An unfair dismissal application may
proceed despite an employer's jurisdictional objection that the
employee was paid an amount above the high income threshold.
Senior Deputy President (SDP) Acton's decision is
an important ruling on what constitutes 'earnings' under the
Fair Work Act 2009 (Cth) (FW Act).
The FW Act provides that an employee's earnings include:
- the employee's wages;
- amounts applied or dealt with in any way on the employee's
behalf or as the employee directs;
- the agreed money value of non-monetary benefits; and
- amounts or benefits prescribed by the regulations.
However, an employee's earnings do not
include:
- payments where the amount cannot be determined in advance;
- reimbursements;
- contributions to a superannuation fund; or
- amounts prescribed by the regulations.
The case
In the case in question, the employee
came to Australia from the UK on a class 457 visa sponsored by the
employer and was subsequently terminated. The employee filed an
application with Fair Work Australia (FWA)
claiming the termination was unfair.
The employer lodged a jurisdictional objection to the employee's
application, submitting that the employee's annual rate of earnings
and other amounts (worked out in accordance with the regulations)
was above the high income threshold (currently $108,300). The
employer claimed the employee's earnings totalled $109,133 per
annum, representing:
- $78,900 in wages;
- $26,100 living away from home allowance
(LAFHA), being an amount 'applied or dealt with in
any way on the employee's behalf or as the employee directs;
and
- $4,133 in health insurance, being a benefit other than the
payment of money as described by the Fair Work Regulations 2009
(Cth) (FW Regulations).
However, SDP Acton found that the
employee's LAFHA was not 'earnings' within the meaning of the FW
Act. SDP Acton concluded that: 'an allowance paid to an employee by
an employer is regarded as a LAFHA where it is reasonable to
conclude from all the surrounding circumstances that some or all of
the allowance is in the nature of compensation to an employee for
additional expenses incurred because the employee is required to
live away from their usual place of residence in order to perform
their duties of employment.'
SDP Acton dismissed the employer's jurisdictional objection,
allowing the employee's application to proceed with FWA.
Outcomes
Payments made by employers for expenses
incurred in living away from home are unlikely to be considered
'earnings' for the purposes of calculating the high income
threshold.
Recommendation
If you have any queries in relation to
calculation of earnings for the purposes of the high income
threshold or generally regarding your obligations with respect to
the termination of employees, you should seek advice.
For more information, please contact:
Louise Houlihan, Partner
Phone (direct): +61 3 9608 2273
Email:
l.houlihan@cornwalls.com.au