First decision of the year! Thomas v Hanseatic Marine Engineer Pty Ltd t/as SilverYachts  FWC 1 reminds employers that it isn’t about how much you pay your managers to take them outside the coverage of a modern award or unfair dismissal rights.
The matter concerns an unfair dismissal application. In particular it is a decision about whether or not Mr Thomas’ position was covered by the modern award and therefore able to bring an unfair dismissal claim.
As you know, a person is protected from unfair dismissal under the Fair Work Act if:
- They have been employed for a minimum period of at least 6 months, unless it is a small business employer, in which case they must have been employed for 12 months
- A modern award covers the person OR
- An enterprise agreement applies to the person’s OR
- The person earns less than the high income threshold – which is $145,400 gross per annum currently and as at 1 July 2018.
SilverYachts argued that Mr Thomas was not protected from unfair dismissal because he was:
- not covered by a modern award; and
- the enterprise agreement did not cover him; and
- his earnings were above the high income threshold.
Mr Thomas’ title was Senior Fitout Designer. He was the eighth highest paid employee out of a total of 163 employees in the company.The method for determining the question of award coverage is the “principal purpose test”. The test requires more than a quantitative assessment of the time spent carrying out various duties. The Commission has to look at the nature of the work and the circumstances in which the employee is employed to do the work in order to determine the principal purpose for which the employee is employed. The evidence before the Commission appeared to demonstrate that while Mr Thomas was a key employee in terms of the work he performed, he did not have the level of autonomy that would be expected of a key management employee that sits outside of the award. It was demonstrated that all aspects of the work, while he made certain recommendations on the basis of his technical expertise, all major decisions were subject to approval and review by other managers. As a result the Commission determined that Mr Thomas’ position fell within the classification of Principal Technical Officer as defined under the award.
What is key for employers to remember is that just because an employee is paid above an award rate of pay, even significantly above, does not necessarily mean that they are automatically a management employee or they will not be covered by the award. Mr Thomas’ salary was above the high income threshold and significantly above the award rate of pay for his classification under the award.
The fundamental dispute between the parties was whether or not Mr Thomas was a “key management employee”. SilverYachts contended that principle purpose of employing Mr Thomas was to lead, manage and run the internal fit-out design team. Mr Thomas contended that he was not a management employee rather he was primarily employed to create and produce manufacturing drawings and fit-outs for large vessels. In order to do so it involved the coordination of the design team and any contractors.
Essentially SilverYachts sought to argue that Mr Thomas’ role was one of managerial responsibility whereas Mr Thomas contended that he fell within the classification of Principal Technical Officer as defined within the award.
The Commission had to determine whether the Manufacturing and Associated Industries and Occupations Award 2010 applied to Mr Thomas’ employment.
It is important for employers to remember that the award cannot be contracted out of and so if an employee falls under an award they will be covered by its terms and also have access to the unfair dismissal regime under the Fair Work Act. If an award applies to your organisation/industry it is important to do a close analysis of your employees’ positions and contracts to ensure they do not breach any relevant award provisions and ensure that the human resources department and managers are aware of which positions have award coverage before those positions are filled. A similar analysis should be conducted during the course of an employee’s employment if the employee continues to be promoted through the ranks.