General protections’ claims in the Federal Circuit Court

If a general protections’ case involving an alleged dismissal does not settle at the conciliation conference which will conducted by the Fair Work Commission if there is no jurisdictional objection by the respondent, an applicant will have four options.

  1. Forget about the matter, and get on with his or her life; (Quite popular)
  2. Ask the respondent to consent to the matter remaining within the Fair Work Commission for consent arbitration ( very, very wise but almost unheard of) ;
  3. Refer the matter to the Fair Work Division of the Federal Court of Australia (a challenging and potentially life wrecking move); or
  1. Refer the matter to the General Federal Law Division of the Federal Circuit Court of Australia either as (a) an ordinary claim within its general federal law jurisdiction OR (b) as a small claim capped at a maximum of $20,000 (often a very smart move, because it is cheap and fast and especially since various other common law claims can be tacked on).

Today I came across the following decision of the Federal Circuit Court which explains the Court’s small claims jurisdiction. Lawyers and other professional advocates like me are not very well versed in this mysterious jurisdiction, since ordinarily we are not welcome to practise within it.

 

  1. “Small claims jurisdiction
  1. Before turning to deal with the substance of the applicant’s claims in these proceedings, the issue arises as to whether the court has the jurisdiction to deal with these claims within the small claims jurisdiction.
  1. This claim is brought in the court’s small claims jurisdiction pursuant to section 548 of the FW Act.  Small claims proceedings can only be dealt with if:
  1. a)           an applicant indicates that they wish to have their matter dealt with as a small claim; and
  2. b)           importantly, the claim relates to an amount referred to in section 548(1A)of the FW Act that an employer was required to pay to or on behalf of an employee:
  3. i)           under the FW Actor a fair work instrument;
  4. ii)           because of a safety net contractual entitlement; or

iii)          because of an entitlement of the employee arising under section 542(1) of the FW Act.

  1. Section 542(1) of the FW Act relevantly provides:

For the purposes of this Part, a safety net contractual entitlement of a national system employer or a national system employee, as in force for time to time, also has effect as an entitlement of the employer or employee under this Act.

  1. A “safety net contractual entitlement” is defined in section 12 of the FW Act to mean:

An entitlement under a contract between an employee and an employer that relates to any of the subject matters described in:

(a)          Subsection 61(2) (which deals with the National Employment Standards); or

(b)          Subsection 139(1) (which deals with modern awards).

  1. Section 61(2) of the FW Act does not relate to bonus payments. Relevantly however, section 139(1) identifies the following subject matters:
  1. a)           minimum wages … and
  2. i)           …
  3. ii)           incentive-based payments, … and bonuses;

  1. It is therefore arguable that a bonus payment, in the nature of the bonus sought by the applicant, is an amount which falls within section 548(1A) of the FW Act and therefore can be the subject of small claims proceedings. The applicant’s other claims, clearly fall within the court’s small claims jurisdiction.
  1. Turning then to consider each of the applicant’s claims.

Relevant rate of pay

  1. The applicant claims that his wages for the period from 1 September to 13 October 2017 should have been calculated at the rate of $125,000 not $115,000.
  1. On the basis of the evidence before me, I find that:
  1. a)           Following the applicant having tendered his resignation, various senior members of staff engaged in discussions with him to see whether they could convince him to remain in the company’s employ.
  2. b)           As a result of these discussions, the respondent undertook an out of cycle pay review and awarded the applicant a $10,000 per annum pay increase effective from 1 September 2017.  Whilst these discussions occurred in the context of other discussions about possible changes to his role which might entice the applicant to remain in employment, the correspondence advising the applicant that he would receive a pay increase with effect from 1 September 2017 was not conditional upon him withdrawing his resignation or agreeing to the changes to his role.  Had this been the company’s intention, it was open to them to have made the pay increase conditional upon such a requirement.  It did not do so.
  3. c)           This is to be contrasted with the clear statements made in the letter of 19 September 2017, which advised the applicant that this out of cycle pay increase would replace the February 2018 pay review as the letter expressly stated that the applicant’s next pay review would occur in February 2019.
  1. I find that the employment contract between the applicant and the respondent was varied by this letter so that the applicant’s annual salary was $125,000. I am therefore satisfied that the applicant should have been paid at this rate for the period from 1 September 2017 to the date of his termination.
  1. Moreover, I am satisfied that the applicant’s annual leave payment on termination should have been calculated on the basis of his salary of $125,000.

Bonus claim

  1. The position in relation to the applicant’s claim for the bonus payment for the 2016/2017 financial year is not as clear cut.
  1. Whilst the respondent does not dispute that Ms Stupka told the applicant that notwithstanding his resignation, he would still be paid his full bonus for the 2016/2017 financial year, ultimately this was a matter for the directors of the respondent to determine.
  1. This discretion is clear from the terms of the employment agreement entered into by the applicant, which expressly states at Schedule 2:

…the amount, terms and schedule of any bonus are entirely at the discretion of the employer and as determined by PaperCut Directors.[12]

[12] Schedule 2, Annexure A of the affidavit of Patrik Varga affirmed 13 and filed 15 August 2018.

  1. Whilst it might be argued that Ms Stupka in making the statement to Mr Varga regarding his entitlement to a bonus payment, was representing her employer, ultimately she could only represent what the directors of her employer had determined.  On the basis of Mr Axon’s evidence, it is apparent that the directors did not finally determine the bonus amount which employees would be eligible for payment of the bonus until after the applicant’s discussion with Ms Stupka.
  1. Mr Axon’s evidence reveals that the directors decided not to pay any bonuses to any employee who was not employed on the date on which the bonus became payable.  The bonus for 2018 became payable in the October pay cycle and it is not in dispute that the applicant was not employed at that time.
  1. On this basis, the applicant’s claim for payment of his bonus for the 2016/2017 financial year must fail.
  1. The applicant also claims interest of 5.5% on unpaid amounts. The court has the power to order interest on application by a party pursuant to section 76 of the Federal Circuit Court of Australia Act 1999 (Cth). I am satisfied that the applicant is entitled to interest on the sums that he should have received and fix the sum of $150.00 in lieu of interest.
  1. For each of these reasons, I order that:
  1. a)           within 21 days, the respondent pay to the applicant the following sums:
  2. i)

$1,153.85 in respect of unpaid wages for the period from 1 September 2017 to 13 October 2017;

  1. ii)           $625.38 in respect of underpayment of annual leave entitlements on termination; and

iii)          the sum of $150.00 in lieu of interest; and

  1. b)           all other claims made by the applicant be dismissed.”

VARGA v PAPERCUT SOFTWARE INTERNATIONAL PTY LTD [2019] FCCA 1003 delivered 18 April 2019 per  Mercuri J