[2018] FWC 1600
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009

s.394—Unfair dismissal

Bill Keramidas
v
Vantage Systems T/A Vantage Systems
(U2017/13480)

DEPUTY PRESIDENT MASSON

MELBOURNE, 21 MARCH 2018

Application for an unfair dismissal remedy – high income threshold.

Introduction

[1] Mr Bill Keramidas (the Applicant) made an application (the Application) to the Fair Work Commission (the Commission) under s 394 of the Fair Work Act 2009 (the Act) on 19 December 2017 for an unfair dismissal remedy in relation to his former employment with Vantage Systems T/A Vantage Systems (the Respondent).

[2] It is not contested that the Applicant commenced employment with the Respondent on 24 May 2017 and ceased employment on 30 November 2017. The Applicant was employed in the position of Southern Business Development Manager for the Respondent.

[3] The Respondent objected to the Application on the grounds that the Applicant’s annual earnings exceeded the high income threshold.

[4] A determinative conference was conducted on 20 March 2017 at which Mr Keramidis gave evidence on his own behalf while Mr Mark Buckley, Chief Executive Officer, gave evidence for the Respondent.

Legislation

[5] Section 396(b) of the Act requires that before the merits of an application under section 394 are considered, the Commission must first determine whether the Applicant was protected from unfair dismissal. To this end, section 382 of the Act provides as follows:

[6] The term “earnings” is defined in s.332 of the Act as follows:

[7] The parties agreed and I am satisfied that the Applicant was employed by the Respondent for a period that exceeded the minimum employment period under s 382(a) of the Act.

[8] The parties also agreed and I am satisfied on the material before me that the Applicant was not covered by a modern award or enterprise agreement.

[9] The matter to be determined therefore is whether at the time of dismissal the annual earnings of the Applicant exceeded the high income threshold for the purposes of s 382(b)(iii) of the Act. At the relevant time, the high income threshold was $142,000.00 per annum.

High Income Threshold

[10] Clause 5 of the Applicant’s contract of employment 1 dated 24 April 2017 provides for a base Total Employment Cost (TEC) of $100,000 per annum. The base TEC is fully inclusive of salary, superannuation contributions in accordance with the Superannuation Guarantee (Administration) Act 1992 (SGC Act) requirements and the costs borne by the Applicant in providing and operating a motor vehicle for the purposes of servicing customer requirements.

[11] Pay slips for the months ending 14 November 2017 2 and 14 October 20173 provided by the Applicant confirmed the following annualised components of his base TEC:

Base Salary: $76,324.20

Car Allowance – Tax Exempt: $12,000.00

Car Allowance – Taxable: $3000.00

Superannuation: $8,675.79

Total Base TEC: $100,000.00

[12] Before going on to deal below with the incentive based payment scheme provided for in the Applicant’s contract of employment, it is necessary to confirm that the minimum superannuation contributions required by the SGC Act are not included for the purposes of calculating “earnings” for the purpose of s 382(b)(iii) of the Act. Consequently, the superannuation contribution of $8675.79 at the base TEC of $100,000.00 which was the Respondent’s minimum SGC Act obligation is not included for the purpose of calculating the Applicant’s “earnings” for the purpose of the high income threshold.

[13] In addition to the base TEC package of $100,000, the Applicant was also entitled to participate in the Vantage Systems Sales Staff Incentive Scheme (Incentive Scheme). Paragraph 4 of Clause 5 of the contract of employment relevantly stated as follows:

“You will be eligible to participate in the Vantage Systems Sales Staff Incentive Scheme, details of which have been generally discussed with you during our meeting which will bring your expected target earnings up to $150,000 per annum. The full particulars of the Incentive Scheme will be provided upon commencement and reviewed annually.” 4

[14] The Incentive Scheme was detailed in the Acknowledgment Form for the 2017 Sales Compensation Plan 5 and was signed by the Applicant on 8 August 2017. The Incentive Plan detailed the incentive opportunity available to the Applicant which would generate an annual TEC of $100,000.00 at base to $150,000.00 at target sales performance and up to $212,000.00 on achieving 200% of target sales performance.

[15] Clause 7 of the General Provisions in the 2017 Sales Compensation Plan also relevantly provides as follows:

Plan Changes. Vantage developed this plan based upon current product and services. If substantial changes occur at Vantage, which may affect these products and services, the company may add, amend, modify or discontinue any of the terms or conditions of the plan with thirty (30) days’ notice.”

[16] It is evident from the contract and the details in the Incentive Plan that achievement of a TEC above $100,000.00 was contingent on the Applicant’s sales performance. This was not contested by the Respondent. It is also clear that the Respondent reserved the right to alter or discontinue the Incentive Plan in accordance with the terms of the Incentive Plan.

[17] Section 332(1) of the Act details the relevant remuneration benefits that are included in calculating an employee’s “earnings” for the purposes of s 382(b)(iii) of the Act. Section 332(2) then details those benefits that are excluded from the calculation of “earnings” for the purpose of s 382(b)(iii). Relevantly for the purpose of the present matter, s 332(2)(a) excludes those amounts that cannot be determined in advance which as noted in the relevant section includes “commissions, incentive-based payments and bonuses.”

[18] A Full Bench in Jenny Craig Weight Loss Centres Pty Ltd v I Margolita 6 (Jenny Craig) considered the meaning of s 332(2)(a) and stated as follows:

[19] It seems clear enough that the legislature intended to exclude bonus payments which are contingent, either because they depend on performance in some way or because management reserves the right to modify or discontinue them. On the evidence in this case it seems that both the annual bonus and the one-off five year bonus are contingent in the relevant sense. In relation to the five year bonus, there is a specific reservation of the right to alter or discontinue the plan. It is unclear, although it is likely that the same reservation applies in relation to annual performance bonuses. This cannot be determined in advance because the remuneration policy provides that: “Management has the right to modify and discontinue the remuneration plan at its discretion” 7

[19] The circumstances in the present case are somewhat analogous to those in Jenny Craig in that the Applicant’s remuneration opportunity beyond his base TEC of $100,000.00 is contingent on sales performance. Further, the Respondent also reserved its rights to alter or discontinue the Incentive Plan, subject to the terms of the Incentive Plan. In these circumstances it cannot be said that the Applicant’s remuneration beyond his base TEC of $100,000.00, which includes minimum SGC Act obligations, was able to be determined in advance.

[20] Having regard to the clear wording of s 332(2)(a) and the Full Bench authority of Jenny Craig it is clear that the Incentive Plan should not be taken into account for the purpose of ascertaining whether the Applicant’s earnings exceeded the high income threshold.

[21] Further, in accordance with s 332(2)(b) of the Act the minimum SGC Act superannuation contributions made in respect to the Applicant cannot be taken into account in calculating “earnings” for the purpose of the high income threshold.

Summary and Conclusion

[22] For the purposes of the high income threshold, the Respondent’s “earnings” were no more than $91,324.24. This is less than the high income threshold. Accordingly, as the requirements of s 382 (a) and (b) have been met, I find that the Applicant is a person protected from unfair dismissal.

[23] The Respondent’s jurisdictional objection to the Application is dismissed. An order to this effect will be issued separately. The Application will now be referred for further programming.


DEPUTY PRESIDENT

Appearances:

Mr B. Keramidas on his own behalf.

Mr M. Buckley on behalf of the Respondent.

Hearing details:

Melbourne.

2018.

20 March.

<PR601269>

 1   Exhibit R2.

 2   Exhibit A5.

 3   Exhibit A6.

 4   Exhibit R2.

 5   Exhibit R3.

 6   [2011] FWAFB 9137.

 7   Ibid at paragraph [19].

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