Modern award coverage; high flyers caught by the system

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When does a modern award cover an employee?

There is a wee myth in workplace relations orthodoxy to the effect that members of management of an enterprise are not award employees. This proposition derives from the historical demarcation between capital and labour and it is true that many managers would be horrified to think that they are covered by a modern award or enterprise agreement. Whether that is a form of snobbery or something else is not really to the point because the belief is wrong.

A modern award is of course the safety net below which an employee’s conditions of employment may not go, unless there is an applicable enterprise agreement which has that effect. And enterprise agreements are not valid unless they are registered by the Fair Work Commission and this cannot occur unless the Commission is satisfied that the conditions of employment provided for by the EA are better of overall than the relevant modern award.

The question whether an employee’s job is covered by a modern award depends upon what is called its “coverage” clause, normally clause 4. Most coverage clauses of modern awards define the ambit of coverage by reference to both an industry in which the employer is engaged and the particular work which an employee of that employee carries out. There are some “vocational” modern awards, the coverage ambit of which is determined solely by reference to what the employee does, but they are in the minority.

Accordingly to determine whether a particular employee’s job is covered by a modern award it is ordinarily necessary to identify the industry in which the employer is substantially engaged and to go to a particular award to see whether the characteristics of the particular employee’s job is covered by the classification clause of the award.

Of course it is not always that simple because many employers are covered by multiple modern awards.

By reason of this process of determining modern award coverage, various incongruities emerge including that senior managers will often be covered by a modern award without the employee being aware of that.

Here is an example.

‘A modern award relevantly covers an employee in relation to particular employment if that award is expressed to cover the employee. A modern award must include a coverage term and that term must be expressed to cover specified employers and specified employees of employers covered by the award. A coverage term in a modern award must describe employees that are covered by the award by specifying their inclusion in a specified class or classes. A class of employees may be described by reference to a particular industry or part of an industry, or particular kinds of work.

It seems common ground that the question whether the Applicant was covered by the Award is to be determined by reference to that which has been described as the principal purpose test. That is, in determining whether the Award covered the Applicant at the time of his dismissal, an examination is necessary of the nature of the work undertaken and the circumstances in which the Applicant was employed to do the work in order to ascertain the principal purpose for which he was employed and then assess whether the Applicant in that employment fell within the coverage provisions of the Award……………………..

Mr Bowden also gave evidence about the Applicant’s earnings, which comprised a base salary, allowances and commission payment, and various incentive payments made and stock given to the Applicant.  This is not disputed by the Applicant. That which was sought to be made of this evidence by the Respondent was that, the remuneration paid to the Applicant compared to the minimum weekly rate paid under the highest paid position contemplated by the Award, was indicative of the different character of the position contemplated by the Award compared to the position occupied by the Applicant.That might well be correct when the duties undertaken by a person do not align with those corresponding duties set out in an award classification. But where the duties or principal purpose for which an employee is engaged in a role correspond with the coverage provisions of a relevant award, high levels of remuneration paid to such an employee are indicative only of an employer’s view that the employee is valuable to the business and a reflection of the success with which the employee has executed the principal purpose for which he or she was engaged. In this regard, high levels of remuneration would say nothing about whether such a person is Award covered.

In my view, the evidence discloses that the Applicant was a high performing employee principally responsible for attracting and executing high-value real estate transactions. He had no managerial responsibilities and no direct reports. He was very senior in the hierarchy of the Respondent, but that hierarchy is not completely or even mostly functionally based. The Applicant’s promotion to Regional Director was recognition of his capacity as a winner of business. The expectations attaching to his role relating to leadership, mentoring and development of less experienced employees would be common of most long serving, experienced and successful property sales representative employed in a real estate business. However, the fundamental or principal purpose for which the Applicant’s position existed was to sell real estate. Apart from maintaining and cultivating relationships with clients and potential clients, the Applicant did this by, inter-alia:

  • the listing and sale of properties or businesses;
  • conducting market appraisals and research;
  • interacting with buyers and sellers of property;
  • supervising the preparation of listing documentation for the relevant properties;
  • ensuring the organisation of advertising campaigns; and
  • liaising with conveyancers and solicitors to ensure the completion of any deals.

The evidence of Mr Bowden earlier extracted underscores this point and the real estate sales nature of the Applicant’s position.

I agree with the Applicant’s submission that put simply, the principal purpose of the Applicant’s position was to sell real estate. Some of the transactions involved were of higher value and greater complexity than those involved in, say a suburban residential real estate agency, but the true nature of the work being performed is much the same. The Applicant had little role in the strategy and management of the Respondent. He had no direct reports. His title, of Regional Director, was effectively a rank or accolade accorded by the Respondent, but the question of award coverage is not determined by the person’s title – it is the duties performed that will be of significance.

It seems to me that the principal purpose of the role occupied by the Applicant at the time of his dismissal as disclosed by the evidence discussed above falls squarely within the role definition of a Property Sales Representative and the duties that he undertook to execute the primary purpose fall comfortably within the indicative tasks for a Property Sales Representative set out in the Award. Some aspects of the Applicant’s role might also be covered by the Property Sales Supervisor role definition in paragraphs B.1.3(a)(i), (ii) and (iv). Although, as he had no direct reports, his position cannot fall within that classification.

The Respondent also submitted that the Applicant occupied a role which has not traditionally been award covered and that prior to the making of the Award, there was no real estate industry award regulation in Victoria. Instead, employees engaged in the industry were covered by the Property and Business Services Industry Sector Minimum Wage Order.

That order did not cover the Applicant’s role. On its face, the order applied to real estate agents  but did not contain a classification readily applicable to a role of the kind occupied by the Applicant. Presumably, the Respondent’s submission seeks to invoke s.143(7) of the Act which provides:

“Employees not traditionally covered by awards etc.

(7)  A modern award must not be expressed to cover classes of employees:

(a) who, because of the nature or seniority of their role, have traditionally not been covered by awards (whether made under laws of the Commonwealth or the States); or
(b) who perform work that is not of a similar nature to work that has traditionally been regulated by such awards.

Note:    For example, in some industries, managerial employees have traditionally not been
covered by awards.”

However, this section is concerned with the power of the Commission to make provision in a coverage clause for certain classes of employees. The submission is an invitation to determine that the Award or aspects of it were beyond power. It is not a finding I can make in this proceeding. To the extent that the submission invites me to read down the coverage clause, I am not persuaded that that is appropriate given the lack of material on the subject, particularly the absence of material pertaining to Victorian State award regulation before the Victorian Parliament referred the power to legislate for certain industrial relations matters to the Commonwealth Parliament.

For these reasons, I am satisfied that the Applicant was at the time of his dismissal covered by the Award because he was engaged in the classification of a Property Sales Representative and is thus protected from unfair dismissal within the meaning of s.382 of the Act. The Respondent’s jurisdictional objection in this regard is dismissed. The application will be reallocated to the Unfair Dismissal Case Management Team in order that the application be dealt with noting that the question whether there was a genuine redundancy should be determined in conjunction with the merits.

Kaufman v Jones Lang LaSalle (Vic) Pty Ltd T/A JLL (2017) FWC 2623 delivered 15 May 2017 per Gostencnik DP