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UNFAIR DISMISSAL AND THE HIGH INCOME THRESHOLD CAP

3 December 2012

There has been a lot of conjecture recently regarding what the unfair dismissal high income threshold is and how it is calculated, which applies under the Fair Work Act 2009 (Cth) (FW Act). From July 1 2012 this high income threshold was increased from $118,100 to $123,100.

An employee's income that exceeds the high income threshold will be excluded from making an unfair dismissal claim. Usually this can be used as a defence, by way of a jurisdictional objection, to any unfair dismissal claim.

Currently, a jurisdictional objection still needs to be heard and argued before a member of Fair Work Australia.

The Federal Government is considering however, allowing the registry to reject claims if it is obvious that the employee's wages exceeds the high income threshold.

In most cases the income of any employee is quite clear and the process of assessing whether the employee is above or below the income threshold will be an easy exercise.

In some cases however, some employees income are greatly impacted by employment bonuses or overtime.

In the case of Lesley Mallows v Touch Base Asia Pacific Pty Ltd t/a Touch Base Asia Pacific [2011] FWA 1695 (18 March 2011) Fair Work Australia had to consider whether performance bonuses and overtime that increased an employee's income above the then high income threshold figure ($113,800) excluded the employee from making an unfair dismissal claim.

Fair Work Australia determined that the amounts the employer argued for could not be included because they could not be determined in advance. Fair Work Australia confirmed that employment bonuses and overtime, unless determined in advance, could not be included as an income for the purposes of the threshold. As the commission and bonus payments (in particular) were contingent on the employee reaching certain employment targets. It was not determinative whether these targets would actually be reached. These performance target bonuses and commissions have been determined to not suit the determinative income that is required under section 332(2)(a) of the FW Act.

In any unfair dismissal claim, the exercise of whether an employee earned above the high income threshold should always be undertaken. However, it is important that an employer does not solely rely upon this jurisdictional objection to defend a claim.

It is a hurdle that can be put in front of an applicant which needs to be overcome before discussion or arguments regarding the substantial claim can be discussed and argued.

When dealing with unfair dismissal claims (or potential unfair dismissal claims) we suggest seeking legal advice to lessen the risk of a successful claim.

For further information, please contact:

Jonathan Mamaril | Associate
Mullins Lawyers
t +61 7 3224 0323
f +61 7 3224 0333
jmamaril@mullinslaw.com.au

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