Employees earning over a certain amount are not able to bring an unfair dismissal claim against an employer.  However, determining whether an employee earns above the cap is not always an easy task.  The Fair Work Act 2009 (Cth) helps shed light on this issue.

The FW Act affords "national system" employers, that is "constitutional corporations", protection from unfair dismissal claims if an employee is not covered by an award or enterprise agreement and earns more than the high income threshold and certain additional amounts.  The high income threshold is currently $108,300.  In assessing whether an employee is earning above this threshold, the FW Act further defines what is and is not included in "earnings".  What is included in the definition of "earnings" are:

  • wages
  • amounts applied or dealt with in any way on the employee's behalf or as the employee directs (this could include amounts which an employee elects to salary sacrifice)
  • the agreed value of non-monetary benefits which the employee is entitled to for the performance of work (for example, personal use of a company car or mobile phone).

However, "earnings" does not include:

  • payments the amount of which cannot be determined in advance (for example, commissions, incentive-based payments and bonuses, and overtime (unless the overtime is guaranteed)) 
  • reimbursements
  • employer contributions to a superannuation fund.

The FW Act also requires an employer, when considering an employee's earnings for the purposes of bringing an unfair dismissal claim, to add to an employee's earnings the average over the previous 12 months, of any amounts which the employee has received which are set by reference to a quantifiable output or task, such as commissions which are calculated in a fixed manner. 

Accordingly, although these amounts (including commissions) are generally not considered to be earnings under the FW Act, in circumstances where they are calculated by reference to a quantifiable output or task, they will be considered when assessing whether an employee can bring an unfair dismissal claim in Fair Work Australia.

Implications For Employers

The FW Act clarifies what amounts and benefits are regarded as "earnings" making it easier for employers to assess whether an employee can bring an unfair dismissal application and therefore what termination process they should follow taking into account this exposure.  In certain circumstances, commissions will be taken into account in determining whether an employee is excluded from bringing an unfair dismissal claim.

For more information, please contact

Sydney

Nadine Zets

t (02) 9931 4999

e nzets@nsw.gadens.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.