LEGAL UPDATE: HIGH-INCOME EMPLOYEES
5 October 2017 by Nick Steinsvaag
Can you dismiss a high-income employee unfairly?
On 1 July 2017, the High-Income Threshold (the threshold) was increased from $138,000 to $142,000.
An employee who earns more that the high-income threshold is not able to bring an unfair dismissal claim, unless they are covered by an award or enterprise agreement.
It is important, therefore, to know whether your employees who earn above the threshold are covered by an award or enterprise agreement.
The fact that the employee is a high-income employee or has a senior job title is irrelevant in determining whether the employee is covered by an award.
The recent decision of the Fair Work Commission in Kaufman v Jones Lang LaSalle considered this point.
Kaufman v Jones Lang LaSalle (Vic) Pty Ltd
Kaufman had been employed by JLL for 25 years, earned over the high-income threshold, and had the job title of ‘director’. When he was dismissed, he brought an unfair dismissal claim against JLL, claiming he was covered by the Real Estate Industry Award 2010.
JLL tried, unsuccessfully, to argue that Kaufman was not covered by the award because he earned over the threshold and because he had a senior role of ‘director’.
The FWC held that high-incomes say nothing about whether a person is covered by an award. The FWC also held that whether a person is covered by an award is determined by the duties they fulfil, not their job title.
Despite being called a director, Kaufman’s duties involved little strategy and management of the company and his main role was to sell real estate. On this basis the FWC found that Kaufman was covered by the award and was able to make a claim for unfair dismissal.
What does this mean?
This case confirms that, under the Fair Work Act, employees will be protected from unfair dismissal if they:
thave served the minimum period of employment; and
(1) are covered by an award or enterprise agreement; or
(2) receive annual earnings of less than the threshold.
Employees who are covered by an award or an enterprise agreement can bring an unfair dismissal claim regardless of how much they earn.
Employees who earn below the threshold can bring an unfair dismissal claim regardless of whether they are covered by an award or enterprise agreement.
Only employees who:
have not served the minimum period of employment; or
are not covered by an award or enterprise agreement and whose earnings exceed the threshold,
are ineligible to make a claim of unfair dismissal.
What you should do:
You should make sure you comply with the National Employment Standards (NES) with all employees.
You should also understand whether your employees are covered by an award (you may have some employees who are and some who aren’t). An award contains additional protections for employees, on top of the NES.
Finally, when considering dismissing any employee you should make sure:
there is a valid reason for dismissing the employee that relates to their capacity or conduct (and there is reliable evidence in support);
you have notified the employee of the reason and given the employee an opportunity to respond and to have a support person present at any discussions;
for performance issues, you warn the employee about their performance and give them a reasonably opportunity to improve (and clear ways to do so); and
you consider the employee’s personal circumstances, and the personal and economic consequences for the employee.
Often factors that are not perceived as relevant by employers are considered by the FWC in an unfair dismissal claim.
Before dismissing an employee, you should take legal advice to ensure the dismissal is not at risk of being found to be unfair, and whether the employee is eligible to bring an unfair dismissal claim.
Please contact our Alex Zilkens if you need any advice regarding dismissing employees.
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