And the award goes to... FWC finds high income earner covered by modern award

Identifying correct Modern Award coverage and classification can be challenging at the best of times and getting it wrong can have serious consequences. It is well understood that misclassifying employees can impact on rates of pay and result in underpayment claims, but employers sometimes forget that employees who are paid well above modern award base rates of pay can still be covered by a modern award for other purposes, including protection from unfair dismissal.

In Mr James Kaufman v Jones Lang LaSalle (Vic) Pty Ltd T/A JLL [2017] FWC 2623 an employee who earned well above the high income threshold (now $142,000.00 per annum) and who held the title of “director” claimed that he was unfairly dismissed. The employee brought his claim under the unfair dismissal provisions of the Fair Work Act 2009 (Cth) (FW Act), which relevantly state that an employee will only be protected from unfair dismissal if one or more of the following apply:

  • a modern award covers the person;
  • an enterprise agreement covers the person;
  • the person’s annual earnings are less than the high income threshold.

The employer in this case raised a jurisdictional objection to the employee’s unfair dismissal claim, arguing that he was not protected from unfair dismissal because:

  • the employer did not have an enterprise agreement;
  • the employee was not covered by a modern award because he was a senior manager in a large real estate and asset management business; and
  • the employee earned well over the high income threshold.

There was no dispute that the employee earned more than the high income threshold and so, the question for the Fair Work Commission (FWC) was whether the employee was covered by a modern award.

The relevant modern award was the Real Estate Industry Award 2010 (the Award) and the employee claimed he was classified as either a Property Sales Representative or a Property Sales Supervisor under that Award. The employee had never been supplied with a job description and so the FWC relied on evidence from witnesses to understand the employee’s duties.

The FWC examined the evidence and applied the principal purpose test, which looks to the principal purpose of a position to understand its classification under a modern award. Of particular significance, the FWC found that despite the title of director, the employee did not have any direct reports and his job was primarily to sell real estate.

The FWC reached the conclusion that the duties of the employee’s position corresponded to the duties set out in the Award classifications. The high remuneration paid to the employee was only indicative of the employer’s view that the employee was valuable to its business and was merely a reflection of the success the employee had achieved in fulfilling his duties. The FWC commented that, in this sense, a high level of remuneration says nothing about whether an employee is modern award covered.

Ultimately, the employer’s jurisdictional objection failed and the matter was reallocated for the substance of the unfair dismissal dispute to be dealt with separately.

This case is a good reminder to employers that generously compensating an employee does not necessarily take the employee outside of modern award coverage and exclude the employee from unfair dismissal protection. When considering modern award coverage, employers should look at how the principle purpose of an employee’s position fits within the modern award classifications – not simply at whether they are paid above the high income threshold. 

Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.

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