Hollis Duncan Rouse v Valtek Australia Pty Ltd [1995] IRCA 149

IN THE INDUSTRIAL RELATIONS ) No. WI 525 of 1994 COURT OF AUSTRALIA ) WESTERN AUSTRALIA DISTRICT REGISTRY )

BETWEEN: Hollis Duncan Rouse Applicant AND: Valtek Australia Pty Ltd Respondent

BEFORE: Boon JR PLACE: Perth DATE: 12 April 1995

REASONS FOR JUDGMENT This is the hearing of a notice of motion filed by the respondent which has moved for orders that: 1. the applicant's claims be dismissed for want of jurisdiction; 2. there be no order as to costs. By application filed 15 November 1994 the applicant seeks reinstatement to his former employment with the respondent pursuant to S170EA of the Industrial Relations Act 1988. The respondent alleges that during the period of 12 months immediately preceding termination on 2 November 1994 the applicant received wages over the amount of $60,000. The respondent says that this court accordingly has no jurisdiction to hear the applicant's claim because of the effect of S170CD of the Industrial Relations Act, 1998, which states:

"170CD(1) [Employee not employed under award conditions] The following Subdivisions do not apply to a termination of employment of an employee who is not employed under award conditions if: (a) in respect of an employee who was continuously employed by the employer during the period of 12 months immediately before the termination day - on the termination day the employee's relevant wages exceeded the applicable amount; (b) ............ 170CD(2) [Amount] The applicable amount for the purposes of subsection (1) is: (a) subject to paragraph (b), $60,000; or (b) ............" Subsection (4) of S170CD defines "relevant wages" in relation to an employee as: "the total amount of the wages that the employee received or was entitled to receive, from the employer in respect of: (a) if paragraph (1) (a) applies to the employee - the period of 12 months referred to in that paragraph; or (b) ........ but, in relation to an employee whose contract of employment prescribes normal hours for the performance of work (whether by prescribing the number of hours in which, or the times at which, work is normally to be performed in a particular period), does not include any wages, additional to normal wages, in respect of additional hours of work performed or in respect of work performed at other times."

THE FACTS The applicant's claim states that he was employed by the respondent between 18 June 1990 and 2 November 1994. At the time of termination he was the State Manager for Western Australia of the respondent's business. By letter dated 26 July 1991 the respondent set out the applicant's then current terms and conditions which included: (a) an annual salary of $53,000 (b) payment of a management bonus (c) 4 weeks paid annual leave plus a leave loading of 17.5% (d) superannuation payments of 4% and (e) sick leave In June 1993 the applicant was transferred to Western Australia. His salary was increased to $60,000.00 per annum effective from June 1993. By letter dated 3 June 1993 the respondent advised the applicant that his new conditions of employment included the increased salary. The letter stated: "Bonus to be based on 20% of salary and to be formulated in accordance with job description. I would anticipate a large portion to be based on WA total bookings as opposed to your individual bookings. This would be a significant contrast to previous WA State Manager bonuses and along the lines we discussed about instigating in 1993 for the State Manager". The letter did not repeat the entitlement of the applicant to such contractual benefits as four weeks annual leave, 17.5% leave loading, sick leave and superannuation. The uncontested evidence before me however is that the applicant did receive these benefits and I am prepared to accept that he had a contractual entitlement to them.

In the 12 months immediately preceding the applicant's termination on 2 November 1994 the payments the applicant received were as follows: (1) $58,846.11 Salary (2) $1,153.85 Holiday Pay (3) $201.92 Leave Loading (4) $5,400.00 Bonus (5) $3,461.53 Holiday Pay (6) $605.77 Leave Loading $69,669.18 The holiday pay and leave loading itemised in (2) and (3) above relate to leave actually taken by the applicant during the 12 months prior to termination. The holiday pay and leave loading itemised in (5) and (6) above were payments made to the applicant on termination in lieu of leave accrued during the applicant's employment but not taken by the applicant.

PAYMENTS TO BE INCLUDED IN "RELEVANT WAGES" The question which is to be decided by this court is which of the items of payment listed above are to be included in the calculation of the applicant's "relevant wages". The respondent's argument is that all of the items numbered (1) to (6) above should be included. If this court is not prepared to do this, the respondent argues that each item should be dealt with separately. I should say at that outset that I would automatically exclude items (5) and (6) from the calculation of 'relevant wages' within the meaning of S170CD because the applicant did not take the leave for which these payments were made. He may have been entitled to take the leave but if he had done so he would not have received a salary over that period. Counsel for the respondent argued that one should look at the definition of 'relevant wages' in subsection 170CD (4). He submitted that the qualification in that subsection in relation to additional hours of work performed or in respect of work performed at times outside the normal hours of work means that "relevant wages" should be interpreted so that all payments which do not relate to any additional performance of the employee outside his or her contractual requirements should be included in the calculation. Thus if a payment needed further performance for the employee to receive it, it should be excluded, and if a payment did not need further performance for the employee to receive it, it should be included. On this basis it was argued that on any interpretation holiday pay and leave loading cannot be said to require performance. Leave loading was said to be an additional payment to an employee taking accrued leave and did not require any additional performance. However I consider that the words "does not include any wages, additional to normal wages, in respect of additional hours of work performed or in respect of work performed at other times" in subsection (4) of S170CD are intended to apply only in relation to "an employee whose contract of employment prescribes normal hours for the performance of work (whether by prescribing the number of hours in which, or the times at which, work is normally to be performed in a particular period)". The qualification in the definition section was not, in my view, intended to mean that all payments in respect of an employee's normal hours of work (and which did not required additional performance) were necessarily intended to be included in the calculation of "relevant wages". Counsel for the respondent argued that when interpreting S170CD the statement of Wilcox CJ in the case of Ardino v Count Financial Group Pty Ltd (1994) 126 ALR 49 as to the meaning of wages is paramount. His Honour in that case stated that as the word "wages" is not defined by the Industrial Relations Act, in S170CD it bears its ordinary meaning. The Shorter Oxford English Dictionary definition of "wage" as "a payment to a person for service rendered; now esp. the amount paid periodically for the labour or service of a workman or servant. Freq.pl" was referred to. The Macquarie Dictionary definition as "that which is paid for work or services, as by the day or week; hire; pay" was also set out but His Honour stated at p55 that "so far as money payments are concerned (superannuation, school fees, etc), the critical question is whether the employee ever had an entitlement to receive the money himself or herself". The respondent's argument is that as the holiday pay, leave loading and bonus were all payments to which the applicant had a contractual entitlement, they constitute his '"wages" within the statements of Wilcox CJ set out above. However, even from that decision it is apparent that not all money payments to which employees are contractually entitled are necessarily "wages", for Wilcox CJ himself said (without deciding the question) that it is arguable that a bonus is not "wages" within the meaning of S170CD. Further, in the case of Thomas Gordon Brown v L.J. Listaglen Pty Ltd IRCA No VI 1072 of 1994 Murphy JR held that commission payments which the employee received under his contract of employment did not constitute "wages". Murphy JR referred to the explanatory memorandum issued in relation to the Industrial Relations Amendment Bill (No 2) 1994, which stated that the provisions of Part VIA are to "be confined to employees who are either employed under an award (federal or state) or have a base wage of no more than $60,000.00". This statement clearly indicates that it is an employee's base wage only which was intended to be included within the meaning of "wages". Further evidence of Parliament's intention is the fact that section 170CD refers to "wages" whereas another section of the Industrial Relations Act refers to "remuneration". The latter term implies the inclusion of benefits on top of a base wage. If Parliament had intended that additional payments be included in the meaning of "wages", it would not have used different words in the same statute or it would have defined "wages" to include other payments. Parliament has expanded the definition of "wages" in other legislation, for example, pay-roll tax statutes. As Murphy JR stated in Brown v Listaglen Pty Ltd (at p3), "In my opinion S170 CD (1) was designed to provide a simple mechanism for determining whether or not an employee was covered by the provisions of Part VIA. This was by reference to the base wages of the employee without reference to commissions or other benefits". For these reasons, I do not consider that the payment of the bonus formed part of the applicant's relevant wages within the meaning of S170CD. The bonus paid to the applicant related to the performance of the respondent corporation, and not to the performance of the applicant as an individual. It did not form part of his base wage and was not a periodic payment for a service rendered within the dictionary definitions of "wages" set out above. Similarly I do not consider that leave loading could be said to form part of an employee's base wage, notwithstanding that there was a contractual entitlement to it. Leave loading takes the form of an additional or bonus payment on top of holiday pay. The traditional rationale behind the payment of leave loading was primarily to compensate employees for the loss of over-award or additional payments such as over-time, penalty rates, allowances and commission whilst they were on leave. A secondary reason for the payment of leave loading was to compensate the employee for the additional expenses related to being on holiday, such as travel. Payments of leave loading are not a periodic payment for a service rendered and do not, in my view, constitute a part of "relevant wages". From what I have said above it is apparent that terms (3), (4), (5) and (6) of the list of payments to the applicant are to be excluded from the calculation of his "relevant wages". As yet there is no authority in this court on the question of whether holiday pay constitutes part of an employee's relevant wages. It is not necessary for me to decide that question here, for even if item (2) is included, the total of the salary and holiday pay (for holidays actually taken) amounts to $59,999.96, which comes to just under the cut-off point prescribed by S170CD. The application by the respondent's notice of motion is accordingly dismissed. There will be no order as to costs. I certify that this and the preceding seven (7) pages are a true copy of the reasons for judgment of Judicial Registrar Boon. Associate: Date: The applicant appeared in person. Counsel for the Respondent: Mr I. Curlewis Solicitors for the Respondent: Phillips Fox Date of Hearing: 7 March 1995 Date of Judgment: 12 April 1995

IN THE INDUSTRIAL RELATIONS ) No. WI 525 of 1994 COURT OF AUSTRALIA ) WESTERN AUSTRALIA DISTRICT REGISTRY ) BETWEEN: Hollis Duncan Rouse Applicant AND: Valtek Australia Pty Ltd Respondent

BEFORE: Boon JR PLACE: Perth DATE: 12 April 1995

MINUTES OF ORDER

THE COURT ORDERS THAT: 1) The application by the Respondent on notice of motion filed 22 December 1994 be dismissed. 2) There be no order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

CATCHWORDS

INDUSTRIAL LAW - Termination of employment - claim of unlawful termination - application to dismiss for want of jurisdiction - alleged that relevant wages exceed $60,000 - meaning of "relevant wages" INDUSTRIAL RELATIONS ACT 1988, Ss 170CD, 170EA

Ardino V Count Financial Group Pty Ltd (1994) 126 ALR 49 Thomas Gordon Brown v L.J. Listaglen Pty Ltd IRCA No. VI 1072 of 1994 HOLLIS DUNCAN ROUSE v VALTEK AUSTRALIA PTY LTD No. WA 525 of 1994 BEFORE: Boon JR DATE: 12 April 1995 PLACE: Perth