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Workplace Ombudsman v QMGIM Pty Ltd & Ors [2010] FMCA 64 (4 February 2010)

Last Updated: 5 February 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WORKPLACE OMBUDSMAN v QMGIM PTY LTD & ORS

INDUSTRIAL LAW – Alleged breaches of Award – Award coverage – whether Award applies to particular employees – calculation of amounts that ought to have been paid.


Re City of Wanneroo v Holmes [1989] FCA 369
Federated Clerks’ Union of Australia, New South Wales Branch v Australian Workers Union (The Purchasing Officers’ Case) [1971] AR (NSW) 419
Re Keogh and Federated Clerks’ Union of Australia; ex parte Linehan [1979] FCA 100; (1979) 40 FLR 445
Voigtsberger v Pine Rivers Shire Council [1980] FCA 157; (1980) 46 LGRA 367
Joyce v Christoffersen (1990) 26 FCR 261
Kingmill Pty Ltd T/A Thrifty Car Rental v Federated Clerks’ Union of Australia New South Wales Branch [2001] NSW IRComm 141
Hayward v Mitsui OSK Lines (Australia) Pty Ltd [1996] IRCA 471
Wool Selling Brokers Officers’ Association of Australia v The Employers’ Association of Wool Selling Brokers and Ors [1949] 67 CAR 227
Re Andrew John Short v F W Hercus Pty Ltd [1993] FCA 51; (1993) 40 FCR 511
Ross Walker v Perpetual Trustees Australia Limited [2004] AIRC 906
Norwest Beef Industries Ltd v Australasian Meat Industry Employees Union (WA Branch) (1984) 12 IR 314
Kucks v CSR Limited (1996) 66 IR 182
Ray v Radino (1967) AR (NSW) 471
Poletti v Ecob (1989) 31 IR 321
Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415

Applicant:
WORKPLACE OMBUDSMAN

First Respondent:
QUEENSLAND MARINE AND GENERAL INSURANCE MANAGEMENT PTY LTD

Second Respondent:
PETER RALPH MARTINUZZI

Third Respondent:
QUEENSLAND MARINE AND GENERAL INSURANCE BROKERS PTY LTD

File Number:
BRG 147 of 2009

Judgment of:
Wilson FM

Hearing dates:
26, 27 & 28 October 2009

Date of Last Submission:
19 November 2009

Delivered at:
Brisbane

Delivered on:
4 February 2010



REPRESENTATION

Counsel for the Applicant:
Mr Murdoch

Solicitors for the Applicant:
McCullough Robertson

Counsel for the Respondents:
Mr Sumner-Potts

Solicitors for the Respondents:
Myles Thompson

ORDERS

(1) The Court declares that the first respondent breached applicable provisions of the Insurance Industry Award 1998 in that it:

(1A) The Court declares that the second and third respondents were involved in each contravention of the first respondent.

(2) A penalty hearing is fixed for 10 March 2010 at 10.00am before Federal Magistrate Burnett.
(3) On or before 19 February 2010 at 4.00pm, the applicant:
(4) On or before 1 March 2010 at 4.00pm, the respondents:
(5) The applicant shall file and serve written submissions as to penalty by 4.00pm 4 March 2010.
(6) The respondents shall file and serve written submissions as to penalty by 4.00pm 8 March 2010.
(7) The applicant shall on or before 4.00pm 19 February 2010 calculate the annual leave loading payable to David Stone in conformity with these Reasons.
(8) The respondents shall by 4.00pm 1 March 2010 file and serve a document stating whether they accept the applicant’s calculation, and if they do not, the calculation contended for by the respondents.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
CAIRNS

BRG 147 of 2009

WORKPLACE OMBUDSMAN

Applicant


And


QUEENSLAND MARINE AND GENERAL INSURANCE MANAGEMENT PTY LTD

First Respondent

PETER RALPH MARTINUZZI

Second Respondent


QUEENSLAND MARINE AND GENERAL INSURANCE BROKERS PTY LTD

Third Respondent


REASONS FOR JUDGMENT

  1. The applicant alleges that the first respondent failed to pay correct wages and allowances to two employees, David Stone and Michael Lee.
  2. In respect of the employee, David Stone, it is alleged in the Statement of Claim that he was underpaid:
    1. Wages of $34,991.04;
    2. Annual leave loading of $2,625.48;
    1. Annual entitlements of $10,085.40; and
    1. A tropical allowance of $1,892.28.
  3. In respect of the employee, Michael Lee, it is alleged he was underpaid:
    1. Wages of $33,211.88;
    2. Accrued long service leave entitlements of $4,475.27; and
    1. A tropical allowance of $1,760.54.
  4. A pecuniary penalty is sought against each respondent pursuant to s.719(1) Workplace Relations Act 1996 for alleged breaches of applicable provisions of an Award. It is alleged that the second and third respondents were involved in the contraventions, and are therefore liable for them. An order is also sought, pursuant to s.719(6) of the Act, for the payment of the amounts allegedly underpaid to be made to the two employees (or in the case of Mr Lee, who has since died, to his legal personal representative).
  5. The relevant Award that is alleged to have been contravened is the Insurance Industry Award 1998. In the case of annual leave entitlements, a contravention of the Industrial Relations Act 1999 (Qld) is also alleged in the alternative, if it is found that the Award did not apply to the two named employees.
  6. The issues in dispute on the pleadings were:
    1. Whether the Award applied to the employment of either or both of the two alleged employees;
    2. Whether either or both employees was an “employee” for the purpose of the Insurance Industry Award;
    1. If so, what classification or grade ought be applied to each of them;
    1. Whether, if the Award applied, either of the alleged employees were underpaid, and if so by how much.
  7. It was an issue on the pleadings as to whether David Stone was an employee of the first or third respondent, as that term is ordinarily understood. Counsel for the respondents conceded, during the course of the final hearing, that David Stone was an employee at common law.
  8. On the pleadings it was admitted that:
    1. Both the first and third respondents were bound by the Award;
    2. The first respondent had previously, from at least 23 June 1997, been bound by the Insurance Officers (Clerical and Administrative Staff) Award 1985;
    1. The second respondent was the manager of both the first and third respondents;
    1. The second respondent was the person within the first and third respondents who determined the wages and/or entitlements to be paid to the employees of the first respondent by the first respondent;
    2. David Stone commenced working on 7 June 1999;
    3. David Stone’s services were provided by the first respondent to the third respondent;
    4. David Stone reported directly to the second respondent;
    5. David Stone was paid a salary of $30,000 per annum (although the characterisation of that payment was a matter of dispute);
    6. Michael Lee was employed by the first respondent from 23 June 1997 until 20 October 2006;
    7. Michael Lee had previously been employed by the third respondent from 3 April 1991;
    8. Michael Lee reported directly to the second respondent.
  9. The starting point of course is the terms of the Award. It was tendered as exhibit 1. Clause 6 of the Award provides:
  10. As stated earlier, the first and third respondents admit that they were bound by the Award.
  11. The Award has no scope clause. In my view it is tolerably clear that the Award only applies to those employees defined in clause 4. Clause 4.1 provides:
  12. Sub-paragraphs (a), (c) and (d) could not apply to Mr Lee and Mr Stone.
  13. In clause 4.2 “representative” is defined to mean “an employee who works away from the office undertaking assessing, surveying and risk control duties as directed or product sales functions”.
  14. Although both Mr Lee and Mr Stone were required, on occasion, to work away from the office, that was very much the exception. Further, as will be discussed, neither Mr Stone nor Mr Lee were selling products but rather were selling advice. Neither was a representative as defined.
  15. Therefore, for the Award to apply each of Mr Stone and Mr Lee must be found to be clerical and administrative staff of the first respondent.
  16. Part 5 of the Award deals with salaries and related matters. Clause 14.1 provides:
  17. Clause 14.2 provides:
  18. Clause 14.5 sets out the grades and salaries payable to employees in such grades.
  19. Clause 16.1 of the Award provides that employees employed in and north of Rockhampton are to be paid a tropical allowance of (currently) $511.00 per annum for employees 21 years of age and over. Clause 16.1.1 sets out how this allowance is to be paid.
  20. Clause 22 of the Award deals with annual leave. Clause 22.9 provides for the payment of such leave on the termination of employment. It is in the following terms:
  21. By clause 22.8.1(b) proportionate leave payable on termination of employment does not attract leave loading. Otherwise clause 22.8.2(a) provides that annual leave loading will be:
  22. Other clauses are relevant to the entitlement to annual leave. Clause 22.3 provides:
  23. Clause 22.4 provides:
  24. Clause 22.9 of course provides for a payout of annual leave on termination on employment.
  25. Clause 25 deals with long service leave. The clause then sets out how long service leave is to be calculated. In the case of Mr Lee, who had 15 years service, he was entitled to long service leave of 13 weeks.
  26. In Appendix B to the Award are set out seven grades each with more than one position. It can immediately been seen that the terms “clerical” and “administrative” are used in some but not all of the grades. Indeed, the words are used in a minority of cases. Some assistance is provided by that part of Appendix B titled “Using the Grade Descriptions”. At step one it is apparent that the types of jobs contemplated are wider in scope than those traditionally considered clerical or administrative. For example managerial/supervisory and specialist/technical would not ordinarily fall within the rubric of clerical or administrative. The typical purpose and responsibilities of typical activities of each grade are set out in Appendix B. I will return to those in due course.
  27. The first matter that must be determined is how the definition of employees in clause 4.1 of the Award is to be construed, having regard to the apparent width of the jobs that would fall within Appendix B to the Award. That is, should clerical and administrative staff be accorded its natural and ordinary meaning, or does it require a particular meaning by reason of the overall terms of the Award.
  28. In Re City of Wanneroo v Holmes [1989] FCA 369 French J (as his Honour then was) said, at [43]:
  29. What then is the natural and ordinary meaning of the words “clerical and administrative staff”. That phrase in my view has a chameleon like quality adapting to a variety of situations. “Clerical” is a word that has been considered many times. In my view, the collocation of the word administrative adds to the breadth of the phrase. The decision to which reference is most often made is that of Sheldon J in Federated Clerks’ Union of Australia, New South Wales Branch v Australian Workers Union (The Purchasing Officers Case) [1971] AR (NSW) 419 at 421:
  30. In Re Keogh and Federated Clerks’ Union of Australia; ex parte Linehan [1979] FCA 100; (1979) 40 FLR 445 Sweeney J said that the words “clerical capacity” are wide words but not of indefinite width.
  31. The decision in The Purchasing Officers Case was applied by Evatt J in Voigtsberger v Pine Rivers Shire Council [1980] FCA 157; (1980) 46 LGRA 367 in determining whether a Council employee should be renumerated as a clerical officer. It was also applied by Gray J in Joyce v Christoffersen (1990) 26 FCR 261. In that case his Honour had to consider whether employees whose primary function was directed to the recording, processing and dissimulation of information were engaged in a clerical capacity. His Honour considered that one needed to look at the substance of the employment for the purpose of characterising it. A person engaged in clerical capacity can have other functions as well.
  32. That approach was followed in Kingmill Pty Ltd T/A Thrifty Car Rental v Federated Clerks’ Union of Australia New South Wales Branch [2001] NSW IRComm 141. That decision was upheld on appeal: (1999) 94 IR 67.
  33. In Hayward v Mitsui OSK Lines (Australia) Pty Ltd [1996] IRCA 471 the court considered the meaning of the words “administrative” and “executive”. Reference was made to the Wool Selling Brokers Officers’ Association of Australia v The Employers’ Association of Wool Selling Brokers and Ors [1949] 67 CAR 227. There Kelly CJ said that “administrative” means “universally acknowledged to mean simply and exhaustively: of or pertaining to administration, that is to say, to the management or conduct or the performance of the executive duties of an institution or establishment”.
  34. That is, the collocation of the word administrative adds to the width of the expression so that executive duties are within it s ambit.
  35. As pointed out those activities contemplated by the grading classification are wider than what might be ordinarily understood by the phrase “clerical and administrative staff”. In order to properly construe that term it is appropriate to have regard to the historical context in which the Award was drafted. In Re Andrew John Short v F W Hercus Pty Ltd [1993] FCA 51; (1993) 40 FCR 511 Keely J, which whom Burchett and Drummond JJ agreed said at [5] – [11]:
  36. Some historical analysis of the Insurance Industry Award 1998 was undertaken by Commissioner Lewin in Ross Walker v Perpetual Trustees Australia Limited [2004] AIRC 906. There, the question was whether a financial planner was covered by the Award. It was held that he was not. The relevant definitions were the same as those required to be construed in the present case.
  37. At paragraph [12] the Commissioner records the applicant’s submission that the term “clerical and administrative” must be read in light of the classification structure contained in the Award which contains work classifications which are broader than might be described as “clerical or administrative” in ordinary usage. Further, it was submitted that there is no fixed definition of the term “clerical and administrative” and that the meaning of the term must be considered in the context of contemporary industrial conditions and the Award as a whole.
  38. At [19] the Commissioner recognised that the case presented some difficulties in respect of the interpretation of the Award’s scope and application. This was because the Award did not contain a scope clause as such, but rather the scope of the Award arose from a combination of the Parties’ Bound and Definitions Clauses. At [20] and [21] the Commissioner said:
  39. After referring to the decisions of Norwest Beef Industries Ltd v Australasian Meat Industry Employees Union (WA Branch) (1984) 12 IR 314 and The Purchasing Officers’ Case the Commissioner continued at [24] – [27] as follows:
  40. The Commissioner then turned to the historical background to the Award. At [29] to [30] the Commissioner said:
  41. The Commissioner referred to the dispute raised by the Finance Sector Union of Australia (the original log of claims was served by the Australian Insurance Employees’ Union) that was the genesis of the Award. It can be seen from the Industry Rule of the Union set out at paragraph [33] of the Commissioner’s decision that it encompasses the insurance industry, the industry of financial intermediaries and the industry of financial services. It was also deemed to include the industries, trades, businesses, undertakings, callings and occupations of loss adjusting, loss assessing, insurance broking etc.
  42. The Commissioner observed that classifications Specialist 6 and 7 were included as terms of the Award from 21 October 1991. After a review of other historical matters the Commissioner concluded at [43]:
  43. Accordingly, it follows from the Commissioner’s reasoning that persons who are employed in the insurance industry (including insurance brokers) ought be covered by the Award. The reasoning in Ross Walker v Perpetual Trustees Australia is, in my view, sound and I propose to follow it. As Madgwick J said in Kucks v CSR Limited (1996) 66 IR 182 at 184:
  44. I therefore accept the submission of the applicant that the “clerical and administrative staff” of the first respondent in this case is to be given a wide meaning having regard to the grades set out in Appendix B. In the present case it is plain that each of the two employees Stone and Lee were involved in the insurance industry. The third respondent carried on business as an insurance broker. Although employed by the first respondent, the services of Stone and Lee were supplied to the third respondent.
  45. I turn then to consider the work carried out by the employees Stone and Lee. The applicant pleaded that each of those two employees fell within the Grade 6 (Specialist) classification. During the course of the final hearing the applicant was granted leave to amend the Statement of Claim to allege that each was appropriately classified as Grade 5 (Technical) or alternatively a Grade 4 (Technical) employee.
  46. At paragraph 8 of the Statement of Claim it is alleged that Mr Stone’s duties consisted of, primarily:
    1. Selling life insurance policies;
    2. Managing life insurance accounts;
    1. Identifying levels of cover or the insurance needs of clients; and
    1. Identifying the most appropriate insurance solutions for clients.
  47. The respondents admit that Mr Stone’s duties consisted of those set out in subparagraphs (c) and (d). The denied that Mr Stone sold life insurance policies or managed life insurance accounts.
  48. Mr Stone gave evidence. He is obviously an experienced life insurance broker and advisor. Exhibit DS1 to Mr Stone’s longer affidavit is a letter from the third respondent to him dated 7 June 1999 in which his position was described as “Account Executive – Life”.
  49. Mr Stone was the only employee in the first respondent’s office who attended to life insurance matters. He was engaged in an effort to establish a life insurance component to the third respondent’s business.
  50. Essentially Mr Stone was employed to obtain for clients of the third respondent whatever life insurance product they needed. That included term life insurance, trauma insurance, disability insurance and other associated products. Mr Stone was required to assess a client’s needs and then source an appropriate policy for them.
  51. Mr Stone holds a Diploma in Life Insurance and undertook ongoing training. He held a financial services license. He was an authorised representative of Dealer Groups and entered into advisor deeds by which he was authorised to act on behalf of certain insurers. The advisor deed characterised him as an Advisor. Mr Stone’s primary function was providing advice to prospective insureds. He did not draft policies. His base salary was $30,000.00 per annum although if he achieved certain commissions he was entitled to an incentive payment in addition to that. He was also provided with a vehicle by his employer.
  52. The typical purpose/responsibilities of a Grade 6 (Specialist) in Appendix B are:
  53. The typical activities of a Grade 6 (Specialist) are stated to be:
  54. The typical background requirements of a Grade 6 (Specialist) were “an in depth knowledge of specialist techniques in own area and a broad understanding of related business issues typically based on either education to advanced skill level plus at least four to six years relevant experience or a part professional qualification plus three to four years experience and training in specific skills (eg systems design underwriting high value non-standard risks, marketing techniques etc).
  55. When one has regard to the work carried out by Mr Stone he was not, in my view a Grade 6 (Specialist). The third respondent operated a provincial small business. It was not at a Head Office or State Branch level. In my view, a Grade 6 (Specialist) connotes a senior position in a large organisation with specialist skills. Mr Stone did not work in collaboration with technical staff, he had no subordinate staff in support. He did not provide specialist advice to technical staff. He did not draft specialist literature, documentation or reports. He did not train or lead subordinate staff. He did not recommend changes of a specialist nature to technical procedures. He did not cooperate with others to research and develop specialist and/or technical knowledge.
  56. With no disrespect to him, Mr Stone was a Life Insurance Advisor. He ascertained client’s needs and organised appropriate insurance for them. He was not a specialist as that term is used in the Award.
  57. In fact it is difficult to “pigeon hole” Mr Stone into any Grade. Because I conclude that Mr Stone was an employee covered by the Award he is required to be assigned to a Grade. In my view he falls between Grade 4 (Technical) and Grade 5 (Technical). Mr Stone would not be regarded as having carried out secretarial, supervisory or administrative work within Grades 4 and 5, as those positions are described.
  58. Mr Stone provided a service to clients of the third respondent. Whether that service is properly described as “technical” is debatable. It was a service that required a particular experience. Mr Stone reported to the second respondent, who was his manager. He did not have any subordinate staff. The third respondent would not be what I would call a large local branch. It would be at best small to medium sized. Mr Stone did not write any technical documentation. He did not provide technical training to users and other staff. He did provide quotations, proposals on risks within clear limits and guide lines and did financial analysis. He had a full working knowledge of life insurance policies and procedures. So far as Grade 4 (Technical) is concerned Mr Stone did provide advice and information to clients on a range of straight forward technical matters within his own specific area. He processed basic technical case work. He did not write computer programs. He did not approve work processed by clerical staff. He did negotiate with or interview contact on straight forward matters. He handled enquiries from a range of clients regarding their requirements, problems etc. He did not provide technical supervision and training to clerical staff.
  59. In my view, the work carried out by Mr Stone substantially fell within Grade 4 (Technical) although with some activities in the Grade 5 (Technical) classification. If required to assign him to one grade it would be Grade 4 (Technical).
  60. At paragraph 46 of the Statement of Claim it was alleged that Mr Lee’s duties consisted of, primarily :
    1. Selling life insurance policies;
    2. Managing life insurance accounts;
    1. Identifying levels of cover or the insurance needs of clients; and
    1. Identifying the most appropriate insurance solutions for clients.
  61. The respondents contend that Mr Lee worked in the general insurance area of the business and gave advice to the clients of the third respondent particularly in marine insurance matters. By its Reply, the applicant accepted the respondent’s contentions.
  62. As with Mr Stone the respondents denied that Mr Lee sold insurances policies, but rather say that he provided advice to clients who required insurance.
  63. Mr Lee had a good deal of experience particularly with marine insurance. His widow, Cheryl Davidson gave evidence that he had previously been employed as an underwriter and an assistant manager. He held a Diploma of Financial Services (Insurance Broking). Ms Kathryn Thompson who worked as a receptionist at the third respondents’ business provided an affidavit of her knowledge of Mr Lee’s work. She was not required for cross examination. She said that Mr Lee effectively managed his own segment of the business. Mr Samuel O’Neil gave evidence to a similar effect. The second respondent, who gave evidence, accepted that Mr Lee was very experienced in what he did.
  64. For much the same reasons as expressed previously with respect to Mr Stone I cannot accept the Mr Lee was a Grade 6 (Specialist). He did not work at Head Office or a State Branch. He did not work in collaboration with any technical staff. He did not provide specialist advice to technical staff in the design of technical services. He did not draft specialist literature/documentation/reports. He did not train and lead subordinate staff. He did not recommend changes of a specialist nature to technical procedures. He was required to occasionally travel to inspect occurrences and the items to be insured.
  65. From the evidence put before the Court Mr Lee provided more high level advice in a more complex area than Mr Stone. Again he falls between Grade 4 and Grade 5 (Technical). I consider he falls more into Grade 5 (Technical) than Grade 4 (Technical) because of the more complex areas of marine insurance and general insurance in which he was working that required knowledge of many more policy details and underwriting criteria than there are of life insurance in which Mr Stone was occupied.
  66. It is then necessary, based on those findings, to determine whether there has been a failure by the first respondent to pay each of the two employees their Award entitlements.
  67. At the conclusion of the final hearing I directed that the parties exchange schedules as to what amounts ought to have been paid depending upon the Grade into which each of the employees was placed, and what was actually paid. There was a large measure of agreement between the parties.
  68. The determination of the base salary paid to each employee has a number of ramifications. First if the base salary is determined to be the amount contended for by the respondents the level of underpayment, if established, will be reduced. However, if each employee was entitled to be paid a higher salary, then concomitantly the annual leave loading and unpaid leave and any long service leave would be calculated using the higher amounts.
  69. It is necessary to resolve the base salary of each employee. If they received a benefit, for example the provision of a motor vehicle, in addition to their wages then that benefit would not be taken into account in determining if there has been an underpayment pursuant to the Award. The authority for that proposition is Ray v Radino (1967) AR (NSW) 471. It was also established that where payments were made to the worker, which related neither to the Award nor to a private contract but were purely ex gratia, for example a bonus, they could not be brought to account to meet a claim for underpayment.
  70. In Poletti v Ecob (1989) 31 IR 321 the Full Federal Court preferred the reasoning of Sheldon J in Ray v Radino to that of the majority, as it was applied by the Industrial Commission of New South Wales in Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415. At [42] their Honours said:
  71. Based on directions made by me at the conclusion of the trial the parties have submitted their calculations of what each employee was entitled to be paid under different scenarios. So that the record is complete I will mark the documents as exhibits in the proceedings and they will be as follows:
    1. Exhibit 7 - applicant’s calculations 30 October 2009
    2. Exhibit 8 - respondent’s calculations 3 November 2009
    1. Exhibit 9 - letter applicant’s solicitors to respondent’s solicitor 5 November 2009
    1. Exhibit 10 - letter applicant’s solicitors to court 10 November 2009 enclosing Schedule regarding Michael Lee
    2. Exhibit 11 – respondent’s amended Schedule 8 November 2009
    3. Exhibit 12 – respondent’s amended Schedule 14 November 2009
    4. Exhibit 13 – letter applicant’s solicitor to respondent’s solicitors 19 November 2009.
  72. So far as Mr Stone is concerned it is common ground that he was paid a salary of $30,000 per annum. I accept the applicant’s calculations of the amount that should have been paid to Mr Stone set out in exhibit 7. As I have found the Mr Stone ought to have been classified as a Grade 4 (Technical) employee the underpayment that I find of wages is $1,002.93.
  73. I have found that the Award applies. Mr Stone was entitled to be paid a tropical allowance pursuant to clause 16. The respondent does not challenge the applicant’s calculation that Mr Stone ought to have been paid a tropical allowance of $1,892.28. It is common ground that this amount was not paid.
  74. The question of unpaid annual leave gives rise to a difficulty because neither party addressed clause 22.3 of the Award. That, to my mind, stipulates that an employee is entitled to carry forward a maximum of two years annual leave. If that were the case, Mr Stone has not been underpaid his annual leave entitlements because as exhibit NJ51 to the longer affidavit of Mr Johnston and the evidence otherwise shows, Mr Stone took 50 days annual leave in the period between 7 June 2006 and when he left the first respondent’s employment. Over a two year period he would have been entitled to a maximum of 40 days annual leave.
  75. The applicant seeks a pecuniary penalty against each of the respondents. It ought prove its case to the requisite standard. In my view, having regard to clause 22.3 of the Award and the absence of any agreement between the parties to the contrary I am unable to find that there has been an underpayment of annual leave entitlements to Mr Stone.
  76. I acknowledge that exhibit NJ51 is the second respondents’ document and shows annual leave being carried forward. However that does not prove that, under the Award, the respondents, or any of them, have failed to pay annual leave due on the termination of the employment of Mr Stone. This is because, pursuant to clause 22.9.1 payment only has to be made in respect of leave to which the employee became entitled under the Award. There seems to be no entitlement to carry annual leave beyond a two year period.
  77. In case my construction of the Award is found to be erroneous, I should add that if annual leave accrued throughout Mr Stone’s employment I accept the calculation made by the applicant and that $8,029.78 has been underpaid.
  78. It follows from my conclusion as to the recoverability of unused annual leave that no annual leave loading was payable to Mr Stone on the termination of his employment. Clause 22.9.2 of the Award provides for the payment of annual leave loading on the conclusion of employment, for leave which has fallen due. There is no leave that was due at the termination of Mr Stone’s employment.
  79. The applicant also claims for leave loading not paid in the past. Its calculation of $1,867.24 is mathematically correct, and I accept it.
  80. However another difficulty arises because of clause 22.8 of the Award. The applicant’s calculation is based on Mr Stone’s actual award entitlements. However, loading of 17.5% is restricted to that sum which represents the average weekly earnings stipulated in clause 22.8.2(a) of the Award. Further, no leave loading would be payable on proportionate leave.
  81. Therefore, a further calculation needs to be carried out to determine whether there has been an underpayment of annual leave loading to Mr Stone, and if so the quantum of that underpayment. I will direct that the parties endeavour to reach agreement about the figures, but if they do not each puts their respective position before the court on the next occasion that the matter is to be dealt with.
  82. So far as Mr Lee was concerned the applicant contends that he was paid at the rate of $30,000.00 per annum, and the respondent contends that he was paid at the rate of $36,000.00 per annum but that $6,000.00 was withheld from his salary on account of a potential fringe benefits tax liability. The second respondent gave evidence that although each employee’s wage was the higher amount the first respondent retained $6,000 from each employee on account of fringe benefits tax payable by the first respondent arising out of the provision to each employee of a motor vehicle as part of their remuneration package.
  83. In my view it is not necessary to resolve the interesting debate between Ms Barbagallo, the accountant called to give evidence on behalf of the applicant, and Mr Bruce Peden, the accountant called to give evidence on behalf of the respondents. Their dispute concerned whether it was appropriate for the employer to withhold money on account of fringe benefits tax payable by the employer, but potentially recoverable from the employee. It is common ground in the present case that Mr Lee was provided with a vehicle by his employer. It is also clear that Mr Lee’s employer was exposed to a fringe benefits tax liability depending upon the private use that Mr Lee made of the motor vehicle provided to him.
  84. The second respondent said that he withheld $6,000.00 on account of fringe benefits tax and if the employee provided him with a log book the tax would have been properly calculated and an adjustment made. It is clear from the evidence that no log book was provided nor did Mr Lee provide odometer readings at the beginning and the end of the year for which fringe benefits tax is calculated. There was no evidence of the age and model of the vehicle that Mr Lee drove nor of the kilometres he travelled for private use during each year.
  85. I find that the motor vehicle was provided to Mr Lee not as part of his salary but in addition to it. That is it was provided as a true fringe benefit. I reach that conclusion for a number of reasons. First, no fringe benefit tax calculations were put into evidence by any of the respondents showing what was actually paid for the motor vehicle provided to Mr Lee. Secondly, Mr Lee’s salary was paid by equal instalments of a total of $30,000.00, and he paid income tax accordingly. Thirdly, in two letters sent to Mr Lee following the termination of his employment the second respondent stated that his annual salary was $30,000.00. I refer to part of exhibit NJ19 to Mr Johnston’s longer affidavit. Fourthly, the second respondent gave inconsistent evidence about Mr Lee’s salary and entitlements. At paragraph 6 of his affidavit he referred to a salary package of $36,000.00 per annum plus a company car and superannuation (see exhibit NJ24). During the final hearing his evidence was that the salary package was $30,000.00 plus a company car. Fifthly, superannuation was calculated on a salary of $30,000.00 and not $36,000.00.
  86. I note that group certificates were issued to Mr Lee showing payments slightly in excess of $36,000.00 each year. I do not accept they accurately reflect the salary paid to Mr Lee but rather were produced by the first respondent to maximise the tax deduction available to it for wages and so that it did not have to complete detailed fringe benefits tax calculations.
  87. I find, therefore, that Mr Lee was, until shortly prior to the conclusion of his employment paid an annual salary of $30,000.00. I accept that on 5 September 2006 Mr Lee approached the directors of the first respondent and asked for a wage increase. He asked for $55,000.00 together with the provision of a motor vehicle. The second respondent gave evidence that the directors agreed to this if Mr Lee promised to stay with the business for an additional two years, and he agreed to do so. The second respondent said that he was provided with his vehicle of choice the same day.
  88. Mr Lee left the first respondent’s employment on 20 October 2006.
  89. In my view having regard to the arrangements that subsisted between the first respondent and Mr Lee prior to 5 September 2006 I accept the second respondent’s evidence that what was agreed to be paid to him was a total salary package of $55,000.00 and that included an allowance of $6,000.00 for fringe benefits tax payable in respect of a motor vehicle that would be supplied to him. His actual salary was therefore increased to $49,000.00.
  90. As I stated earlier it is difficult to determine whether Mr Lee falls within a Grade 4 (Technical) or Grade 5 (Technical) classification. I think that because more of his duties are within the Grade 5 (Technical) classification and because of his level of expertise, I would adopt that classification for him.
  91. I accept the amended calculations made by the applicant for a Grade 5 classification based on a salary of $30,000.00. This establishes that Mr Lee was underpaid $9,203.45. I assume that the amount stated as received in the period to 20 October 2006 includes the payment made subsequent to the termination of employment on account of wages of $2,045.45 gross. If it does not, the amount of the underpayment should be reduced by that amount.
  92. Although Ms Davidson accepted that Mr Lee had received bonuses on 22 July 2004, 18 July 2005 and 8 June 2006, having regard to the reasoning in Ray v Radino and Poletti v Ecob these were not made on account of wages and therefore cannot be set off against the underpayment.
  93. I accept the applicant’s calculation of long service leave that was underpaid by the first respondent to Mr Lee. The difference between the parties relates to the salary on which leave is calculated. The respondents calculated Mr Lee’s long service entitlements based on a salary of $30,000.00. However, as pointed out earlier shortly prior to the termination of his employment, Mr Lee had negotiated a salary increase to $49,000.00 per annum.
  94. There is no dispute that Mr Lee was entitled to be paid 13 weeks salary. Clause 25.5.1 of the Award in my view makes it clear that long service leave is calculated according to the salary immediately prior to the time of the taking of long service leave. That means that it should be calculated on the annual figure of $49,000.00. I accept that the applicant’s calculation is correct.
  95. As with Mr Stone, the respondents accept that if the Award applies a tropical allowance is payable, and has not been paid. The amount that ought to have been paid was $1,760.54.
  96. It follows that there have been underpayments to each of Mr Lee and Mr Stone although not in the amounts claimed by the applicant. The amounts that I find that were underpaid are as follows:
    1. In respect of Mr Lee:
      1. Underpayment of wages $9,203.45;
      2. Underpayment of accrued long service leave entitlements $4,475.27;
      3. Non payment of tropical allowance $1,760.54.
    2. In respect of Mr Stone:
      1. Underpayment of wages $1,002.93;
      2. Non payment of tropical allowance $1,892.28.
  97. There will be findings of contravention by the first respondent in respect of the above matters. The respondents did not submit, having regard to the way in which the business was conducted, that if a finding was made against the first respondent it should not also be made against the second and third respondents. Each was involved in the contravention by the first respondent.
  98. The matter will be fixed for a penalty hearing and I will make orders to that effect. Otherwise, there will be orders as set out prior to the commencement of these Reasons.

I certify that the preceding 98Error! Style not defined.!Syntax Error, !Error! Style not defined.Error! Style not defined.!Syntax Error, !ninety-eightninety-eight (98) paragraphs are a true copy of the reasons for judgment of Wilson FM


Associate: Lynnette Chin


Date: 4 February 2010

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