‘Regional Director’ able to seek Unfair Dismissal despite Income Cap
Over the past few weeks we have seen a number of matters involving whether an executive is “Award -covered” or Award-free”, as this will often determine whether or not they can make an Unfair Dismissal Application in the Fair Work Commission (‘FWC’).
The following case will assist in explaining the issues.
In James Kaufman v Jones Lang LaSalle (Vic) Pty Ltd T/A JLL  FWC 2623, the Victorian Regional “Director” of the employer lodged an Unfair Dismissal Application. The employer argued that as he was engaged over the High Income Threshold (‘HIT’) for such Claims, the Application should be dismissed on jurisdictional grounds.
Generally, employees earning over the HIT are not able to file Unfair Dismissal Applications by the Fair Work Act 2010 (Cth) (‘FW Act’). At the time of the case, the HIT was $138,900pa. From 1 July 2017, it became $142,000 and will be subject to annual increases.
Section 392 of the FW Act states that a person is only able to file an Unfair Dismissal Application if they have worked for the minimum employment period and one or more of the following apply:
- They are covered by a Modern Award;
- They are covered by an Enterprise Agreement (even if it has passed its nominal expiry date); or
- They are earning below the HIT.
The FWC found that even though the Applicant earned well over the HIT, he was nevertheless covered by the Real Estate Industry Award 2010 (‘the Award’).
The Applicant’s role was made redundant by the Respondent in December 2016.
In response, the Respondent sought to reply on s 392 of the FW Act.
It was not disputed that an enterprise agreement applied or that the Applicant earned under the HIT. In fact, the case rested on whether his role was covered by the Award or not.
The Respondent alleged that the Applicant was a ‘senior manager’ with ‘significant leadership, mentoring and business generation responsibilities’ well beyond those outlined in the Award’s role definition.
The Applicant however claimed that, despite his title, he was really a ‘Property Sales Representative’ as defined by the Award.
Deputy President Gostencnik of the FWC applied the “principal purpose test” to determine the Applicant’s role as he did not have a formal role description in his current employment contract.
This test required the Deputy President to examine:
the nature of the work undertaken and the circumstances in which the Applicant was employed to do the work
ascertain the principal purpose for which he was employed and then assess whether the Applicant in that employment fell within the coverage provisions of the Award.
The FWC considered a variety of factors in coming to its decision including the fact that:
- No employees reported to the Applicant;
- The Applicant himself reported to the “Head of Sales and Investments in Victoria”;
- The “directors’ meetings” that the Applicant attended up to three times a year were “essentially information sessions’ with no detailed discussion of the business” financial statements;
- There were over 50 employees in Victoria with a job description including the term “Director”;
- There were no duties inherent to the Applicant’s role that could be considered “managerial”; and
- The Applicant was held to a sales target and was primarily involved in finding and negotiating property sales.
In light of these findings, the Deputy President held that the Applicant’s title:
was effectively a rank or accolade accorded by the Respondent
and not indicative of his actual duties. As such, Deputy President Gostencnik found that Mr Kaufman:
falls squarely within the role definition of a Property Sales Representative
and was therefore able to file an Application for Unfair Dismissal.
As the case before the FWC was only on the eligibility of the Applicant to bring a claim, the determination of whether the dismissal was unfair was considered at a later date.
Message for Employers
All employers should be aware that the HIT cannot prevent a claim for Unfair Dismissal in the event the former employee is found to have been covered by an Award.
This case was unusual as most high income employees are usually in managerial roles that are beyond the scope of an Award.
It is important to note however, that there are a variety of industries covered by Awards that can have highly paid positions such as in the above case of large scale commercial real estate.
If you are unsure whether an Award applies to your senior staff, seek legal advice prior to any potential redundancies or other similar actions to avoid exposure to unexpected liability.