PR955909 PR955909 Download Word Document AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION Workplace Relations Act 1996 s.170CE application for relief re termination of employment Manuar Ali and Victorian Aboriginal Health Service Co-Operative Ltd (U2004/7599) COMMISSIONER GRAINGER MELBOURNE, 25 FEBRUARY 2005 Termination of employment - jurisdictional objection - award coverage and salary cap. DECISION Introduction [1] This is an application pursuant to s.170CE (1)(a) of the Workplace Relations Act (the Act) by Mr Manuar Ali (Mr Ali, the applicant) in respect of the termination of his employment by Victorian Aboriginal Health Service Co-Operative Ltd (VAHS, the respondent) on or about 1 December 2004. The applicant's application was lodged with the Commission on the requisite Form R18 on 6 December 2004. The respondent lodged its Notice of Employer's appearance in the Commission on the requisite Form R21 on 10 December 2004. On the attached Form R21A VAHS indicated that it moved for the dismissal of the applicant's application for want of jurisdiction before the matter is referred for conciliation on the grounds that "pursuant to s.170CBA(1)(f) the applicant's annual remuneration exceeds $90,400. Mr Ali's total remuneration package is $95,784." [2] The hearing of this jurisdictional objection took place on 3 February 2005. The applicant was represented by Mr K Boden of counsel. The respondent was represented by Mr D McPherson. The Facts [3] Mr Ali commenced working for VAHS in May 2001 as a contract employee on a casual basis (PN192, 193). On 8 October 2001 VAHS employed Mr Ali on a permanent basis (PN196, PN272). The then Chief Executive Officer of VAHS, Mr Tony McCartney (Mr McCartney) gave Mr Ali a draft employment agreement (the draft agreement) at that time which was never formally executed and which was similar to but not identical to a document tendered by the respondent as Exhibit R2 (PN200, PN206). Mr Ali was remunerated by VAHS in accordance with the provisions of the draft agreement (PN209) which states (Exhibit R2) inter alia that: Clause 1 - The employer has agreed to employ Mr Ali in the position of Accountant. Clause 3 - Mr Ali's employment is governed by the Health Services Union of Australia (Aboriginal and Torres Strait Islander Health Service) Award 2002 (the award). Clause 5 - Mr Ali will report to the Deputy Chief Executive Officer of the VAHS. Clause 15 - Subject to the provisions of this agreement the remuneration package of Mr Ali shall be $65,000 gross per annum by way of: (a) equal weekly instalments by direct transfer into Mr Ali's nominated bank account (b) contributions on behalf of Mr Ali into a nominated Superannuation Fund. Clause 18 - VAHS shall provide Mr Ali with a suitable motor vehicle for use in the course of his employment for the Accountant's limited private use subject to the following conditions: (f) private use of the vehicle is permitted within a radius of one hundred (100) kilometres of the Melbourne GPO. The employer's written approval must be obtained prior to undertaking a journey in excess of 100 kilometres for private purposes. (g) the cost of fuel, tyres and maintenance shall be borne by the employer. Clause 19 - VAHS shall provide Mr Ali with a suitable mobile phone for use in the course of his employment. [4] During the course of his employment with VAHS Mr Ali had a range of work carried out on the two vehicles he was supplied with as part of his remuneration package (see Exhibit R4 and PN218). The respondent claims that these extra costs meant that the value of the vehicle component of the remuneration package should actually be $26,000 per annum. The respondent also adduced evidence from Mercer Human Resource Consulting that the annual value of the vehicle component of the vehicle supplied as part of Mr Ali's remuneration package was $18,307 (see Exhibit R3). [5] The evidence is disputed as to whether or not some of the work done on Mr Ali's contract vehicle was authorised but Mr Ali's uncontradicted evidence was that Mr McCartney had approved all of this work because Mr Ali's pay had not increased significantly (PN297-PN299). [6] The award is an award within the meaning of s.4(1) of the Act having resulted from a decision of the Commission on 22 November 2002 (AW819920) to which the respondent in this matter is a respondent. The applicant's submissions [7] At the hearing the applicant submitted (PN32-43) that: (a) Section 170CBA(1) of the Act specifies that the following kinds of employee are excluded from the operation of subdivision B, D, E and F and sections 170CL and 170CM: (f) an employee: (i) who is not employed under award conditions; and (ii) to whom subsection (5) or (6) applies. (b) Mr Ali was an employee of VAHS who was employed under award conditions and the relevant award is the Health Services Union of Australia Aboriginal and Torres Strait Islander Health Services Award of 2002, (AW819920) (the award). (c) VAHS is named as a respondent in the Schedule of Respondents to the award. (d) VAHS in its Form R21 actually stated that "the applicant was employed under an award or agreement, that being the HSUA (Aboriginal and Torres Strait Islander Health Services) Award 2002". (e) Mr Ali's position description at VAHS specifies under the heading of classification that the classification is Health Services Union of Australia Aboriginal and Torres Strait Islander Health Service Award 2002. [8] The applicant made the following written submissions in response to the respondents objection to jurisdiction (Exhibit A1): " Statement to dispute Employer's claim in Section 170CE jurisdiction hearing In an effort to dismiss my application for unfair dismissal, the employer has stated that my salary is in excess of $90,400. In so doing they have given three tables of my salary from 1 December 2003 to my last day of service 1 December 2004. In all the three tables they have used nominal wage rather than actual payments made. I believe that we should still abide with the normal accounting period stipulated for determination of annual salaries and proper process of wages, issues of group certificates for taxation and other purposes. The salary package includes the use of a company vehicle. This is the part and parcel of fringe benefit and the fringe benefit year is 1 April to 30 March. Furthermore salaries and wages are calculated upon the financial year, i.e. from July to June. When considering annual salaries we have to abide by these regulations. I would assume that to consider the $90,400 limit we have to work on the earnings within the financial year. On 1 October 2002, my salary was increased to $65,000 per annum with the use of a company vehicle. In accordance with the Superannuation Guarantee Act, the employer contributes 9% towards my superannuation. 2003/04 Financial Year My group certificate for the year ending 30 June 2004 is attached by the employer showing that my total gross pay for the financial was $43,885 and a Fringe Benefit Reportable amount of $37,248. This amount of $37,248 is inclusive of my salary sacrifice and the motor vehicle component allocated to my personal use. The $15,450 salary sacrifice benefit is not a liability of the employer nor is it a condition of employment with the employer, but a statutory of the Income Tax Assessment Act. The statutory definition excludes salary and wages, exempt benefits, benefits that arise under an employee share scheme, payments to a complying superannuation fund. For all intent and condition of the employment, the employer has given me the benefit of the following: Taxable pay $43,885 Salary Sacrifice $15,450* Personal Use of motor vehicle $07,248* Total remuneration $62,750 *This is shown on the group certificate as a gross up value of $30,000 for salary sacrifice and $7,248 for persona use of company vehicle. 2004/05 Financial Year The year to date pay to 1 December 2004 was $24,909.49 with a salary sacrifice amount of $10,477.42. The personal use of the company car for 5 months would be in the vicinity of $36,000 @ 20% for 5/12 of the year is approximately $3,000. This is significantly less that the $90,400. If we were to use the 12 months period prior to termination as determined in the employer's submission, we have to abide by wages paid, i.e. previous earnings for the 12 months (inclusive of termination and leave loadings). It should be noted that this payment includes 9 weeks of Annual Leave, Termination pay and leave loadings. Taxable wages $49,601.14 Salary Sacrifice $26,433.02 Personal use of motor vehicle $07,200.00 Total $83,244.16 The $26,000 valuation used by KPMG is exorbitant when considering the cost of the motor vehicle to be $36,000 and generally it is accepted that the depreciation is for a 5 year period. Even if the operating method is used to calculate the fringe benefit of a motor vehicle, the actual cost is far less than the estimation shown in the employer's submission. I was approved to use an XR6 Turbo by the previous CEO and the then Chairman, Mr. Bruce McGuinness (deceased). A previous Turbo purchased for approximately $36,000 was sold for $38,000 after 5 months use. There was some disagreement by the Board on this vehicle because of the colour. The current vehicle, in the approved white colour was purchased as a replacement with the approval of the CEO and Chairman. Apart from the salary levels, The employer's letter to AIRC includes a special note alleging that the modifications to the car was (sic) not approved and that the modifications require the car to use premium unleaded fuel. I refute the claim as firstly the car and all accessories fitted to the car has been made with the approval from the previous CEO, Tony McCartney and secondly the XR6 Turbo was recommended by Ford in its brochure to use premium unleaded fuel to protect the engine. The claim that the modifications have increased the car's performance from 240kw to 350kw is preposterous. VAHS has a policy of having a company car washed at the local car wash dealer. This was the accepted norm prior to my employment at VAHS and I have complied with the procedures. A credit account has been set up and all the company cars were washed at the Magic Car Wash in Nicholson Street. The allegation that I have taken advantage of this is malicious and without foundation. Details of the accounts can be inspected and I would have expected that KPMG would have uncovered this, rather than making the allegations that I have taken advantage of the car wash service. As part of the improvements to the accounting reports, I have introduced spreadsheets for various staff uses, inclusive of mobile phones, purchase of fuel and car wash. Details of each car and mobile phones are then broken up into the respective cost centre and the spreadsheet is usually given to the CEO in month end reports. In the employer's submission, they have included theoretical figures. This can be verified through the above spreadsheet for the individual's actual cost of car wash and fuel usage. I would like to add that the mileage used for September 2003 to now, is approximately only 20,000 kms. By comparison to the other staff members this is very low and my running cost should reflect this low mileage." The respondent's submissions [9] The respondent made the following written submissions objecting to the Commission's jurisdiction in this matter (Exhibit R1): "In the matter of U2004/7599 jurisdiction hearing, attached is the VAHS written submission and evidence to support their claim that the applicant's annual remuneration exceeds the threshold limit of $90,400.00 per annum. The attachments and supporting evidence are as follows: Salary Table 1 Based on the applicant's basic salary earnings over the 12 month period 01 December 2003 to 01 December 2004, from the table you can see the applicants combined remuneration is $101,289.47, clearly the total remuneration exceeds the threshold limit of $90,400.00. Salary Table 2 Based on applicant's basic salary earnings over the 12 month period 01 December 2003 to 01 December 2004, including annual leave paid on termination (1 December 2004). By including the payment made on termination the applicants remuneration is $107,525.62 once again the total remuneration exceed the threshold limit of $90,400.00. Salary Table 3 Based on applicant's actual salary earnings as an employee whose employment earnings attract a tax free fringe benefits grossed up amount of $30,000.00. This grossed up amount equates to a non-grossed up taxable value of $15,450.00. By including the actual salary earnings and the grossed up amount for fringe benefits purposes the applicants remuneration is $114,447.97... The applicant... sacrificed a portion of his earnings at the full tax-free FBT rate of $15,450.00. In addition to this the application (sic) further sacrificed a further amount of $10,993.02 into his superannuation, for the purposes of this exercise we have not included this amount or the grossed up amount for the superannuation in our calculations. Special Note Applicant's use of company vehicle and type of car: The applicant stated to the VAHS and his union representative during an interview prior to his termination that he had a full (sic) maintained company vehicle: a Ford Falcon BA XR6 Turbo that unbeknown to the company and at the company's expense the applicant had the turbo modified/changed which meant a higher consumption of fuel and higher costs per litre as the vehicle could now only take premium fuel... It is the company policy that all company vehicles only be driven 100km from the Melbourne GPO. The applicant claims he had unlimited use of the vehicle and therefore any additional costs he incurred for the use of the vehicle he claimed from VAHS. Hence if the applicant claims this them (sic) he must accept that these form part of his remuneration... In addition to the fuel consumption rate and cost of fuel... the applicant also claimed regular car detailing and washing, both of which are above the normal running costs for a company vehicle. In the main it is Companies' (sic) expectation that company cars used by employees, should be washed by the employee... However, not in the applicant's case, he claimed the premium fuel and not only the cost of washing the car but also the detailing of the vehicle, as such must form part of the applicant's remuneration. The RACV place the average fuel costs of running a Ford Falcon BA XR6 Turbo at best 10.4 litres of fuel per 100kms, at worst 14.6 litres of fuel per 100kms and an average of 12.8 litres of fuel per 100kms... These modifications would have significantly increase the car's performance from Ford specifications of this car at 240kW's to a minimum of 350 kW's plus. Therefore the significantly higher fuel costs, etc that the applicant has claimed from the VAHS must form part of the remuneration package. Supporting Evidence 1. Applicants Group Certificate for the 2003/2004 Financial year 2. Payroll Print Out from VAHS' payroll system for the period 01/12/2003 to 01/12/2004 3. Details for the VAHS' Salary Sacrifice Provider on Public Benevolent Institutions (FBT exempt). 4. KPMG Valuation of the company vehicle (to be supplied) 5. Superannuation - the organisation relies on the appropriate Government Superannuation Act that requires a minimum 9% employer contribution. As stated the VAHS seeks to have the applicant's S170CE dismissed on the grounds of the jurisdiction objection by the VAHS that the Applicants remuneration is in excess of the stated threshold limit of $90,400.00 per annum. Further the VAHS is of the opinion that the applicants S170CE claim is unsubstantiated and the applicant's actions are vexatious and the company will seek costs should he proceed further with his claim." [10] The respondent made the following submissions at the hearing (PN78): 1. Mr Ali is governed by the award. 2. Mr Ali's employment contract specifies that the award does not form part of this agreement and further states that the accountant's hours are based on a 35 hour week. The Legislation [11] s.170CBA(1) of the Act relevantly provides: "(1) The following kinds of employee are excluded from the operation of Subdivisions B, D, E and F and sections 170CL and 170CM: (a) an employee engaged under a contract of employment for a specified period of time; ... (f) an employee: (i) who is not employed under award conditions; and (ii) to whom subsection (5) or (6) applies." [12] s.170CBA(4) of the Act provides: "(4) For the purposes of subparagraph (1)(f)(i), an employee is taken not to be employed under award conditions unless the employer is bound, in relation to the employee's wages and conditions of employment, by an award, a certified agreement, an AWA or an old IR agreement." [13] s.170CBA(5) of the Act provides: "(5) For the purposes of subparagraph (1)(f)(ii), this subsection applies to an employee if: (a) the employee's remuneration immediately before the termination of employment was not wholly or partly determined on the basis of commission or piece rates; and (b) the rate of remuneration applicable to the employee immediately before the termination exceeds a rate specified, or worked out in a manner specified, in the regulations (the specified rate)." [14] s.170CBA(6) of the Act provides: "(6) For the purposes of subparagraph (1)(f)(ii), this subsection applies to an employee if: (a) the employee's remuneration immediately before the termination of employment was wholly or partly determined on the basis of commission or piece rates; and (b) in accordance with the regulations, the rate of remuneration that is taken to be applicable to the employee immediately before the termination exceeds the specified rate." [15] Regulation 30BB of the Workplace Relations Regulations provides that for the purposes of paragraph 170CBA(5)(b) and 170CBA(6)(b) of the Act, the specified rate is $64,000 per year, subject to indexation which meant that at 1 December 2004 the specified rate was $90,400 (as of 1 July 2004). [16] s.170CD(3) of the Act provides: "(3) For the purposes of this Division, an employee is taken to be employed under award conditions if both wages and conditions of employment of the employee are regulated by awards, certified agreements or AWAs, that bind the employer of the employee." [17] Section 4(1) of the Act defines "award" to mean an award or order that has been reduced to writing under subsection 143(1). The first issue - was the applicant employed under award conditions? [18] At the time of the termination of his employment by the respondent, Mr Ali was employed as the Finance Manager or Accountant of VAHS. Whilst no employment agreement was ever executed by the parties I accept the draft agreement at Exhibit R2 as evidence of what the parties always intended should be the terms of Mr Ali's employment. This makes abundantly clear that Mr Ali's employment was intended to be governed by the award. Whilst some of Mr Ali's entitlements exceed those provided for in the award, there is no doubt whatsoever that the award covers employees of VAHS up to and including the Chief Executive Officer (see Clause 11.2.8 of the award Exhibit R7). Mr Ali's employment was encompassed by the provisions of clause 11.2.7 of the award (see Exhibit R7). The Award Wages Rates: Schedule to the award (Exhibit R8) sets out the award rate of pay for an Administrative Officer Grade 7 Level 2 of $942.50 which was acknowledged to be the rate applicable to the level of accountant held by Mr Ali (PN152). The salary component of Mr Ali's rate of remuneration exceeds that, being $65,000. Clause 9 of the award (Exhibit R9) specifies that in an "ordinary fortnight work shall be 76 hours which shall be worked in 9.5 ordinary working week days" with ordinary hours being "worked between 7.30 a.m. and 7.30 p.m. Monday to Friday" . The draft employment agreement (Exhibit R2) specifies at clause 9 that "the Accountant must work the hours of 9.00am to 5.00pm from Mondays to Thursdays (inclusive) and from 9.00am to 4.00pm on Fridays". There is nothing in the draft agreement, and I reiterate that it was only a draft, which appear to displace the award conditions as those governing Mr Ali's hours of work. When one considers the totality of the conditions provided for in the award, in addition to rates of pay, including: clause 14 - overtime clause 21.2 - travelling allowance clause 22.2 - recall allowance clause 24 - accident pay clause 26 - personal leave clause 27 - annual leave clause 28 - ceremonial leave clause 29 - parental leave clause 30 - study leave clause 31 - public holidays clause 32 - dispute settlement procedure clause 33 - termination of employment clause 34 - redundancy it is apparent that Mr Ali had the protection of a wide range of award conditions which are not displaced by the provisions of any other agreement. What was recorded in the draft agreement merely set out enhancements to Mr Ali's conditions of employment in a very limited range of areas, notably salary and motor vehicle, but did not displace the applicability of the other award conditions. Accordingly Mr Ali was at 1 December 2004 an employee employed under award conditions, see Full Bench decision of this Commission in Stephenson v Moonee Valley Racing Club Inc. (Print T2285, 20 October 2000). The respondent has not in this matter discharged the onus of proof on it to satisfy the Commission that Mr Ali was not employed under award conditions when so many of the indicia of the relationship between Mr Ali and VAHS, including the terms of the draft employment agreement and the award itself show that Mr Ali was so employed. The second issue - did the remuneration package exceed the specified rate? [19] Whether the latter finding makes clear that the Commission does have jurisdiction in this matter I proceed also to consider the provision in respect of whether Mr Ali's remuneration package at 1 December 2004 exceeded the specified rate. [20] The respondent has adduced evidence about work undertaken on Mr Ali's contract motor vehicle (Exhibit R4) and has made submissions about what the value of that vehicle ought to be in relation to Mr Ali's remuneration package. I find much of the respondent's evidence and submissions to be unsatisfactory and inconclusive. What seems incontrovertible is that: (a) Mr Ali was entitled to a motor vehicle under his contract and was supplied with such a vehicle with the approval of the Chief Executive Officer of VAHS. (b) The value of the vehicle would not have exceeded $18,307 (see Exhibit R3) [21] The applicant says (PN44-56) that the value of the remuneration package was as follows: Salary $65,000 Superannuation $05,850 Motor Vehicle $07,200 $78,050 [22] The respondent has asserted that the total value of the package was (see Exhibit R10) at least: Salary $65,000 Superannuation $05,850 Leave Loading $00,875 Overtime $03,125 Motor Vehicle $26,000 $100,860 [23] In relation to overtime which is "uncertain" and "irregular" this has been found not to be part of remuneration - Flemming v Keith Miller & Sons Builders Pty Ltd (Print R4890, 18 May 1999). I find Mr Ali's overtime to have been of the "uncertain" or "irregular" kind that should not be included in the calculation of remuneration . As to the inclusion of "annual leave loading" in remuneration, this appears to be sufficiently fixed and certain to warrant inclusion in the remuneration. As to the value of the motor vehicle, a Full Bench of this Commission in Fewings v Kunbarllanjnja Community Government Council (Print Q0675, 31 October 1997), held that the employer must establish the estimated cost of the utilisation of the vehicle for private purposes, not relying on the formula used by the Australian Taxation Office but rather looking at a range of factors (see Q0675 pp5-6) relating largely to the annual distance travelled by the vehicle and the percentage of that distance made up of private use. The respondent has adduced evidence (Exhibit R3) that the value of Mr Ali's car was $18,307 per annum based on the vehicle doing over 40,000 kilometres (PN90). The applicant had, in fact, only travelled 26,000 kilometres (PN104) and presumably not all of that can be attributed to his personal use. However, I will allow the whole of the sum of $18,307 to be counted as part of the calculation of Mr Ali's remuneration, discounting the respondent's other claims as to what the value of that component should be for "enhancements" to the vehicle. [24] I find that the value of Mr Ali's remuneration package should be calculated on the following basis: Salary $65,000 Superannuation $05,850 Leave Loading $00,875 Motor Vehicle $18,307 $90,032 [25] This figure is less than the specified rate. Finding [26] I find that Mr Ali was at the date of termination of his employment employed under award conditions and that his rate of remuneration did not exceed the specified rate and therefore the Commission does have jurisdiction to deal with this application under s.170CE (1)(a) of the Act. BY THE COMMISSION: COMMISSIONER Appearances: Mr K Boden, of counsel, on behalf of the applicant. Mr D McPherson, SIAG, for the respondent. Hearing Details: Melbourne. 2005. February 3. 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