[2013] FWC 7042

FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr Shannon Priem
v
Priority Building Pty Ltd
(U2013/2416)

COMMISSIONER SPENCER

BRISBANE, 19 SEPTEMBER 2013

Application for relief from unfair dismissal - jurisdictional objection - high income threshold.

Introduction

[1] This decision relates to an application made by Mr Shannon Priem (the Applicant) pursuant to s.394 of the Fair Work Act 2009 (Cth) (the Act) for an unfair dismissal remedy on the grounds that the termination of his employment from Priority Building Pty Ltd (the Respondent) was harsh, unjust or unreasonable (the substantive matter).

[2] The Respondent raised a jurisdictional objection to the substantive matter, on the basis the Applicant’s income at the time of the dismissal was above the high-income threshold and that he was not covered by a modern award or an enterprise agreement did not apply to him.

[3] The matter was listed for a directions conference on 22 August 2013. The Applicant was self-represented and the Respondent was represented by Mr Stephen Knight, a Director of the Respondent. The parties agreed to have the jurisdictional issue considered on the papers.

[4] Directions were set for the filing of submissions and evidence in relation to the jurisdictional objection only. Material was filed by both parties.

[5] It is noted that whilst not all of the evidence and submissions are referred to, in this matter, I have considered all of such, in making the decision.

Background

[6] The Applicant’s Form F2 application stated that the Applicant commenced employment on 28 January 2007 and was notified of his dismissal, and the dismissal took effect on, 3 July 2013. The Respondent submitted that the dismissal came into effect on 2 July 2013 but nothing turns on the difference in the jurisdictional matter.

[7] The Applicant attached the letter of termination to his application which specified multiple reasons for termination. Primarily, the letter identifies that the Applicant was dismissed because the Respondent discovered that he had applied for at least one other position while still working for the Respondent. The Respondent stated in the termination letter that it was their expectation that members of the Management Team (of which the Applicant was a part) would be “fully engaged in the business” and will not “only consider their personal needs but will also consider the needs of the company”.

[8] As this decision is concerned with the question of the jurisdictional objection only the reasons for termination will not be considered further apart from noting that the Applicant disputes the reason.

Legislation

[9] Section 382 of the Act sets out when a person is protected from unfair dismissal. Relevantly to this matter s.382 of the Act provides:

[10] Section 332 of the Act defines the term “earnings” as follows:

Summary of Respondent submissions and evidence

[11] The Respondent submitted that the Applicant’s income exceeded the high income threshold applicable at the time of his dismissal.

[12] The Respondent submitted that the Applicant’s total salary, of $130,166 (being $123,968 plus the 5% pay increase on the previous year’s salary), was in excess of the threshold for the financial year commencing 1 July 2013.

[13] The Respondent also submitted that the Applicant earned over the high income threshold for the 2012/2013 financial year on the following basis:

[14] The Respondent relied upon a statement of Ms Kristn White, Administration Manager for the Respondent.

[15] Ms White stated that in June 2011, after discussions with the Applicant and Mr Knight, a pay rate adjustment and “automatic annual increase” of 5% was negotiated for the Applicant. Ms White further stated that it was agreed that this annual increase would apply each July, commencing in July 2012. Ms White stated that the pay increase was processed for the 12/13 financial year and that the Applicant was notified of this in writing. This notification was not in evidence.

[16] Ms White stated that it is the process of the Respondent for any negotiated increases to be applied in the first payroll run of the new financial year. The first payroll run for the current 13/14 financial year, according to Ms White, occurred on Wednesday 10 July 2013 which applied for the payroll period of 26 June 2013 to 9 July 2013. Ms White stated that rather than process the Applicant’s increase she processed his termination entitlements on the basis of his lower salary being the salary for the 12/13 financial year.

[17] Ms White stated that had the Applicant not been terminated she would have processed his salary increase for the pay period of 26 June 2013 to 9 July 2013. That is the pay increase would have taken effect prior to 3 July 2013, being the date of termination.

[18] Ms White stated that this would have meant that the Applicant had a base salary for the 13/14 financial year of $130,166.40.

[19] Annexed to Ms White’s stated was a screen printout of her MYOB entry on 4 July 2013 recording the increase to the Applicant’s salary at that time. Relevant it stated:

[20] The payslip for the Applicant, for payment day 11 July 2012 shows an annual salary of $123,968.00.

Summary of Applicant submissions and evidence

[21] The Applicant submitted that the evidence shows that his actual earnings for the financial year 13/14 were below the threshold. The Applicant relied upon his annual salary of $123,968.00 which, the evidence shows, is the annual salary of the 12/13 financial year.

[22] The Applicant annexed to his submission a copy of his final pay advice for period ending 9 July 2013. This pay advice records the annual salary of the Applicant as $123,968.

[23] The Applicant submitted that any reliance upon the payments actually made in the 12/13 financial year are irrelevant to a consideration of whether, at the time of dismissal, the Applicant’s annual rate of earnings was above the high income threshold.

[24] Specifically the Applicant submitted that any reliance upon his university fees by the Respondent is misplaced because that course was completed on 1 June 2013. Accordingly he was not entitled to this additional payment or benefit and it should not be taken into account for the purposes of calculating his annual rate of earnings at dismissal.

[25] The Applicant submitted that the reference or reliance upon the 5% increase to the Applicant’s salary was misleading. The Applicant stated in this regard:

[26] The Applicant stated that his recollection was that “no advice had been given” to him to advise that the 5% increase was “annual or automatic”. The Applicant stated that his recollection of the discussion was that the pay increase would be a one-off adjustment only.

[27] The Applicant also submitted that the letter of termination, provided by the Respondent, made no reference to the 5% increase. The Applicant submitted that “such an increase” has been concocted to prevent the Applicant from making an unfair dismissal application.

[28] The Applicant submitted that he had not had a conversation with the Respondent regarding the annual 5% increase. The Applicant submitted, in essence, that the Respondent has processed his termination payment on the basis of his salary prior to the 5% being implemented but then relies upon the 5% as having taken effect on 2 July 2013 to prevent his application for unfair dismissal.

[29] The Applicant attached to his submission a copy of the offer of appointment to his position as Marketing Manager. This letter of offer does not mention any entitlement to pay increases or reviews. The letter of offer stated that the Applicant’s commencing salary was $75,000 per annum.

[30] The Applicant relies upon the lack of any evidence as to the 5% increases; namely no letter or notification of the increase or an updated letter of offer or employment agreement.

[31] The Applicant submitted that the Respondent’s own admission that the 5% increase was not included in the termination payment because it felt it was not “reasonable to do so” was evidence that the jurisdictional objection was not raised on a genuine basis.

[32] The Applicant submitted that some unfairness attached to the 5% increase in the event that it did apply “where the employee forfeits entitlements such as protection from unfair dismissal, disadvantages the employee”. This argument has little weight as in the circumstances if the 5% increase applies to the Applicant his eligibility under the unfair dismissal regime would not have changed. He was not a person protected from unfair dismissal prior to 1 July 2013 in any event.

[33] As to the note made by Ms White, in MYOB, (extracted above) the Applicant submitted that it cannot be given much weight as he was not aware that it existed and further it cannot be assessed when it was entered into MYOB.

[34] In any event the Applicant submitted that the pay advice, referred to above, for the period ending 10 July 2013 did not include the 5% increase and was subsequent to when the increase allegedly took effect.

[35] The Applicant submitted that if the discussions concerning the 5% increase did take place he would have requested that the agreement be reduced into writing for his “own assurance for future periods”.

Consideration

[36] The only matter in dispute between the parties is whether, at the time of dismissal, the alleged 5% increase existed and had taken affect. If it had effect then the Applicant’s annual rate of earnings, at the time of dismissal, was greater than $130,000 and therefore over the high income threshold. If the 5% had not taken effect then the Applicant’s annual rate of earnings, at the time of dismissal, was $123,968 and, therefore, under the high income threshold as at 3 July 2013.

[37] The use of the phrase taken affect is used to indicate an entitlement to the increase. The relevant consideration in s.382(b)(iii) is to the annual rate of earnings. That is, the question is, whether the rate of earnings, by way of some entitlement (usually contractual), when considered in combination with any such other amount as worked out in accordance with the regulations, is less than the high income threshold. A contractual entitlement, or other such entitlement which is enforceable, whether it has been complied with by an employer or not, if it is binding, is enough to found an annual rate of earnings. To consider otherwise would not be consistent with the plain reading of the Act (“the sum of the annual rate of earnings”) and would lead to uncertainty in the application of this portion of the Act.

[38] In this matter, on the balance of probabilities, the Commission finds that the Applicant and Respondent had agreed to 5% increases in salary per annum. The Commission does not accept that the Applicant was unaware of the entitlement to increase or that the absence of any written variation or contract regarding the increase is determinative. The evidence is that during the Applicant’s tenure with the Respondent he had previously received increases to his salary package.

[39] The Applicant stated that if the discussions concerning the 5% increase negotiations took place, no weight is attributed to the evidence. This is so because, the evidence before the Commission is that the Applicant was employed pursuant to an offer dated 20 December 2006. This offer indicates that the Applicant was entitled, at the time, to a salary of $75,000 per annum. It is not in dispute between the parties, that a significant increase in wages had occurred during the intervening years. No evidence of any further written contract or further written offer was entered into between the parties. Or, perhaps more importantly, no evidence that the Applicant did, as he has submitted that he would have, requested for it to be in writing.

[40] This view has also been concluded, on the evidence, as if, in the alternative, the Applicant’s submission was right that there is no evidence that the Applicant, being a highly paid managerial staff member, has sought to commence negotiations for a wage increase for the coming financial year. If the Applicant had only accepted a wage increase for the previous year, as he submitted was the case, then it would be expected that some steps were taken, at least in the preliminary phases, to commence negotiations for a wage increase in the coming year. No such steps are in evidence. This supports the finding that the wage increase has already been agreed in the previous year.

[41] The notation in MYOB by Ms White also supports this conclusion.

[42] The Applicant placed some reliance on the argument that it was unlikely that a 5% increase would be agreed to by an employer generally because it would result in a wage increase, over an extended period, above the Reserve Bank of Australia’s estimate of inflation. This argument is given no weight. It is entirely in the ordinary course that employers set increases to remuneration to retain their employees, particularly those in management positions, with wage increases that are greater than inflation. The argument does not go to the nature and effect of the relationship between these two specific parties.

[43] It is not uncommon for small enterprises such as the Respondent to have more relaxed systems for dealing with such arrangements. Particularly for members of their management team, which the Applicant was. Salary increases are normally contractual in nature and done by negotiation between the parties. These increases should, for clarity and best practice, be reduced into writing. However, the law recognises oral, written and partly written and partly oral contracts.

[44] I find that, despite the Respondent not having actually applied the wage increase, due to the termination being effected immediately after the increase took effect, the balance of the evidence is that the Applicant was entitled to a 5% increase as of 1 July 2013.

[45] Therefore the application, made pursuant to s.394 of the Act, is jurisdictionally barred in accordance with s.382 of the Act, because the Applicant was not a person protected from unfair dismissal at the time of his dismissal.

[46] I Order accordingly.

[47] It is noted for completeness that my finding as to the 5% increase only considers it in the context of the high income threshold. Any action for enforcement and payment of that increased figure is a matter beyond the jurisdiction of the Commission. In any event the Respondent conceded that the final payment of the wages in lieu of notice, should have included the 5% increase and paid such accordingly.

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