995, Decision No. 628/95; see also Witkowski+ and API Securities Pty Ltd
Print P2850.