The Case

Mark Jolley was employed by Moorelex Pty Ltd trading as Lexus of Blackburn (Moorelex) as its General Manager, until his employment was terminated on 30 December 2016.

Mr Jolley commenced unfair dismissal proceedings in the Fair Work Commission (FWC). Moorelex objected to the application on jurisdictional grounds on the basis that Mr Jolley’s income was above the high-income threshold (i.e. $138,900 gross per annum). Mr Jolley’s employment was not covered by a modern award or enterprise agreement.

At the date of employment termination, Mr Jolley’s base annual salary was $150,000. Mr Jolley argued that in determining whether his remuneration exceeded the high-income threshold, his wage should be averaged over the previous 12 months.

Mr Jolley argued that it would be unfair to calculate his annual rate of earnings at the date of employment termination because his wage had only been increased in October 2016. He submitted that to calculate the rate at the date of employment termination would enable employers to increase the base salary of employees prior to employment termination to avoid being liable for unfair dismissal.

The Verdict

The FWC held that s382 Fair Work Act 2009 (Cth) refers to the annual rate of earnings at the time of the applicant’s dismissal. If Parliament had wished to refer to the average amount earned over the previous 12 months, it could easily have done so.

The FWC said: “What needs to be ascertained is the annual rate of earnings at that time, not the annual earnings to that time (the amount earned in the 12 months to that time).”

Accordingly, Mr Jolley’s application was dismissed because at the date of his employment termination he earned more than the high-income threshold.

Lessons

Prior to terminating the employment of an employee, it is important to assess the legal risks involved. One important assessment is whether the employee is eligible to make an unfair dismissal claim.

You will need to check:

• the person is an employee and not a contractor;
• the employee works full-time, part-time or is a casual employed on a regular and systematic basis;
• the employee’s length of service, which must be 12 months for employers with fewer than 15 employees and 6 months for those with 15 or more employees who work on a regular and systematic basis; and he employee’s income at the date of employment termination must be below $138,900, unless they are covered by an award or enterprise agreement. When calculating the employee’s income you should include wages, amounts dealt with on the employee’s behalf or as they direct, and the agreed monetary value of non-monetary benefits. You do not include superannuation or amounts that cannot be determined in advance, such as incentive, bonus or overtime payments, unless these are guaranteed payments.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.