[2014] FWC 3047

[2014] FWC 3047

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Malcolm Harris
v
SX Projects Pty Ltd
(U2013/17556)

DEPUTY PRESIDENT BOOTH

SYDNEY, 9 MAY 2014

Termination of employment - application for unfair dismissal remedy - jurisdiction - high income threshold - minimum employment period.

[1] Mr Malcolm Harris worked as a construction project site manager with SX Projects Pty Ltd until 28 November 2014. He was given notice of dismissal on 18 November 2014 by email. The email contained no reasons for dismissal. He was told by Construction Manager, Mr Stephen Millard by telephone that he “was being made redundant...due to my apparent uncertainty of my future employment plans with the company and my apparent altercation via email with another staff member”. 1

[2] Mr Harris has made an application to the Fair Work Commission (the Commission) pursuant to s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy.

[3] SX Projects Pty Ltd has objected to his application being made on the grounds that Mr Harris’s employment does not meet the minimum employment period and his annual rate of earnings was greater that the high income threshold (currently $129,300 per annum). 2

[4] The matter came before me for hearing on 7 March 2014. SX Projects Pty Ltd was represented by Ms Kate O’Connell, Chief Financial Officer and Mr Harris represented himself. Although directions had been given on 14 February 2014 for SX Projects Pty Ltd to file submissions in support of its jurisdictional objection 14 days prior to the hearing, its material was only supplied to the Commission and Mr Harris on 6 March 2014. However, Mr Harris was satisfied that most of this material had already been seen by him and he was prepared to respond to the jurisdictional objection. Although not directed to, Mr Harris provided submissions to the Commission on 5 March 2014 and these submissions were supplied to Ms O’Connell on the day of hearing. I adjourned the hearing to allow time for Ms O’Connell to read these submissions.

[5] I allowed further time beyond the day of hearing for Mr Harris to provide any further information about his use of his private motor vehicle for work related purposes and for Ms O’Connell to consider the relevance of s.22 of the Act to her submission in relation to Mr Harris’s continuity of service for the purpose of calculating the minimum employment period.

[6] Mr Harris supplied some material on 4 April 2014. Amongst this material were statutory declarations dated 13 March 2014 from Mr Scott Sturt, former Construction Foreperson, SX Projects Pty Ltd and from Mr Steven Baker, Building Operations Manager, Winston Hills Mall, dated 1 April 2014. Ms O’Connell also provided a statutory declaration from Mr Daniel Lipari of SX Projects Pty Ltd dated 4 April 2014. I have had no regard to these Statutory Declarations as Mr Sturt, Mr Baker and Mr Lipari did not give evidence before me.

[7] Ms O’Connell did not take the opportunity of making any further submissions in relation to s.22 of the Act.

[8] SX Projects Pty Ltd bears the onus in satisfying the Commission of the validity of their jurisdictional objection to Mr Harris’s application, that is, that Mr Harris is not protected from unfair dismissal. To be protected from unfair dismissal Mr Harris must have completed the minimum employment period and either be covered by a modern award or an enterprise agreement or have received annual rate of earnings less than the high income threshold. It was common ground between the parties that he was not covered by a modern award or an enterprise agreement.

[9] Section 382 of the Act reads as follows:

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.

Note: High income threshold indexed to $129,300 from 1 July 2013

Minimum employment period

[10] SX Projects Pty Ltd employed 55 employees at the time or immediately prior to Mr Harris’s dismissal and accordingly, pursuant to s.383 of the Act, the minimum employment period was six months.

[11] Section 383 of the Act reads as follows:

383 Meaning of minimum employment period

The minimum employment period is:

(a) if the employer is not a small business employer—6 months ending at the earlier of the following times:

(i) the time when the person is given notice of the dismissal;

(ii) immediately before the dismissal; or

(b) if the employer is a small business employer—one year ending at that time.

[12] The calculation of Mr Harris’s period of employment is in contention. Section 384 of the Act makes clear that the period of employment is the period of continuous service the employee has completed with the employer.

[13] Section 384 of the Act reads as follows:

384 Period of employment

(1) An employee’s period of employment with an employer at a particular time is the period of continuous service the employee has completed with the employer at that time as an employee.

(2) However:

(a) a period of service as a casual employee does not count towards the employee’s period of employment unless:

(i) the employment as a casual employee was on a regular and systematic basis; and

(ii) during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis; and

(b) if:

(i) the employee is a transferring employee in relation to a transfer of business from an old employer to a new employer; and

(ii) the old employer and the new employer are not associated entities when the employee becomes employed by the new employer; and

(iii) the new employer informed the employee in writing before the new employment started that a period of service with the old employer would not be recognised;

the period of service with the old employer does not count towards the employee’s period of employment with the new employer.

[14] It is not contended that Mr Harris is a casual employee.

[15] Ms O’Connell contended that Mr Harris was employed by SX Projects Pty Ltd on 1 July 2013 and as the date his dismissal took effect was 28 November 2013 his period of employment was less than 5 months. As such it was less than the minimum employment period of 6 months for an employer, such as SX Projects Pty Ltd , that employs more than 15 employees.

[16] On the other hand Mr Harris submits that he has been employed by SX Projects Pty Ltd since 30 January 2006 when he commenced his employment with Southern Cross Constructions (NSW) Pty Ltd. He says his employment was transferred to an associated entity, SX Projects Pty Ltd or SX Projects (NSW) Pty Ltd on 1 September 2012 and again on 1 July 2013 to SX Projects Pty Ltd.

[17] Ms O’Connell submitted, in effect, Mr Harris’s continuity of service with SX Projects Pty Ltd was broken when he became employed by SX Projects Pty Ltd on 1 July 2013. Ms O’Connell agrees that Mr Harris’s employment by SX Projects Pty Ltd on 1 September 2012 was a result of a transfer of employment from Southern Cross Constructions (NSW) Pty Ltd where he had been employed from 30 January 2006. That is, Ms O’Connell drew a distinction between the occasion of Mr Harris’s transfer of employment between Southern Cross Constructions (NSW) Pty Ltd and SX Projects Pty Ltd in September 2012, which she conceded did not break his continuity of service and the occasion of his employment on 1 July 2013 with SX Projects Pty Ltd which she said was with a new company that was not associated with the previous employer, also named SX Projects Pty Ltd.

[18] Ms O’Connell relied on the two companies named SX Projects Pty Ltd each having a different Australian Business Number (ABN) to demonstrate that Mr Harris was employed by different companies for the purpose of determining the minimum employment period.

[19] Ms O’Connell referred to a letter of offer of employment dated 1 July 2013 3 that was signed as accepted by Mr Harris on 18 September 2013 which contained the following paragraph:

“It is with pleasure that I confirm your new offer of employment in the position of Site Manager. Your new employer is SX Projects Pty Ltd, which is referred to within this document as ‘the Company’ or ‘SX Projects’.”

[20] The letter also contained the following paragraph:

“2. Term

You will commence full-time employment with SX Projects Pty Ltd with effect from 1 July 2013. Your previous service with SX Projects (NSW) Pty Ltd will be carried forward.”

[21] Ms O'Connell made the following submission in relation to this letter:

“I guess it's ambiguous. I'll give you that, because it does say, ‘your previous service with SX Projects (NSW) Pty Ltd will be carried forward.’ I guess we should have used the word ‘entitlements’, as opposed to service.” 4

[22] It is clear as a result of this letter of offer that the s.384(2)(b) does not apply to Mr Harris because the new employer, SX Projects Pty Ltd, did not inform Mr Harris in writing before the new employment started that a period of service with the old employer, SX Projects Pty Ltd, would not be recognised; quite the contrary.

[23] Nevertheless, Ms O’Connell submits that Mr Harris’s service prior to 1 July 2013 should not be counted towards the minimum employment period because his employment, the subject of the letter of offer of 1 July 2013, was with a new company.

[24] I asked Ms O’Connell to comment on whether s.22 of the Act had an impact on her submissions.

[25] Section 22 of the Act reads as follows:

Meanings of service and continuous service

General meaning

(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

(2) The following periods do not count as service:

(a) any period of unauthorised absence;

(b) any period of unpaid leave or unpaid authorised absence, other than:

(i) a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or

(ii) a period of stand down under Part 3-5, under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or

(iii) a period of leave or absence of a kind prescribed by the regulations;

(3) An excluded period does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service.

(3A) Regulations made for the purposes of paragraph (2)(c) may prescribe different kinds of periods for the purposes of different provisions of this Act (other than provisions to which subsection (4) applies). If they do so, subsection (3) applies accordingly.

Meaning for Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2

(4) For the purposes of Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2:

(a) a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include:

(i) any period of unauthorised absence; or

(ii) any other period of a kind prescribed by the regulations; and

(b) a period referred to in subparagraph (a)(i) or (ii) does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service; and

Note: Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2 deal, respectively, with requests for flexible working arrangements, parental leave and related entitlements, and notice of termination or payment in lieu of notice.

(4A) Regulations made for the purposes of subparagraph (4)(a)(ii) may prescribe different kinds of periods for the purposes of different provisions to which subsection (4) applies. If they do so, paragraph (4)(b) applies accordingly.

When service with one employer counts as service with another employer

(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee’s continuous service with the second employer.

Note: This subsection does not apply to a transfer of employment between non-associated entities, for the purpose of Division 6 of Part 2-2 (which deals with annual leave) or Subdivision B of Division 11 of Part 2-2 (which deals with redundancy pay), if the second employer decides not to recognise the employee’s service with the first employer for the purpose of that Division or Subdivision (see subsections 91(1) and 122(1)).

(6) If the national system employee has already had the benefit of an entitlement the amount of which was calculated by reference to a period of service with the first employer, subsection (5) does not result in that period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.

Note: For example:

(a) the accrued paid annual leave to which the employee is entitled as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer; and

(b) if an employee receives notice of termination or payment in lieu of notice in relation to a period of service with the first employer, that period of service is not counted again in calculating the amount of notice of termination, or payment in lieu, to which the employee is entitled as an employee of the second employer.

Meaning of transfer of employment etc.

(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(a) the following conditions are satisfied:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee’s employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(b) the following conditions are satisfied:

(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;

(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

Note: Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer.

(8) A transfer of employment:

(a) is a transfer of employment between associated entities if paragraph (7)(a) applies; and

(b) is a transfer of employment between non-associated entities if paragraph (7)(b) applies.

[26] Ms O’Connell did not take up the opportunity afforded her of taking advice and preparing any supplementary submissions in relation to this section of the Act. Mr Harris submitted that the factual circumstances of his case satisfied the essential elements of s.22(7)(a) in that he became employed by the second employer not more than three months after the termination of the employment with the first employer and the first and second employers were associated entities when he became employed by the second employer.

[27] The term “associated entity” has the meaning given by s.50AAA of the Corporations Act 2001 (the Corporations Act).

[28] The Corporations Act contains s.50AAA as follows:

Associated entities

(1) One entity (the associate ) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

(2) This subsection is satisfied if the associate and the principal are related bodies corporate.

(3) This subsection is satisfied if the principal controls the associate.

(4) This subsection is satisfied if:

(a) the associate controls the principal; and

(b) the operations, resources or affairs of the principal are material to the associate.

(5) This subsection is satisfied if:

(a) the associate has a qualifying investment (see subsection (8)) in the principal; and

(b) the associate has significant influence over the principal; and

(6) This subsection is satisfied if:

(a) the principal has a qualifying investment (see subsection (8)) in the associate; and

(b) the principal has significant influence over the associate; and

(7) This subsection is satisfied if:

(a) an entity (the third entity) controls both the principal and the associate; and

(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:

(a) has an asset that is an investment in the second entity; or

(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.

[29] The two companies both named SX Projects Pty Ltd with two different ABN numbers do not appear to me to be associated entities as defined in the Corporations Act. However, it does appear to me that there was a transfer of business between the two entities.

[30] Ms O’Connell made the following submission in relation to the second employer:

“I’m saying the third entity was the purchase of an employee who decided to buy the contracts of a business that was under administration and that director made a decision to employ the original staff of the company that went into liquidation and he made a decision to take on their employee entitlements. He didn't legally have to take on their entitlements but he chose to do that in good faith. But my argument is that just because he made a decision that he didn't legally have to do to take over their entitlements does not mean that it's a related entity to the companies that went into administration. It’s a brand new entity and while he made a decision to keep the same name it has no legal relationship with the previous entities.” 5

[31] I conclude that Mr Harris’s service from at least 1 September 2012 and probably 1 January 2006 should be counted towards the minimum employment period. On both occasions he was told that his past service would be “carried forward”. Even if this is not decisive, I conclude that when Mr Harris was offered employment with SX Projects Pty Ltd on 1 July 2013 he was being offered a transfer of employment between non-associated entities due to a transfer of business between SX Projects Pty Ltd and the new company also named SX Projects Pty Ltd. That is, a transfer of business took place from the first employer to the second employer and, consequently, pursuant to s.22 of the Act his continuity of service is maintained from at least 1 September 2012 and he had been employed for more the minimum employment period at the time of his dismissal on 28 November 2013.

[32] The jurisdictional objection is dismissed.

High income threshold

[33] It was accepted that Mr Harris was not covered by an award or by an agreement, therefore, his income at the time of his dismissal must have been below the high income threshold of $129,300 per annum for him to be a protected person from unfair dismissal.

[34] Ms O’Connell submitted that Mr Harris’s annual rate of earnings at the time of his dismissal was $145,000, more than the high income threshold.

[35] Mr Harris agreed that his salary package was $145,000, however, he asserted that the package was comprised of elements that pursuant to s.332 of the Act were not to be included in the calculation of annual rate of earnings for the purposes of comparison with the high income threshold.

[36] SX Projects Pty Ltd bears the onus of substantiating the jurisdictional objection that Mr Harris is excluded from protection from unfair dismissal because his annual rate of earnings exceeds the high income threshold. 6 However, as Mr Harris has asserted that his superannuation, travel allowance and mobile allowance should be deducted from the calculation of earnings, he bears the onus of establishing that proposition.

[37] Section 332 of the Act reads as follows:

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

(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;

(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 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.

[38] It was accepted that Mr Harris’s salary package at the time of dismissal was made up as follows:

PAYG salary $120,641

Superannuation $11,159

Travel Allowance $12,000

Mobile Allowance $1,200

Total $145,000

[39] I note that the annual rate of earnings is to be calculated as at the time of the dismissal not over the 12 months leading up to the dismissal. 7

[40] I am satisfied that the amount of $11,159 is a superannuation contribution that is required to be paid to avoid an obligation pursuant to the Superannuation Guarantee Charge Act 1992. Accordingly, pursuant to s.332(4)(b) of the Act this amount is not to be included in the annual rate of earnings for the purpose of comparison with the high income threshold and is deducted leaving an amount of $133,841.

[41] This leaves in contention whether the amounts of $12,000 travel allowance and/or $1,200 mobile allowance are also to be deducted.

[42] Ms O’Connell maintained that the travel allowance should be included because it was, in effect, an amount applied or dealt with in any way on the employee’s behalf or as the employee directs and not a reimbursement.

[43] Ms O’Connell said:

“The travel allowance is there so that you don’t pay tax on that amount of money. It was there for your benefit. You know it, I know it. So you don’t spend it on travel within work hours.”

[44] On the other hand Mr Harris submitted that his $12,000 travel allowance was compensation or reimbursement for travel expenses related to his use of his private vehicle to perform the duties of his position as a Site Manager. He says that these duties required him to travel to the sites where SX Projects Pty Ltd was undertaking building projects and use his vehicle during the day to visit the offices of SX Projects Pty Ltd in Pyrmont or Edgcliff (inner city suburbs of Sydney, NSW), attend meetings with consultants and pick up supplies. He conceded that the requirement to pick up supplies was infrequent, citing five times a year.

[45] His submission was that his last project was a residential building project at Little Bay for the period from May 2013 to his date of dismissal in November 2013. Prior to that he was located at 99 Elizabeth St, Sydney and prior to that in Zetland from July 2012 where SX Projects Pty Ltd was building a car dealership premises.

[46] Mr Harris submitted material prepared by his accountant and lodged in his 2013 tax return that calculated the annual cost of his Holden utility vehicle as $17,639, which exceeded the $12,000 paid in travel allowance. He maintained that the whole of the $12,000 should be excluded from the calculation of his annual rate of earnings.

[47] In submissions received in response to my request for more information Mr Harris elaborated his oral submissions concerning his daily activities. In summary, he contended that in his Holden utility vehicle he carried tools and/or equipment to site from his home and back again and around the site, used his vehicle to travel between sites, to SX Projects Pty Ltd offices, to meetings with consultants and pick up supplies.

[48] In answer to questions put to him during the hearing he said that his use of his vehicle during the day for the purposes described above “potentially” accounted for one-third of the travel he undertook in the vehicle.

[49] On the other hand, Ms O’Connell contended that “[s]ite managers are on site. There is no travel for work in our employment.” 8

[50] Is there any basis in Mr Harris’s submissions to find that all or a portion of his travel allowance should be excluded in the calculation of annual rate of earnings pursuant to s.332 of the Act?

[51] There is no evidence that Mr Harris was required by his contract of employment to use his own vehicle to carry out his duties. However, my understanding of the role of a site manager in the building industry would suggest that it would be reasonable to conclude that he did need a vehicle to carry out his duties. The provision of a travel allowance appears to me to be recognition of this.

[52] I accept Mr Harris’s assessment of his work use of his vehicle. It is not plausible that it was not used for work purposes at all as asserted by Ms O’Connell. No evidence was before me to support this contention. Equally it is clear that Mr Harris used it to travel to and from work and I regard this as private use that is not to be reimbursed by the employer. 9

[53] Accordingly, one-third of the travel allowance, the amount equivalent to the proportionate work use of his vehicle, or $4,000, should be from deducted from Mr Harris’s annual rate of earnings. This approach to apportionment between work and private use was taken by the Commission in Mr Jeff Hardmen v Statewide Communications Australia Pty Ltd T/A Alarming Solutions Statewide Health Integration. 10 This would take Mr Harris’s annual rate of earnings to $129,841.

[54] It remains to consider the question of the mobile allowance of $1,200. Ms O’Connell made no submission in relation to the use of a mobile phone for work purposes save the contention that the mobile allowance should be included in the annual rate of earnings. Mr Harris submitted that there was no landline on the site on which he worked and, in effect, he was not provided with a means of telecommunication by SX Projects Pty Ltd. I have no reason to doubt the veracity of this submission and it weighs in favour of his plausible contention that he used his own mobile phone for work purposes. He provided some mobile phone bill statements to the Commission but did not identify which calls were work related or make any submission about apportionment. Ms O’Connell did not make any submission about these mobile phone statements. On the face of it, the mobile allowance is as it is described, an allowance. In the absence of any information to the contrary I accept that it is intended as a reimbursement for the use of Mr Harris’s mobile phone. In accordance with s.332(2)(b) of the Act, the amount of the reimbursement should be deducted from the annual rate of earnings, resulting in an annual rate of earnings of $128,641. This amount is less than the high income threshold of $129,300 at the time of Mr Harris’s dismissal.

[55] The jurisdictional objection by SX Projects Pty Ltd is dismissed.

[56] Mr Harris’s application pursuant to s.394 of the Act may proceed to be heard on its merits and the file will be returned to the Unfair Dismissal Team for directions and further listing.

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