Unfair dismissal claim fails due to the calculation of an employee’s earnings

In a recent case, the Fair Work Commission held that an employee (Mr Maloney) was not entitled to bring an unfair dismissal claim as his income had exceeded the ‘high income threshold’ by $315.02. In this case, the employee’s income, as calculated by the Fair Work Commission, included a portion of the employee’s annual leave loading, fuel allowance and mobile phone entitlements.

The Fair Work Act 2009 (Cth) says that an employee who is not covered by an award or enterprise agreement does not receive protection from unfair dismissal if their income exceeds the threshold, currently at $145,400 per annum.

In this case, the issue was whether the employee’s entitlements to annual leave loading, fuel allowance and a mobile phone were to be included in his earnings.

Regarding the annual leave loading, the Commission found that the full amount of annual leave loading should be included in the calculation of earnings in this case. The Commission made this finding even though the annual leave loading was not ‘explicitly bargained for before employment commenced’ but ‘arose at a later time’.

To determine whether the fuel allowance was to be included in Mr Maloney’s earnings, the Commission referred to the methods of calculation used in previous cases to distinguish between the amount of private use against work-related use of the car. The Commission held that it is the employer who bears this evidentiary onus to prove the amount of private use of the car when the employer asserts that the private use component puts the employee over the earnings threshold for an unfair dismissal. The lack of evidence in this case prevented the Commission from being able to accurately assess the split in favour of the employer. Instead the Commission approximated that 80% of the fuel allowance was to be attributed to private use and 20% was for business use, which ‘may even be overly generous to the employee’. Again, only the proportion that is allocated to private use (here being 80%) is included as part of the employee’s earnings.

There was again a lack of credible evidence regarding the use of the mobile phone, which was provided and paid for by the business. Several calls had been made to Mr Maloney’s partner and the Commission determined that 80% of the costs for the mobile phone could be included as part of Mr Maloney’s earnings.

Therefore, Mr Maloney’s earnings encompassed his salary of $140,000 as well as the annual leave loading, 80% of the fuel allowance and 80% of mobile phone expenses. The total earnings of $145,715.02 was above the threshold and therefore disentitled Mr Maloney from pursuing an unfair dismissal claim.

This case highlights how employers should keep in mind that an employee’s earnings are not necessarily limited to their traditional salary. Earnings may include items like fuel allowance and mobile phone expenses, to the extent that they have a private use, rather than being used by the employee for the business as part of their employment duties. This case also suggests the importance of keeping detailed records which may provide evidence of the apportionment of these items to private, as opposed to business use. For example, records of the ‘annual distance travelled by the car’, the distance travelled for business purposes and mobile phone records may be of assistance.    

Rob Maloney v John Herrod and Associates Pty Ltd [2019] FWC 3071 (9 May 2019)

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.