PR972245
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AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Workplace Relations Act 1996
s.170CE application for relief re termination of employment

Sadler

and

Townes Chappell Mudgway Pty Ltd
(U2006/2031)

COMMISSIONER WHELAN

MELBOURNE, 22 MAY 2006

Jurisdiction – regulation of wages; remuneration.

DECISION

[1] In this matter the applicant Mr Sadler has filed an application under section 170CE(1)(a) and section 170CK. The respondent has moved for dismissal of the application before conciliation on the grounds that, “Mr Sadler’s remuneration exceeds the specified rate and Mr Sadler is not employed under award conditions” 1.

[2] Mr Sadler gave evidence on his own behalf and was represented by Mr Matarazzo of the Australian Municipal, Administrative, Clerical and Services Union (ASU). Evidence was given by Ms Hermann and Mr Townes for the respondent. The respondent was represented by Ms Garland of the Northern Territory Chamber of Commerce and Industry.

[3] Submissions were filed and served by the Chamber on 22 March 2006. The ASU filed and served a reply on 29 March 2006. A further submission was filed and served by the Chamber prior to evidence and oral submissions being heard on 4 April 2006. Parties were also given the opportunity to make further written submissions.

Background

[4] The applicant commenced work with the respondent on 11 August 2003 in the position of Senior Electrical Engineer. He worked in that capacity until 23 February 2006 when his employment was terminated. Several issues were raised by the respondent in the termination letter of 24 February 2006. The applicant’s request to have his working week shortened to four days was not acceptable; a doctor’s warning that the applicant not drive a car severely limited his ability to carry out his duties; and the applicant had been absent from the office, had left early without notifying the company and had not made up for absences by working extra hours.

[5] It was not disputed that the respondent, by virtue of the award being common rule, is bound by the Technical Services Professional Engineers (Consulting Engineers) Award 1998 2.

Evidence

[6] Ms Hermann is the administrative officer for the respondent. She gave evidence about the calculation of vehicle usage by the applicant 3. She took the advice of the respondent’s accountant regarding the payment of superannuation on the notice paid to the applicant4. She stated this amount ($410.19) was not paid directly to the applicant but to his superannuation fund5. She stated that the respondent paid the employee’s Institute of Engineers membership and covered the cost of the Institute dinner6. She was not qualified to answer if membership of the Institute was a requirement of the applicant’s job7. Ms Hermann explained the delay in the final payment made to the applicant8.

[7] In cross-examination Ms Hermann indicated vehicles are leased by the respondent 9 and the lease expenses paid by the company. She agreed other employees had access to the vehicle and stated that a sign in-sign out sheet was used10. The company does not keep an exact log11. She stated the applicant could drive the vehicle to and from work and that it was used by him on four occasions during work hours and once by another employee during this period12. Ms Hermann stated that the applicant’s use of the vehicle did not reach the level required for fringe benefits and therefore did not appear on his group certificate13. She could not give an exact figure for kilometres of private use by the applicant14.

[8] Ms Hermann stated she was aware of the 1994 Tax Office Superannuation Guarantee ruling. She was advised by the company’s accountant to pay superannuation on the notice as a good will gesture 15 although the payment was not a requirement16. “What they (the accountant) said to me was it was a good will thing. They thought we should pay it”17. It was her understanding that employees were not directed to attend the Institute dinner. Not all of the company’s engineers attended each time18. Ms Hermann indicated the applicant had fifteen days leave without pay over 12 months19.

[9] In response to questions from the Commission, Ms Hermann indicated that the vehicle was usually driven by Mr Stainton 20. She agreed that the applicant did not usually have access to a company vehicle except if he needed one during the day21. She agreed that judging from the fuel costs the car was not used extensively by the applicant22. She stated that the fuel dockets were “around about the normal amount that we spend per fortnight on that vehicle, whether Mr Stainton has it or Mr Sadler has it” 23.

[10] In re-examination, Ms Hermann stated that the applicant requested the use of the vehicle. He had previously asked for a company car. She agreed he was free to use the vehicle for any personal use over the two periods when he had the vehicle. She agreed that the respondent paid the applicant in excess of the superannuation ruling.

[11] Mr Sadler gave evidence about his commencement date, position and salary. He stated in the last twelve months he had three weeks leave without pay because of illness 24. Mr Sadler said he had requested a company vehicle about 18 months ago because both associates had one and he did not. This request was refused. Mr Sadler was asked by Mr Stainton to take his car while he was on leave. Mr Sadler stated he did not use the vehicle for private use. It sat on the nature strip outside his house25. He drove it to and from work and used it on four occasions during work time26.

[12] Mr Sadler stated that Mr Townes decided who could go to the Institute dinner. The applicant had attended every year. It was never indicated this was part of his salary. The cost had never shown up on his group certificate. Mr Sadler stated that the reduced amount of $911.54 for the pay period of 16 November 2005 was because he was in hospital on leave without pay 27.

[13] In response to questions from the Commission Mr Sadler stated that the respondent never specifically said that employees had to be members of the Institute of Engineers. They offered to pay the membership. He did not ask. Mr Sadler confirmed that he was asked by Mr Stainton and reminded by Mr Townes to take Mr Stainton’s vehicle home.

[14] There was no cross-examination by the respondent.

[15] Mr Townes is a co-director of the company. He gave evidence about the company’s vehicles 28. He stated that company vehicle use was authorised by Mr Chappell or himself29. He recalled the applicant asking Mr Chappell for use of the car. In response to a question from the Commission Mr Townes agreed that it was not part of Mr Sadler’s package that he have access to home garaging30.

[16] In cross-examination Mr Townes stated that a credit card was kept in the cars for the purchase of fuel. He agreed that a total of $138.34 would be about two tanks 31. He stated that attendance books are used instead of log books. These are filled in every time the car is taken out and indicate where the car is going32. He agreed that, with one exception, car use was workplace related33. He did not know if the applicant used the vehicle outside of work hours34.

Submissions

What formed the applicant’s remuneration?

[17] Ms Garland submitted that the applicant’s remuneration for the period 24 February 2005-23 February 2006 was as follows:

 

$

Base salary

76,226.14

Superannuation

6,743.05

Profit share bonus

5,000.00

23 February 2006 (1 day worked)
(pay period ended 22 February 2006)

303.85

Superannuation

27.35

   

Subtotal

88,300.39

   

3 weeks notice in lieu

4,557.69

Superannuation

410.19

Annual leave owed (including leave loading)

2,881.01

Superannuation

259.29

   

Subtotal

8,108.18

   

Engineer Institute member renewal (pro rata for 2004-2005 financial year)

64.16

Engineer Institute member renewal (full amount for 2005-2006 financial year)

199.10

Institute of Engineers Dinner Payment for Mr and Mrs Sadler

170.00

   

Subtotal

433.26

   

Personal car use 24 March 2005-14 April 2005

638.77

Personal car use 11 January 2006-30 January 2006

628.29

   

Subtotal

1,267.06

   

TOTAL

96,108.89 35

[18] This amount exceeds the specified rate of $94,900.

[19] Ms Garland submitted that the applicant benefited from the Institute of Engineer membership, from the personal vehicle use and that these amounts should be included in his remuneration. The evidence of all three witnesses clarified that these amounts were received by him. Amounts not actually received by him were paid on his behalf and he has benefited from them.

[20] Ms Garland submitted that the Commission should consider the notice paid to Mr Sadler be included in his remuneration. It is an entitlement that the applicant actually received. It is an amount required to be paid by law - the payment is neither discretionary or a reimbursement. It is an entitlement that the applicant received due to his termination. Ms Garland took the Commission to the provisions of Regulation 30BC as the basis for the submission that the notice paid formed part of the applicant’s remuneration, in particular the following:

[21] Mr Matarazzo submitted that the applicant’s salary was under the statutory limit and this was the case whether the calculation was based on a salary of $76,000 (a total of $87,969.19 37) or $79,000. He submitted the applicant’s gross salary, superannuation and bonus should be added to arrive at a final figure. He submitted that the payment of lieu in notice and any superannuation on that sum should not be counted and relied on the definition of ordinary time earnings given in the 1994 Tax Office Superannuation Guarantee Ruling.

[22] Mr Matarazzo submitted that the amounts attributed for personal vehicle usage should not be included. He stated those amounts did not form part of the applicant’s salary package. He submitted that the amounts attributed to the Institute of Engineers membership and dinner should be characterised as a reimbursement of expenses rather than remuneration. Those amounts were not included on Mr Sadler’s group certificates and therefore do not form part of his remuneration.

Was the applicant covered by the award?

[23] Ms Garland submitted that the applicant was excluded from the jurisdiction of the Workplace Relations Act 1996 by virtue of section of 170CBA(1)(f). The applicant was employed in the position of Senior Electrical Engineer and was employed under the Technical Services Professional Engineers (Consulting Engineers) Award 1998 at a Level 4 classification. However, in relation to the rates of pay for a level 4 employee the award states:

[24] Section 170CD(3) of the Workplace Relations Act 1996 states:

[25] It was submitted that although the applicant’s conditions of employment were covered by the award, wages were not. Therefore the applicant was not employed under award conditions.

[26] Ms Garland agreed that the award states in relation to level 4 employees that minimum rates of pay are not specified, but are to be negotiated between employer and employee. It would be commonsense to look at the minimum wage rate of $52,000-plus for a level 3 employee and take that as a safety net for level 4 and 5 employees but that is not clearly specified in the award. The rate is determined by negotiation. The award governs Mr Sadler’s conditions of employment. It does not govern his wages.

[27] Mr Matarazzo submitted that the applicant was not award free for the purposes of salary and conditions. He submitted that the level 3 safety net rate of $52,509 per annum formed an indirect safety net that an employer could not lawfully pay below for a level 4 or 5 engineer covered by the Technical Services Professional Engineers (Consulting Engineers) Award 1998. He submitted that the words “ ‘determined by negotiation between the employer and employee’ means any annual full-time rate equal to or above $52,509 per annum which are determined by the employees in level 4 or 5 and the employer”. It would be ludicrous to suggest that an employer could pay a full-time level 4 or 5 engineer less than an annual salary of $52,509.

[28] Mr Matarazzo took the Commission to the award and in particular the following:

[29] He submitted that although clause 15.2 of the award indicates the parties can negotiate, the award expressly states it governs the salaries and conditions of professional engineers at all levels of the award. The applicant therefore is not award-free for the purposes of salary and conditions.

[30] The Commission referred the parties to Full Bench decisions that had found that an award could provide a safety net where there was an express exclusion of a particular rate 40. Parties were given the opportunity to make further submissions.

[31] Ms Garland maintained her submission that the applicant was not bound to the award for the purposes of wages. She noted the provisions of section 170CBA(4) of the Act which state that “an employee is taken not to be employed under award conditions unless the employer is bound in relation to the employees wages and conditions, by an award”. She defined “bound” as “to place restrictions on”, “to form a boundary”, or “a limiting line or boundary” 41. Clause 15.2.1 expressly excludes wage setting for Level 4 or 5 professional engineers. Wages at these levels are determined by negotiation hence the award has no binding power. “The award does not place any ‘restriction’ or ‘boundary’ on those negotiations therefore those employees cannot be bound to the award for the purposes of setting wages”42.

[32] She distinguished Stephenson 43 and Mornington Racing Club Inc44 on the basis that in those cases the employer was bound to either pay the minimum rate for the relevant classification or, to attract the award exclusion, pay 50% above the relevant classification by specific agreement between the parties. In this case, the award provides an automatic exclusion of wages for level 4 and 5 by the operation of clause 15.2.1. The clause expressly excludes the applicant’s wages from the operation of the award. The applicant is not employed under award conditions. He is excluded from the jurisdiction of the Act.

[33] Mr Matarazzo relied on the provisions of clause 6.2 of the award. He further submitted that the employer had conceded on transcript that Mr Sadler was graded as a level 4 employee. Clause 6.2 states the award covers all employees engaged in the performance of professional engineering duties and this applies to all five grades in the award.

Conclusions

[34] The Commission is required to determine two issues in these proceedings. First, whether Mr Sadler was “employed under award conditions” within the meaning of section 170CD(3), as it then was and second, if he was not so employed, if “the rate of remuneration” applicable to him immediately before the termination exceeded the specified rate, namely $94,900.

[35] It is not disputed that the Technical Services Professional Engineers (Consulting Engineers) Award 1998 binds the employer. Further it is not disputed that Mr Sadler was “engaged in the performance of Professional Engineering duties” at a Level 4 classification level.

[36] Clause 6.2 of the Award states:

[37] At a later point in the award it also states:

[38] The fact that the award does not specify a minimum rate for a Level 4 Professional Engineer does not, in my view, mean that the wages of the Professional Engineer Level 4 are not regulated by the award. First, the award expressly states that it “governs the salaries . . . of all employees engaged in the performance of Professional Engineering duties”.

[39] Second, the award provides a minimum safety net for all employees whose salaries and conditions are governed by the award. Reading clause 15.2.1 in that context, it is clearly the intention that a Level 4 Professional Engineer could not be paid less than a Level 3 Professional Engineer, for whom a minimum rate is specified in the award.

[40] Third, to the extent that the award specifies a mechanism for determining the salaries of level 4 and level 5 engineers it does “regulate” their wages and fourth, a dispute arising from a failure to negotiate a salary would be a dispute over the application of the award and subject to the relevant dispute settlement procedure.

[41] I am therefore satisfied that Mr Sadler was employed under award conditions.

[42] If however I am wrong in that conclusion, I am satisfied that the applicant’s “rate of remuneration” immediately before the termination did not exceed the statutory specified rate. The “rate of remuneration” is not the same as the “total remuneration received in the previous twelve months” 45. On the evidence before me the applicant’s annual salary rate “immediately before the termination” was $79,000. The rate of superannuation payable on that amount is $7,110. The amount of superannuation paid on his behalf was however $7,439.88 and he received a profit share bonus of $5,000. This is a total of $91,439.88.

[43] It is not appropriate to include notice paid at the time of the termination as under normal circumstances this would be included in the applicant’s annual salary of $79,000 as time worked and paid for, not as an additional payment. He was further paid $2,881.01 in accrued annual leave bringing the total to $94,320.89.

[44] I am not satisfied that it was part of the applicant’s salary arrangement that the employer would pay for his membership of the Institute of Engineers or for his attendance at the Institute of Engineers dinner. However even if those sums are included the amount is still less than $94,900.

[45] There is in my view no basis for including as part of the applicant’s remuneration the use of a company vehicle for two periods during March-April 2004 and January 2006. It was never part of the applicant’s salary package that he would have the provision of a company car for private use. Indeed the vehicle in question was provided to another employee as part of his salary package. The fact that Mr Sadler was allowed to take this vehicle home when its regular owner was on leave does not entitle the employer to claim that the use of the vehicle for those periods became part of the applicant’s remuneration.

[46] I find it unnecessary to consider the way in which the sums associated with such use were calculated given my conclusions that it was not a component of his remuneration.

[47] For these reasons I find that the applicant is not excluded from bringing this application and the motion to dismiss is refused.

[48] The application is therefore referred for conciliation.

BY THE COMMISSION:

COMMISSIONER

Appearances:

L. Matarazzo of the Australian Municipal, Administrative, Clerical and Services Union for K. Sadler.

J. Garland with M. Humphreys of the Northern Territory Chamber of Commerce and Industry for Townes Chappell Mudgway Pty Ltd.

Hearing details:

2006.
Darwin:
April 4.

Printed by authority of the Commonwealth Government Printer

<Price code C>

 1   Respondent’s submission of 22 March 2006 at 3

 2   AW800663CR

 3   Transcript at PN128

 4   Transcript at PN134

 5   Transcript at PN134-136

 6   Transcript at PN137

 7   Transcript at PN138

 8   Transcript at PN140

 9   Transcript at PN143

 10   Transcript at PN145

 11   Transcript at PN147

 12   Transcript at PN153

 13   Transcript at PN156

 14   Transcript at PN158

 15   Transcript at PN159

 16   Transcript at PN160

 17   Transcript at PN161

 18   Transcript at PN162

 19   Transcript at PN166

 20   Transcript at PN170

 21   Transcript at PN173

 22   Transcript at PN174

 23   Transcript at PN177

 24   Transcript at PN208

 25   Transcript at PN210

 26   Transcript at PN212

 27   Transcript at PN222

 28   Transcript at PN240

 29   Transcript at PN241

 30   Transcript at PN248

 31   Transcript at PN261

 32   Transcript at PN269

 33   Transcript at PN270

 34   Transcript at PN271

 35   Respondent’s submission of 4 April 2006 at 22 and 23

 36   Workplace Relations Regulations, Part VA, Division 1, 30BC – Rate of remuneration per year

 37   Applicant’s submission of 28 March 2006 at 5

 38   AW800663CR

 39   AW800663CR

 40   Stephenson v The Moonee Valley Racing Club Inc [T2285]; Mornington Racing Club Inc v Bellchambers [PR905252]

 41   Respondent’s submission of 13 April 2006 at 3

 42   Respondents’ submissions of 13 April 2006 at 5

 43   Print T2285

 44   PR905252

 45   Maxwell v Acacia Resources [Print P6396] per Ross VP, Drake DP and Lawson C