Managerial employees have historically not been subject to award coverage. However, many modern awards such as the Clerks - Private Sector Award 2010 (Clerks Award) and the Professional Employees Award 2010 do include coverage for senior supervisors, team leaders and managers, depending on their duties. The consequences for businesses include unfair dismissal rights. Two recent cases have examined the right of managers to bring unfair dismissal claims, and considered the issue of whether the managers are covered by a modern award or not.
Modern Award Coverage of Managers
The award modernisation process has seen a range of historically award-free managerial employees given award coverage for the first time. Modern awards such as the Clerks - Private Sector Award 2010 (Clerks Award) and the Professional Employees Award 2010 cover a range of senior supervisors, team leaders and managers expressly, based on the nature of the duties and role.
Employers need to consider potential award coverage for managers in a range of contexts, including:
- negotiation over the coverage of an enterprise agreement under the Fair Work Act 2009 (Cth) (FW Act);
- entitlement to award benefits such as overtime and paid breaks; and
- termination of employment and access to unfair dismissal, as two recent Fair Work Australia (FWA) decisions demonstrate.
A manager can access unfair dismissal provisions if they are covered by a modern award, even if they earn above the high income threshold (currently $118,100 and indexed annually).
Two recent decisions of FWA have considered the issue of award coverage of managerial employees in the context of unfair dismissal applications and provide guidance for employers as to the principles that FWA will apply, as FWA will assess award coverage by examining the duties of the employee.
Michelle Gray v Hamilton James and Bruce Pty Limited [2011] FWAFB 6884, (Acton SDP, Hamilton DP and Cargill C), 7 October 2011
The Applicant, Michelle Gray, earned $160,000 per annum as the General Manager of the Brisbane branch of the Respondent, Hamilton James and Bruce Pty Limited. Upon her employment being terminated on 16 March 2011, Ms Gray brought an unfair dismissal application in FWA.
The employer claimed FWA had no jurisdiction to hear the application because the employee was not covered by a modern award or enterprise agreement and her income was over the statutory income threshold of $118,100. However, Ms Gray argued that she was covered by the Clerks Award at level 5 classification, thereby having access to the unfair dismissal jurisdiction.
Clause 4 of the Clerks Award sets out the award coverage which is for employers in the private sector with respect to employees “engaged wholly or principally in clerical work, including administrative duties of a clerical nature.” Clause B.6.1 of the Clerks Award outlines the characteristics of a “level 5” classification, which includes roles that involve the ability to “train and supervise employees in lower levels.”
FWA was required to consider the duties of Ms Gray to ascertain whether her duties were wholly or principally administrative in nature, falling under the level 5 classification.
Ms Gray’s duties
The duties which Ms Gray performed in her role were not contested. Ms Gray was the most senior employee at the employer’s Brisbane branch, which employed approximately 23 employees, 8 of whom reported directly to her. Ms Gray answered directly to the Chief Operating Officer, who reported to the CEO.
Ms Gray’s role involved the following duties:
- marketing, sales and communication;
- developing and implementing business plans and budgets;
- managing external consultants and accounting staff;
- coaching, training, and mentoring staff;
- recruiting, managing and disciplining staff;
- managing client/candidate complaints;
- dealing with body corporate/building managers;
- assisting with tenders and bids;
- attending client visits with Associate Directors;
- networking and attending or organising industry events.
The employer’s Chief Operating Officer (COO), described Ms Gray’s duties as “purely managerial.” Her administrative functions were said to constitute only 10% of her time.
Findings of FWA – Principal Purpose Test
The Full Bench of FWA on appeal upheld the decision at first instance that the employee was not covered by the award. The application of the principal purpose test to the role being performed was endorsed by the Full Bench as the correct test to apply. In doing this, FWA applied the test set out in Layton v North Goonyella Coal Mines Pty Ltd (2007) 166 IR 394, where it was found that if the principal or primary purpose of a role is the exercise of skills of a professional or quasi professional nature, the role will not be regarded as clerical.
In particular, the Court in Layton stated:
“… the task of interpretation is not a quantitative one based upon time spent performing certain types of duties. Rather, the task involves a qualitative assessment of the primary purpose of the position. Professional and managerial employees are clearly not clerks. Where the primary purpose of the role is the exercise of skills of a professional or quasi professional nature, the role will not be regarded as clerical - notwithstanding that the role involves various recording and ordinary administrative office functions.”
Ms Gray’s employment was primarily to manage the Brisbane office and perform managerial tasks, such as attracting new clients, managing and training staff, monitoring the Respondent’s finances and from the employer’s perspective, acting as the face of the company in Queensland. Ms Gray was clearly a very senior managerial employee, whose position was not covered by an award. The Full Bench accepted the evidence of the COO and noted that given the list of the Applicant’s duties, it was difficult to see how this role could be classified as a level 5 clerical worker.
Accordingly, Ms Gray was found not to be engaging “wholly or predominantly in clerical work” in accordance with clause 4 of the Clerks Award. In this situation, where Ms Gray earned above the high income threshold and was not covered by an enterprise agreement, FWA had no jurisdiction to hear the claim.
Iryna Margolina v Jenny Craig Weight Loss Centres Pty Ltd [2011] FWAFB 9137 (Guidice P, Hamilton DP, Roberts C), 23 December 2011
A recent further Full Bench decision has reiterated that managers who perform some administrative functions, but predominantly perform a supervisory role, will not be covered by the Clerks Award.
In this decision on 23 December 2011 the Full Bench overturned a finding that a Regional Manager for Jenny Craig, Iryna Margolina, was covered by the Clerks Award.
Ms Margolina was dismissed from the Respondent when her role was made redundant. Prior to this, the Respondent had not consulted with Ms Margolina regarding her redundancy. During a meeting Ms Margolina asked if there was any other employment available and was advised “for you there is nothing.”
Within 2 weeks of being retrenched Ms Margolina:
- began work as a manager for a competitor, on a significantly lesser wage ($55,000); and
-
lodged an application for unfair dismissal.
In the first instance, the Respondent opposed the application on the basis that FWA had no jurisdiction to hear the claim, because Ms Margolina earned over the high income threshold and that her termination was a genuine redundancy.
Ms Margolina’s total earnings in the 2010 financial year were $202,000 (comprising $60,000 base salary, $100,000 one-off bonus for 5 years’ work and a performance bonus for that financial year of $42,000).
Ms Margolina claimed that she was covered by the Clerks Award under a level 5 classification and that because the Respondent had not consulted with her in accordance with the Clerks Award, the preconditions for a “genuine redundancy” under section 389(1)(b) of the FW Act were not met.
Ms Margolina’s Duties
Ms Margolina’s main duties were described by the Respondent’s HR manager as being responsible for upskilling and overseeing of all call centre staff and liaising with outside consultants to ensure products were dispersed correctly. She had an overseeing role rather than direct contact with clients, and was responsible for hiring and firing staff, scheduling their work and monitoring performance.
Ms Margolina was also responsible and accountable for the business activity, strategic direction and revenue growth for her region, and had approximately 40 to 50 staff whom she managed including 12 Jenny Craig centre leaders.
The Respondent submitted that Ms Margolina was not covered by the Clerks Award. Her title (Regional Manager) and salary (which did not provide for overtime, weekend penalties, or loadings), were both indicative of primarily a managerial role rather than a clerical role. Further, the Respondent stated that they did not offer to redeploy Ms Margolina as the only positions were part-time, at a reduced salary. These alternatives were considered inappropriate and possibly an insult in light of her seniority.
Findings of FWA
In the first instance, Commissioner Ryan found that, notwithstanding the job title of “manager”, the Clerks Award did cover Ms Margolina. This was because the Commissioner considered that the evidence provided by the Respondent of Ms Margolina’s job description and the actual duties performed by her fell within the duties performed by a classification 5 and/or 6 under the Clerks Award.
However, on appeal by the Respondent, the Full Bench rejected this finding and said that it was unable to conclude that Ms Margolina was engaged “wholly or principally in clerical work” in accordance with the coverage clause of the Clerks Award. While her duties had some elements of clerical work, they were mainly supervisory and managerial.
The Full Bench then noted that while Ms Margolina’s total salary in 2010 was $202,000, her 5 year bonus was earnings which could not be determined in advance, as it was contingent on performance and because management reserved the right to alter or discontinue the plan. Therefore, that bonus amount was excluded under section 332 of the FW Act from the calculation of Ms Margolina’s income for the purpose of the high income threshold.
While the Full Bench found that Commissioner Ryan was in error regarding the award coverage, the Full Bench were satisfied that Ms Margolina was still protected from unfair dismissal as her relevant earnings were under the high income threshold of $118,100.
The Full Bench also agreed with the Commissioner’s conclusion that it would have been reasonable in all the circumstances to redeploy Ms Margolina as there was a lower paying role available which she had the requisite skill and experience for - and therefore her redundancy was not “genuine”.
The appeal was dismissed and Commissioner Ryan’s decision that Ms Margolina was protected from unfair dismissal was confirmed. As this was a jurisdictional hearing only, no remedies were awarded but instead the unfair dismissal application should now go on to be heard on its merits in FWA.
Conclusion – Implications for Employers
When considering whether a senior manager is covered by a modern award, the Full Bench decision of Gray confirms that the approach will be the application of the “primary or principal purpose test” to employees’ duties, to determine the primary purpose of their role.
These decisions do not change which managers are covered by a modern award or when, but reinforce the test of coverage and clarify how FWA will apply that test.
FWA will consider the primary purpose of the manager’s employment in question, and prudent employers will adopt the same approach.
The answer to which managers will be covered or not depends on the terms of the award or other instrument in question, every time. As these decisions demonstrate, earnings levels alone do not decide the issue and bonuses may not be taken to be part of a manager’s income for the purpose of the high income threshold.
Modern award coverage is unlikely to extend to employees who are:
- at a senior level in the company with a high level of control over their own employment as well as over others;
- evidenced by their role in the management structure and designated authority to make financial and operational decisions;
- exercise competencies which go well above those set out in the applicable modern award classification;
- performing any clerical and administrative functions as a minor part of their role; and
- earn above the high income threshold.
What do I need to do now?
Prudent employers will review their existing arrangements with their “managers” to understand whether they are covered by a modern award or other instrument, by taking the following steps:
- Review what modern awards apply to your business.
- Review position descriptions and roles, as they operate in practice. Ask “What is the principal purpose of having this person employed?”
- Consider whether existing position descriptions and roles ought to be updated.
- Check compliance with all applicable modern awards or other instruments, in all respects, including: overtime, shift or penalty rates, and allowances.
- Consider the desirable scope of coverage when negotiating an enterprise agreement under the FW Act.
- Consider discussing redeployment options with all candidates for retrenchment, as a matter of standard policy, to help minimise the consultation risks that arose in the Jenny Craig case.
This article was produced by Herbert Geer.
It is intended to provide general information in summary form on legal issues.
The contents do not constitute legal advice and should not be relied upon as such.
