Andrew Bernadou v Sam Technology Engineers Pty Ltd [2017] FWC 3228

1 Fair Work Act 2009 s.394—Unfair dismissal Andrew Bernadou v Sam Technology Engineers Pty Ltd (U2017/3288) COMMISSIONER RYAN MELBOURNE, 7 AUGUST 2017 Application for an unfair dismissal remedy - high income threshold. [1] This decision arises from an application for relief from unfair dismissal, pursuant to section 394 of the Fair Work Act 2009 (the Act). Mr Andrew Bernadou (the Applicant) claims he was dismissed from his employment with Sam Technology Engineers Pty Ltd (the Respondent) on 10 March 2017. The Applicant lodged an application for an unfair dismissal remedy with the Fair Work Commission (the Commission) on 27 March 2017. [2] On 7 April 2017 the Respondent filed its Employer Response to the Unfair Dismissal Form F3 and in it the Respondent identified the following jurisdictional objections: that the dismissal was a case of genuine redundancy; that the Respondent is a small business and that the Applicant earned more than the high income threshold. [3] Before considering the merits of the Applicant’s unfair dismissal application the Commission is required by s.396 to decide certain matters. Section 396 provides as follows: “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.” [4] It is not disputed that the application was filed within the 21 day statutory timeframe specified in s.394(2) of the Act. Therefore, the next issue that must be determined is whether [2017] FWC 3228 DECISION -- 1 of 7 -- [2017] FWC 3228 2 the Applicant is a person protected from unfair dismissal (s.396(b)). The critical question in this regard has to do with the operation of s.382(b)(iii). Relevant legislative framework [5] Section 382(b)(iii) of the Act provides that a person is only protected from unfair dismissal where: “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] Assessment of the high income threshold requires application of two considerations. Firstly, consideration needs to be given to the person’s annual rate of earnings, which requires an examination of several factors, including those set out in s.332, and, because of a reference in that section, potentially factors included in the Regulations. Secondly, and separately, consideration needs to be made about whether there are any amounts to be added to the person’s annual rate of earnings because of factors included in the Regulations. The sum of these two considerations is what is compared against the high income threshold. [7] Regulation 3.05 “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”. The Commission must work out the Applicant’s earnings in accordance with that regulation and other statutory provisions. These include the following sections of the Act: "329 High income employee (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 (b) the time occurs during the 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 (b) the time occurs during the 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. -- 2 of 7 -- [2017] FWC 3228 3 (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. 332 Earnings (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. -- 3 of 7 -- [2017] FWC 3228 4 [8] A hearing was conducted on 9 June 2017 to determine the jurisdictional issue of whether the Applicant’s annual rate of earnings is above or below the high income threshold. [9] The Applicant and the Respondent were self represented. The Relevant Facts [10] The Applicant entered into a contract of employment with Sam Technology Engineers Pty Ltd as a Business Development Manager. The contract of employment states, relevantly, as follows: “Remuneration Your base salary will be $125,000 per annum, (inclusive of all overtime leave loadings and superannuation). Salaries are paid weekly by electronic fund transfer, direct to your nominated account. Car allowance of $15000 per annum plus $5000 after 12 months service. Computer plus company phone.” Issues for Consideration [11] The issues raised in this matter concerned the treatment of superannuation, the car allowance and other allowances. Salary and Superannuation [12] Whilst the contract of employment provided that the salary of $125,000 was inclusive of superannuation this was not in fact the case. The pay slips provided by the Applicant showed that two separate superannuation payments were being made. The amount of superannuation required to be paid by the Respondent in compliance with the Superannuation Guarantee legislation was paid in addition to the payment of the salary of $125,000.00. A second superannuation payment was paid as a voluntary contribution by the Applicant out of the $125,000 salary. Therefore all of the salary of $125,000.00 forms part of the Applicant’s earnings pursuant to s.332(1)(a) and (b). Car Allowance [13] The parties were in dispute about what percentage of the $20,000.00 car allowance was a reimbursement of the costs of using the Applicant’s own car for business purposes and what percentage was for the personal benefit of the Applicant. [14] On 7 June 2017 I caused to be sent an email to the parties which relevantly included the following: “….the key issue would then be to consider the proper allocation of the vehicle allowance to private use and business use. -- 4 of 7 -- [2017] FWC 3228 5 The Commissioner notes the Applicant’s reliance on the ATO statements which comprise Attachment E to the Applicant’s material filed on 24 May 2017 and the Respondent’s reliance on its accountant’s advice which comprises Attachment E to the Respondent’s material filed on 15 May 2017. However, neither the Applicant nor the Respondent have yet provided any evidence in relation to the actual private usage of the vehicle or the actual business usage of the vehicle. The parties should turn their minds to this issue.” [15] In relation to the car allowance, the Applicant submitted that: “In the period following 22 February 2014, and leading to an agreement with regard to a formalised Offer of Employment and Contract, I had various discussions and then final agreement by James Schmidt about a Car Allowance for Business Purposes. This came about as I had my own privately owned vehicle that I had used in a previous employment position (that vehicle was under finance and I was not willing to be financially disadvantaged from a position of negative equity, in selling or disposing of it). The proposition of a Car Allowance appeared to be attractive to James Schmidt as he told me that the alternative would require the Company to purchase a vehicle for this newly created role. An agreement was reached with SAM Technology Engineers PL in relation to paying me a Car Allowance for the business use of my own vehicle, and agreement to the continuance of an existing ATO PAYG Variation in relation to it. That ATO PAYG Variation was based on 86% business use and a taxable component related to 14% private use.” [16] It is relevant to note that the car allowance provided to the Applicant was calculated at the Applicant’s request on the basis of that Australian Taxation Office (ATO) withholding tax variation which was issued by the ATO on 30 May 2014 and had an expiration date of 30 June 2016. [17] The Applicant tendered his vehicle log book commencing on 10 March 2016 and concluding on the date of his termination, 10 March 2017.1 Each log book entry includes an estimation by the Applicant of the number of kilometres which were for personal private use and the number of kilometres which were for business use. The Applicant also tendered petrol receipts for period of 9 March 2016 until 8 March 2017.2 [18] In examination in chief, Mr Bernadou gave sworn evidence as to the accuracy of each of Exhibit A1 and A2. [19] Given that Mr Schmidt had not had access to Exhibits A1 and A2 until the date of the hearing, I granted the Respondent’s request for a further 5 weeks in which to review the exhibits and to then make submissions on what he says should be the split between business and private use of the car allowance, and the Applicant was given an opportunity to respond to any submissions made by the Respondent. [20] The parties agreed to file their further submissions and evidence in the form of a Statutory Declaration and as such that I would then determine the matter. -- 5 of 7 -- [2017] FWC 3228 6 The Respondent’s case on car allowance [21] Mr Schmidt filed a Statutory Declaration on 30 June 2017 which stated in part: “The Applicant has claimed that he uses the car for business use about 12% of total use. This is minimal utilisation. On the basis of randomly selecting working weeks (from the Logbook) as referred to above and checking the location of the Applicant's mobile phone usage, it appears that, on average, the Applicant used the company car for business use about 40% of the time, compared to the Applicant's claim.” The Applicant’s case on car allowance [22] Mr Bernadou filed a Statutory Declaration declared on 17 July 2017 in which he gave evidence that that the actual data and individual Log Book kilometre entries (Business & Private use) for the period indicate private use at 6.95% for the period. Determination of the Issue of car allowance [23] The dispute between the parties does not need to be resolved. It is sufficient for the purpose of the disposition of the high income threshold for the Commission to accept the Respondent’s case that only 40% of the usage of the car by the Applicant was for business purposes and that the remaining 60% of the usage of the car by the Applicant was for private purposes. On this basis the $20,000.00 car allowance should be split into an amount of $8,000.00 for business use and an amount of $12,000.00 for personal use. The $12,000.00 becoming part of the wages of the Applicant for the purposes of s.322(1)(a). [24] So far the earnings of the Applicant are made up of a salary of $125,000.00 (which includes an amount of voluntary superannuation contributions) and an amount of $12,000.00 paid to the Applicant to cover his private use of his own car. The total of $137,000.00 falls below the high income threshold. Other reimbursements [25] The Respondent contended, based upon the view expressed by the Respondent’s accountant, that half of two other reimbursements paid to the Applicant should be treated as being for personal benefit and not a reimbursement for business purposes. The two reimbursements were a telephone reimbursement of $1,560.00 per annum and a laptop reimbursement of $1,500.00 per annum. The Respondent provided a statement from Mr Dunn, Managing Director of The Accountancy Practice P/L who said of these two reimbursements: “In relation to the telephone and laptop reimbursement, I estimate (based on my 28 Years of experience as an accountant) a private usage component of 50% based on normal work usage by staff.” This statement was not given as sworn evidence nor was it tested in any way. However, for the purpose of disposing of the high income threshold issue I am prepared to accept the statement of Mr Dunn and the Respondent’s reliance on it. -- 6 of 7 -- [2017] FWC 3228 7 [26] If each of the two reimbursement amounts are split 50/50 between private and business usage then I must increase the earnings of the Applicant by a further $780.00 for private telephone usage and a further $750.00 for private laptop usage. The total earnings of the Applicant is now made up of a salary of $125,000.00 (which includes an amount of voluntary superannuation contributions) and an amount of $12,000.00 paid to the Applicant to cover his private use of his own car and an amount of $780.00 for private telephone usage and an amount of $750.00 for private laptop usage. The total of $138,500.00 is still below the high income threshold of $138,900.00. Conclusion [27] The Commission is satisfied that the the sum of the Applicant’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. Further disposition of the matter [28] The application will be subject to further proceedings as directed by the Commission. The parties will be advised in due course of the next stage of proceedings. COMMISSIONER Printed by authority of the Commonwealth Government Printer <Price code C, PR593713> 1 Exhibit A1. 2 Exhibit A2. -- 7 of 7 --