The FWC received 13,928 unfair dismissal applications last year: How to stay on the right side of the law

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In the reporting year 2018/2019, the Fair Work Commission (FWC) received 13,928 unfair dismissal applications. Undoubtedly, unfair dismissal applications are among the most common received by the FWC.

The success or otherwise of an unfair dismissal application depends on many factors, but one of the most basic considerations is whether or not the employee making the application is entitled to protection from unfair dismissal under the Fair Work Act 2009 (Cth).

Under s382 of the Fair Work Act, employees will only be protected from unfair dismissal if they have completed the minimum employment period and one of the following applies:

  • They are covered by a modern award;
  • An enterprise agreement applies to them; or
  • Their annual rate of earnings is less than the high-income threshold (currently $148,700).

If an employee does not meet the criteria in s382, their employer will have a valid jurisdictional objection to their unfair dismissal claim.

The FWC was recently tasked with determining one such jurisdictional objection when an employer objected to a claim by a former employee on the basis that he was not covered by a modern award or enterprise agreement and, most significantly, his annual earnings were more than the high-income threshold.

In this case, the employee’s total remuneration was made up of a number of components including a base salary, 12.5% superannuation contributions, a car allowance and a bonus of up to 15% of the employee’s base salary.

The employee argued that he was entitled to bring his unfair dismissal claim because his base salary, of $143,780, was below the high-income threshold. He claimed the other components of his remuneration were not “earnings” as described by the Fair Work Act, and should not be included for the purposes of calculating whether his salary reached the high-income threshold.

“Earnings” is described in s332 of the Fair Work Act as relevantly including wages and amounts dealt with on the employee’s behalf or as the employee directs. Earnings do not include payments that cannot be determined in advance, reimbursements or contributions to superannuation to the extent that those contributions are what the employer is required to contribute under superannuation legislation.

It was common ground between the parties in this case that any bonus paid to the employee should not be included in any calculations, because it could not be determined in advance. However, the employer contended that the superannuation contributions above the legislated 9.5% should be included as amounts dealt with on the employee’s behalf. The employer also contended that any portion of the car allowance that did not go towards the employee’s actual use of his vehicle for work should also be included.

The FWC considered the wording of the relevant provisions of the Fair Work Act and the leading authorities on the subject. The FWC concluded that, consistent with binding authority, a portion of the vehicle allowance not used for work purposed could form part of the high-income threshold calculations.

The method for determining that portion of the car allowance involves determining the usage of the vehicle over the year preceding termination of employment and multiplying that mileage by the relevant per kilometre figure (based on the vehicle, its age and the locations of the usage, with information obtainable from the NRMA or similar). That figure is then deducted from the total vehicle allowances paid to the employee and the difference is the portion of the car allowance that will be considered “earnings” for the purposes of the high income threshold.

Similarly, the FWC agreed that the superannuation payment in excess of the legislative minimum was also “earnings” for the purpose of the high-income threshold and could be included in such calculations.

Having reached these findings, the FWC held that the employee’s annual rate earnings at the time of his dismissal totalled $168,355, which was well above the high-income threshold.

The employee’s unfair dismissal application was dismissed.

Lessons for employers

If an employer is served with an unfair dismissal application, as a preliminary step, it should consider all available jurisdictional objections to that application — including assessing whether the employee earned more than the high-income threshold.

High-income threshold calculations can include not just an employee’s base salary, but also other components of their remuneration, including any car allowance.

This article was first published by Workplace Law.

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