| [2015] FWC 3286 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Adric Schreuders
v
Freelancer International Pty Ltd
(U2014/4145)
DEPUTY PRESIDENT BOOTH |
SYDNEY, 15 MAY 2015 |
Application for relief from unfair dismissal - jurisdictional objection - high income threshold - jurisdictional objection dismissed
[1] On 28 January 2014 Mr Adric Schreuders made an application for an unfair dismissal remedy pursuant to s. 394 of the Fair Work Act 2009.
[2] On 25 February 2014, Freelancer International Pty Ltd filed a Response to the Application.
[3] Freelancer objected to the application on the grounds that, at the time of dismissal, Mr Schreuders earned above the high income threshold and was therefore not a person protected from unfair dismissal pursuant to s. 382(b)(iii) of the Act.
[4] The parties participated in conciliation on 17 March 2014 but were unable to resolve the matter. The matter was listed for hearing before me on 30 May 2014 and was re-listed for 13 June 2014, as requested and mutually agreed by the parties.
[5] On the morning of the hearing on 13 June, the Applicant’s solicitor emailed my chambers advising that an in principle settlement had been reached and that Mr Schreuders would be in a position to file a Notice of Discontinuance in the coming weeks. Accordingly, the hearing on 13 June was cancelled.
[6] On 30 July, 24 August, 30 September, 23 October and 17 November 2014, my associate contacted Mr Schreuders’ solicitor for a progress report in this matter. By 17 February 2015, there had not been any Notice of Discontinuance filed and so I listed the matter for a directions hearing on 11 March 2015. At that hearing the parties were given permission to be legally represented, directions were issued for submissions and the matter was re-listed for a hearing of Freelancer’s jurisdictional objection on 16 April 2015.
[7] Mr Schreuders commenced his employment with Freelancer in the position of ‘software engineer’ on 4 April 2011 in Sydney. In September 2012, he accepted a temporary role with Freelancer in the Philippines. 1 Mr Schreuders was promoted to the position of Regional Director of Engineering on 17 April 2013. That contract was based in Sydney, noting that Mr Schreuders would be required to spend extended periods of time in the Philippines.2
[8] Mr Schreuders’ employment with Freelancer was terminated on 6 January 2014. 3
Was Mr Schreuders protected from unfair dismissal?
[9] The issue between the parties is whether Mr Schreuders is a person who was protected from unfair dismissal.
[10] Section 382 of the Act sets out the conditions that must be met for a person to be protected from unfair dismissal. It 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.”
[11] The parties agree that Mr Schreuders had completed the minimum employment period so he meets the condition of s.382(a). However he must also meet one of the conditions in s.382 (b). It is agreed that he was not covered by an award or an enterprise agreement so the question becomes did Mr Schreuders earn less than the high income threshold. The high income threshold at the time of dismissal on 6 January 2014 was $129,300.
Did Mr Schreuders earn less than the high income threshold?
[12] Both parties agree that:
(a) the base salary of Mr Schreuder sat the time of dismissal was $105,263 excluding superannuation; 4 and
(b) Mr Schreuders received a $50 per diem payment, 7 days per week; which totals $18,250 per annum; 5 and
(c) Mr Schreuders' accommodation cost and utilities were paid by the Freelancer totalling $23,160. 6
[13] There is no disagreement between the parties that the base salary of Mr Schreuders identified above, is included in his annual rate of earnings, for the purpose of the high income threshold. This is consistent with s.332(1)(a) of the Act.
[14] What is disputed between the parties is whether the per diem payment and/or the cost of accommodation and utilities are, for the purpose of s.382(b)(iii), included in his “annual rate of earnings and such other amounts (if any) worked out in relation to the person in accordance with the regulations”.
[15] “Earnings” are defined in s. 332 of the Act in the following way:
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.
(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.”
[16] It is evident that if either the per diem payment or the accommodation/utility costs are not included as earnings, Mr Schreuders annual rate of earnings will fall below the threshold and the application may proceed. Conversely, if both the per diem payment and the accommodation costs are included as earnings, Mr Schreuders’ earnings will exceed the high income threshold and the application must be dismissed.
[17] Freelancer submits that while the role of Mr Schreuders in the Philippines began as a temporary role, by the time the Applicant’s employment ended on 6 January 2014, Mr Schreuders was permanently based in the Philippines. 7 Freelancer cites the following reasons for this submission:
(a) Mr Schreuders asked for a promotion and for his work in the Philippines to be “more permanent” for “at least a total of 6 months” on 23 October 2012;
(b) on 14 November 2012, Mr Schreuders was promoted, pursuant to his 23 October 2012 request;
(c) Mr Schreuders stopped renting accommodation in Sydney in March 2013 and sold his car and other possessions in April 2013;
(d) on 17 April 2013, Mr Schreuders was provided with a contract of employment that he signed on 4 September 2013 that:
(e) Mr Schreuders sought and obtained taxation advice that for 2013/2014 he could be considered a non-resident for taxation purposes.
(f) As at 11 June 2014, more than five months after he ceased employment with Freelancer, Mr Schreuders continued to live in the Philippines; and
(g) As at the date of these submissions, Mr Schreuders has continuously lived in the Philippines since 6 January 2014. 8
[18] In light of the context advanced, Freelancer submits that the Per Diem payments are ‘benefits’ under s 332(1)(d) of the Act, or, alternatively, ‘wages’ under s332(1)(a) of the Act.
[19] Freelancer draws my attention to Reg 3.05(6) 9 as the relevant Regulation to consider in relation to whether or not the payment was an amount or a benefit prescribed by the Regulations, and therefore “earnings” under s332(1)(d).10
[20] There is no question that the Per Diem was a payment of money. Reg 3.05(6) is titled “Benefits other than payment of money.” Freelancer contends that this is not consistent with s 332(1)(d) of the Act which provides “amounts or benefits prescribed by the regulations”, and therefore, it follows that Reg 3.05(6) does apply.
[21] I note that s.332(1)(d) does not specifically refer the reader to Reg 3.05(6) but to “the regulations”. Freelancer did not bring my attention to any other relevant regulation that prescribes amounts and, in fact, there does not appear to be any. 11
[22] Furthermore, in relation to Reg 3.05(6), the Explanatory Statement to the Fair Work Regulations provides as follows:
“104. Certain benefits other than the payment of money (my emphasis) are also relevant for the purposes of the high income threshold. Subregulation 3.05(6) provides that benefits that have been agreed upon by the employer and employee and have an attributable but not agreed value are to be included at FWA’s discretion for the purposes of calculating the high income threshold, subject to certain conditions being satisfied.” 12
[23] It is clear and unambiguous in the words of the Regulations, and in the Explanatory Statement, that the intention of Reg 3.05(6) was to cover benefits ‘other than the payment of money’.
[24] For this reason I consider that Reg 3.05(6) does not apply to the Per Diem payment and therefore, the payment is not classified as ‘earnings’ under s. 332(1)(d) of the Act.
[25] In the alternative, Freelancer submits that the Per Diem payments be classified as wages, in a similar manner to the classification of an ‘allowance’ in Priddis v Komatsu Australia Pty Ltd 13 and Wilkinson v BIS Industries Limited T/A BIS Industries.14
[26] The Per Diem payments in this case can be distinguished from the allowances in Priddis and Wilkinson. In both Priddis and Wilkinson, the allowance was included in the calculation of the superannuation payable to them 15 and was included in their contract of employment and could not be removed while the applicants were located in the zone or site for which the allowance was payable .16 This was not the case for Mr Schreuders. Whilst Freelancer pointed to the Per Diem being paid to Mr Schreuders on an occasion that he returned to Sydney, the evidence was that this was an oversight. 17
[27] Mr Schreuders submits that the Per Diem payments are not included as earnings because they are reimbursements which are expressly excluded by virtue of section 332(2)(b) of the Act.
[28] The Per Diem payment was commenced on 1 July 2013, to replace the way in which reimbursements were paid to Mr Schreuders for ‘meals, cabs and other subsistence costs’. 18
[29] Freelancer submitted that the Per Diem payment was not a reimbursement because it could be spent at the discretion of Mr Schreuders 19 and there was a ‘float’ for any office related expenses.20
[30] During the hearing, Mr Schreuders was questioned about both submissions. Mr Schreuders gave evidence that the float was for office related expenses, and not for personal work expenses. 21 (my emphasis). It is also evident from emails produced, that the office float was not for the work related expenses of Mr Schreuders and that his work related expenses were paid by him and thus reimbursed by way of the Per Diem payments.22 I accept this evidence.
[31] Exhibit E to the statement of Mr Darren Williams, Chief Technology Officer of Freelancer, is correspondence between Mr Neil Katz, Chief Financial Officer, and Mr Schreuders on 26 June 2013. Tellingly, that email says:
“Hi Adric
Ok, we;ll (sic) move you to a $50 per day per diem from 1 July. This will cover all your meals, cabs and other subsistence costs...We can pay this amount via the payroll system. It will be tax free.
Regarding office expenses, we;ll (sic) give you a float and then each time its (sic) need a top up you will need to submit an expense claim reconciling the expenditures...”
[32] That email was forwarded to Mr Williams by Mr Katz on 18 February 2014 adding to the body of the email:
“Email re per diem. We were originally reimbursing him for his meals with receipts, but changed to per diem from 1 Jul”. 23
[33] Whilst there is no dispute that Mr Schreuders could spend the Per Diem payments at his discretion, I do not think that this has the effect of changing the nature of the payments. It is clear from the evidence, that the Per Diem was implemented as an easier method by which to reimburse Mr Schreuders for his work related expenses. 24 In Mr Lee C v CLS Pty Ltd25, Senior Deputy President Acton held that a change in the method of payment for the reimbursements is irrelevant.26 I agree with the Senior Deputy President.
[34] I find that the Per Diem payments are reimbursements. The nature and purpose of the Per Diem is not affected by the fact that Mr Schreuders had stopped renting accommodation in Sydney, had sold his car and other possessions or his taxation status. His decision to remain in the Philippines after his dismissal is not something that I should take into account in assessing the Per Diem at the time of his dismissal. No inference can be drawn from a decision he made after his dismissal. At the time of his dismissal he was clearly in the Philippines to perform his job for Freelancer and it is not relevant how long he had been there, whether he paid for residential accommodation elsewhere or whether he remained following his dismissal.
[35] The Per Diem is fundamentally different to wages in that it is not money paid for work performed. Mr Schreuders derives no benefit from the payment. In fact, it would be a detriment for Mr Schreuders if his work related expenses were not reimbursed by Freelancer.
[36] By operation of s 332(2)(b), I find the Per Diem payment is not included in the calculation of the earnings of Mr Schreuders.
[37] In light of my finding in relation to the Per Diem, even if I were to find that Mr Schreuders’ accommodation/utility costs were included in the calculation of his earnings his earnings would fall short of the high income threshold. Adding the accommodation/utility cost of $23,160 to the base salary of $105,263 yields an amount of $128,423. This is less than the high income threshold at the time of $129,300.
[38] It is therefore unnecessary for me to make a finding in relation to the accommodation and utilities costs.
[39] The jurisdictional objection by Freelancer is dismissed. An order will issue with this decision.
[40] I will list Mr Schreuders’ application for a directions hearing to program the hearing of his application for an unfair dismissal remedy as soon as possible.
DEPUTY PRESIDENT
Appearances:
Mr D Taylor appeared for the Applicant
Mr S McIntosh appeared for the Respondent
Hearing details:
Sydney
2015
16 April
1 Statement of Darren Williams at [3] to [4]
2 Exhibit A of the Statement of Darren Williams
3 Statement of Adric Schreuders at [4]
4 Statement of Darren Williams at [8]; Statement of Adric Schreuders at [4]
5 Statement of Darren Williams at [29]; Applicant’s Outline of submissions in Reply on Respondent’s Jurisdictional Objection dated 12 June 2014 at [15]
6 Statement of Darren Williams at [29]; Applicant’s Outline of submissions in Reply on Respondent’s Jurisdictional Objection dated 12 June 2014 at [15]
7 Respondent’s Supplementary Submissions dated 2 April 2015, at paragraph [3]
8 Respondent’s Supplementary Submissions dated 2 April 2015, at paragraph [3](a) to (f)
9 Fair Work Regulations 2009
10 Respondent’s Supplementary Submissions dated 2 April 2015, at paragraph [6]
11 Gandel [2013] FWC 4583 at [29]
12 Fair Work Regulations 2009
15 Priddis v Komatsu Australia Pty Ltd [2015] FWC 2406 at [7]; Wilkinson v BIS Industries Limited T/A BIS Industries[2015] FWC 2385 at [8]
16 Priddis v Komatsu Australia Pty Ltd [2015] FWC 2406 at [9]; Wilkinson v BIS Industries Limited T/A BIS Industries[2015] FWC 2385 at [5]
17 Transcript PN250
18 Annexure E to the Statement of Darren Williams
19 PN144
20 PN158
21 PN166
22 Exhibit E to the Statement of Darren Williams
23 Exhibit E to the Statement of Darren Williams
24 Exhibit E to the Statement of Darren Williams
25 [2009] FWA 779 at [22]
26 Lee C v CLS Pty Ltd [2009] FWA 779 at [22]
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