We at HHG Legal Group every day advise employers and employees about their risks and rights in managing the employment relationship including in relation to termination of employment. One of the most important issues for the employer and employee is whether a particular termination may constitute an unfair dismissal under the Fair Work Act 2009 (Cth) (FW Act). While our advice often focuses on ensuring a termination process is not harsh, unjust or unreasonable, it can be just as important to consider as a very first step whether the Fair Work Commission (FWC) has jurisdiction to hear any claim.
One of the key jurisdictional questions is whether the employee is under the high income earner threshold. In short, the FW Act provides, in effect, that high income earners (that is, employees who earn upwards $138,900 plus superannuation) may not make a claim for unfair dismissal in the FWC, unless one of various exceptions applies. A key exception is where an employee is covered by an award.
Where an award covers an employee, that employee may still bring an unfair dismissal claim in the FWC even though their earnings exceed the high income earner threshold. We see employers exposed to claims and liability when terminating the employment of very senior employees because employers assume that an employee’s seniority, managerial responsibility and earnings over the high income threshold, mean that the employee cannot make an unfair dismissal claim. Employers often assume that their liability ends on the payment of a notice period.
This assumption is perhaps a byproduct of a common misconception amongst employers that the FW Act, especially in relation to unfair dismissal claims, is designed to only protect lower income earning employees and that high income earning employees must fend for themselves. Unfortunately, and as the employer in the recent decision of the FWC in Kaufman v Jones Lang LaSalle (Vic) Pty Ltd  FWC 2623 learned the hard way, this is not the case. It is vitally important that before making decisions, the employer thoroughly considers whether very senior employees are in fact covered by one or more awards and therefore able to bring an unfair dismissal claim.
The employer, Jones Lang LaSalle, terminated Kaufman, a very senior regional manager, on the incorrect assumption that due to Kaufman’s seniority, his high salary (well in excess of the high income earner threshold) and that he carried out managerial functions in addition to his sales functions, his employment fell outside the coverage of the award covering sales employees. The FWC held that even though Kaufman was very senior, in reality, he performed a sales function, not a managerial one, and that as a result, the relevant award (the Real Estate Industry Award 2010) covered him thereby enabling him to make an unfair dismissal application to the FWC under the FW Act.
While this decision stands as a cautionary tale, employers should take comfort in the fact that with early, astute advice from an experienced employment lawyer and a well developed strategy, employers can minimise their exposure to liability for unfair dismissal, and better manage the employment relationship.
This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.