Did incentive scheme push worker over high-income threshold?

Cases

Did incentive scheme push worker over high-income threshold?

An employee can pursue an action for unfair dismissal after the FWC ruled potential earnings from an incentive scheme did not make him a high-income earner.

An employee can pursue an action for unfair dismissal after the FWC ruled potential earnings from an incentive scheme did not make him a high-income earner.

Background


Bill Keramidas commenced employment with Vantage Systems (the respondent) on 24 May 2017. He was employed as a southern business development manager up until 30 November 2017.

On 19 December 2017 Mr Keramidas made an application for unfair dismissal to the Fair Work Commission under section 394 of the Fair Work Act 2009.

The respondent objected to his application on the basis that he was a high-income earner and therefore not protected from unfair dismissal.

The law


Under section 382 of the Fair Work Act 2009 a person is protected from unfair dismissal if the sum of the applicant’s earnings is less than the high-income threshold (currently $142,000 per annum).

Arguments


The applicant argued that he was not a high-income earner as he earned less than $142,000. The employer argued that he was a high-income earner because he had access to an incentive scheme that would potentially increase his salary beyond $142,000.

Legal question


The commission had to determine whether the applicant was a high-income earner and whether he was able to bring an action for unfair dismissal.

Decision


The commission paid attention to the meaning of “earnings” under section 322 of the Fair Work Act 2009. It noted that earnings included wages and an agreed money value of non-monetary benefits, but it did not include payments that couldn't be determined in advance.

Deputy president Masson found that Mr Keramidas' pay was as follows:
  • base salary: $76,324.20
  • car allowance – tax exempt $12,000
  • car allowance – taxable $3000
  • total base: $100,000
The commission also found that the amount of $8,675.79 for superannuation to be paid to the applicant was not to be included in the earnings of Mr Keremidas.

It stated: “it is necessary to confirm that the minimum superannuation contributions required by the SGC Act [the Superannuation Guarantee (Administration) Act 1992] are not included for the purposes of calculating earnings”.

In addition to the base salary Mr Keremidas was entitled to participate in the Vantage Systems sales staff incentive scheme. Paragraph 4 of Clause 5 of the scheme stated that an expected target earnings would be up to $150,000 per annum.

The commission noted that through the incentive plan Mr Keremidas could generate an income of up to $150,000 if target sales were met, and up to $212,000 on achieving 200 % of target sales.

Deputy president Masson cited clause 7 of the 2017 Sale Compensation Plan which provided the respondent with the power to discontinue or alter the terms of the incentive plan within 30 days’ notice.

“It is evident from the contract and the details of the incentive plan that achievement of…above $100,000 was contingent on the applicant’s sales performance” said the deputy president.

The commission found the incentive scheme was not earnings as it could not be payment that could be determined in advance. Therefore, these potential earnings were not to be taken into consideration in determining whether Mr Keremidas was a high-income earner for the purpose of unfair dismissal protection.

The commission held Mr Keremidas was not a high-income earner and could proceed with his application for unfair dismissal.

Bill Keramidas v Vantage Systems T/A Vantage Systems [2018] FWC 1600 (21 March 2018)
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