C2003/187, Transcript of Proceedings [2004] AIRCTrans 62 (8 January 2004)

AUSCRIPT PTY LTD
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TRANSCRIPT OF PROCEEDINGS

O/N 088

AUSTRALIAN INDUSTRIAL

RELATIONS COMMISSION

SENIOR DEPUTY PRESIDENT LACY

C2003/187

APPEAL UNDER SECTION 45 OF THE ACT
BY DIAMOND OFFSHORE GENERAL COMPANY
AGAINST THE DECISION BY DEPUTY
PRESIDENT McCARTHY ISSUED ON 19
JUNE 2003 IN U2001/7238 (PR933314)
RE APPLICATION FOR RELIEF OF
TERMINATION OF EMPLOYMENT

C2003/190

APPEAL UNDER SECTION 45 OF THE ACT
BY DANIEL JAMES ROBERTSON AGAINST
THE DECISION OF DEPUTY PRESIDENT
McCARTHY ISSUED ON 19 JUNE 2003 IN
U2001/7238 (PR9333273) RE APPLICATION
FOR RELIEF OF TERMINATION OF
EMPLOYMENT

PERTH

9.05 AM, MONDAY, 15 DECEMBER 2003

Continued from 21.10.03

PN326

MR N. ELLERY: I continue to appear for Diamond Offshore.

PN327

MR M. LLEWELLYN: I appear and with me is MS Y. PEARCE.

PN328

THE SENIOR DEPUTY PRESIDENT: Yes. Now, I have received a draft outline of the calculation of the proposed compensation and that was, as I understand it, provided to the company representatives, as well as to the company director. I'm not sure which but you might be able to enlighten me, Mr Ellery. What was the - - -

PN329

MR ELLERY: Yes. It wasn't provided direct to my office, your Honour. It was provided to the company but I should note that Ms Hoyne was away on leave and so she didn't actually see the document until Thursday morning of this week and she assumed that I would have had a copy of it also, until I got in touch with her on Friday. So I didn't receive the document until Friday either.

PN330

THE SENIOR DEPUTY PRESIDENT: Have you had an opportunity to examine it and consider it?

PN331

MR ELLERY: I've had an opportunity to briefly examine it and to discuss it with Ms Hoyne and she has had a brief opportunity to go through the document and to have her payroll department work on the document. The position we have, and I've discussed this briefly with Mr Llewellyn this morning, is that we would accept the gross figure that is provided in that document, which is a gross figure $38,868.98. That obviously would be subject to taxation. Some of it would be taxed as a redundancy.

PN332

Some of it would be taxed as an ETP and we wouldn't be in a position to make any commitments to what is taxed as what, suffice to say that it would be taxed lawfully and appropriately. The company will need to take advice and obviously the company wouldn't be in any way seeking to disadvantage Mr Robertson and how it is treated for tax purposes, but we would need to reserve the position on tax. To the extent that we've had the chance to review the figures, we've only been able to look at it from a brief preliminary point of view.

PN333

It may be that on more reflection and with more time, we would come to a different dollar amount but for the sake of resolving it, we are happy to accept that gross figure, if it is able to be resolved this morning. If it has to be resolved at a later time, then we would need the opportunity to reserve our position on the final calculations and we may come to a slightly different figure.

PN334

THE SENIOR DEPUTY PRESIDENT: All right. Thank you very much. Mr Llewellyn, perhaps you might just walk me through it anyway. I've got the explanation in paragraph 6 of your submission. Perhaps if we could just sort of go to that area first. I need to clarify a couple of things.

PN335

MR LLEWELLYN: Yes, not a problem. One thing I should clarify, just check the adding up and the gross figure is actually 39,669 so there may be an error somewhere in that bottom piece but if you add 1-4, that is what you get as a gross. I don't know what I've done wrong but I've obviously taken something off and not added it back on. If I can - in terms of what I've set out in terms of the explanation in .6 for each of the components of salary, what I've tried to set out is that in terms of Mr Robertson's earnings, if I take the Commission to table 2 as it relates to .1.

PN336

Table 2 sets out on Mr Robertson's salary, he was on 2189.29 per fortnight. That was paid each and every fortnight. Now, while there seems to be an error in terms of some of the material that was presented to the Commission where it said that amount was a weekly amount, it is, in fact, a fortnightly amount and I notice that was an error from the respondent - some of the respondent's submissions earlier.

PN337

THE SENIOR DEPUTY PRESIDENT: It has been calculated there as a fortnightly - - -

PN338

MR LLEWELLYN: Yes, it has.

PN339

THE SENIOR DEPUTY PRESIDENT: Yes.

PN340

MR LLEWELLYN: The tax-free component that is also part of the salary which gets paid each fortnight is the LAHA component which is paid as a pre-tax amount.

PN341

THE SENIOR DEPUTY PRESIDENT: That is living away from home allowance, is it?

PN342

MR LLEWELLYN: That is correct.

PN343

THE SENIOR DEPUTY PRESIDENT: Is that paid irrespective of the fact that the employee is located at the workplace? In other words, how was the work worked? I mean, he worked so long on, so long off?

PN344

MR LLEWELLYN: 2 weeks on, 2 weeks off.

PN345

THE SENIOR DEPUTY PRESIDENT: Yes. Well, the 2 weeks off - - -

PN346

MR LLEWELLYN: Or actually in this case 3 on, 3 off.

PN347

THE SENIOR DEPUTY PRESIDENT: 3 on, 3 off. The period off though, was he paid LAHA in that period?

PN348

MR LLEWELLYN: No. What the employer does is pays the salary fortnightly so essentially what they've done is each fortnight there is 7 days LAHA. Now, I have a difficulty with the way in which it is paid, because if you look at the award and the agreement on how it is meant to be paid, each 3 week cycle you would actually accrue 22 days of LAHA not 21, but the way in which it has been paid to Mr Robertson traditionally under the AWA that he was under, was that for each fortnight, the employer pays 7 days LAHA. So if you like, over a 6 week period it adds up to 21 days.

PN349

THE SENIOR DEPUTY PRESIDENT: All right. So it is calculated on the same basis though, as you have calculated it?

PN350

MR LLEWELLYN: Yes. Essentially what the - what I gather has been done under the AWA is they have taken all the earnings for a 52 week period, divided it into 26 equal amounts and then paid it in that fashion.

PN351

THE SENIOR DEPUTY PRESIDENT: Why would that be payable if the person wasn't actually working on the site?

PN352

MR LLEWELLYN: Well, the compensation is for what he would have earned had he remained at work for the period. Now, that is inclusive of all allowances.

PN353

THE SENIOR DEPUTY PRESIDENT: That is really allowed as a dispersed allowance, isn't it? I mean, for example, you say it is tax free. Well, it is tax free because it is allowed on the basis that the employee uses it for the purpose of any incidentals and so forth that may be incurred as a result of being away from their home.

PN354

MR LLEWELLYN: In terms of compensation for loss, it is still a loss the employee suffered.

PN355

THE SENIOR DEPUTY PRESIDENT: Well, how can it be a loss if he wouldn't have - if he hadn't - I mean, he wasn't away from home, so to speak.

PN356

MR LLEWELLYN: No, he wasn't but I mean, in terms of the agreement, he also gets paid when he is on annual leave.

PN357

THE SENIOR DEPUTY PRESIDENT: Does he?

PN358

MR LLEWELLYN: So I mean, if I apply the same principle, he is not away from home when he is on annual - well, he may be away from home when he is on annual leave but he is certainly not at work. He gets paid for all that period of time, but I mean in terms of, for example, notice period under 170CM of the Act, the employee would be entitled to that payment as part of notice even. Now, when you simply go to compensation in lieu of notice, the required amount of compensation instead of notice must equal or exceed the total amounts.

PN359

If the employee's employment had continued to the end of the required period of notice, the employer would have become liable to pay to the employee because of the employment continuing for the period. Now, the same thing applies in terms of orders for compensation for loss. It still would have been moneys that the employee would have received, he worked the period. For example, in terms of both the operation of the award provisions and also the operation of the AWA provisions, the employees actually receive the LAHA as part of their redundancy payments.

PN360

THE SENIOR DEPUTY PRESIDENT: Do they?

PN361

MR LLEWELLYN: Because the redundancy includes all allowances, the same as the annual leave includes allowances. They get paid LAHA on sick leave, because sick leave includes all allowances.

PN362

THE SENIOR DEPUTY PRESIDENT: It just seems like a windfall to me and I have difficulty understanding how it could be tax free in those circumstances.

PN363

MR LLEWELLYN: Well, on the same basis that it is tax free when it is paid as annual leave.

PN364

THE SENIOR DEPUTY PRESIDENT: Well, that might be something that the Commissioner might ultimately find out is not right.

PN365

MR LLEWELLYN: Well, he probably does not mind, considering he charges the employer 98 per cent fringe benefit tax on it.

PN366

THE SENIOR DEPUTY PRESIDENT: Yes. All right.

PN367

MR LLEWELLYN: So he probably makes more out of that than he does if he taxed it in the hands of the employee, if the truth be known.

PN368

THE SENIOR DEPUTY PRESIDENT: So you say it is an allowance that the employee is entitled to, independently of whether he is away from home or not?

PN369

MR LLEWELLYN: That is correct and that is the way it is paid.

PN370

THE SENIOR DEPUTY PRESIDENT: All right.

PN371

MR LLEWELLYN: In terms of the super, the super is just the straight superannuation figure taken off his pay sheets. In terms of the redundancy figure that is listed in 4 - - -

PN372

THE SENIOR DEPUTY PRESIDENT: Again, how does that get paid to the employee?

PN373

MR LLEWELLYN: Well, I don't mind whether it is paid to the employee or to his superannuation fund.

PN374

THE SENIOR DEPUTY PRESIDENT: Superannuation fund.

PN375

MR LLEWELLYN: In terms of assessment for income for threshold assessments, superannuation is one of those things that is included in the assessments. Now, in terms of loss, the same applies. I mean, for the - - -

PN376

THE SENIOR DEPUTY PRESIDENT: I understand there is a loss. I just - I wonder how the employer discharges their obligation under the superannuation guarantee fund by paying it to the employer and not in the superannuation fund.

PN377

MR LLEWELLYN: Well, I mean, I'm happy if it goes to superannuation, the issue being for super, from my view. I mean, super traditionally was a wage increase the employees fore-went.

PN378

THE SENIOR DEPUTY PRESIDENT: Yes, I understand all that. That is what I say, I don't - I have no difficulty with it being incorporated as part of a compensation package. What I'm saying is, I don't know how the employer discharges its liability under the Superannuation Guarantee Fund by paying it direct to the employee, not into the superannuation fund.

PN379

MR LLEWELLYN: Well, as I said, I'm happy for it to go into a super fund. I'm just simply identifying it as a separate amount. In terms of the redundancy figure, the redundancy figure is calculated on a redundancy of 4.3 weeks per year of service. Now, that is pro rata over the employment period from when Mr Robertson commenced employment with the appellant in this matter until his termination which is some 120 weeks, which is 2.3 years of service.

PN380

Then it is simply a matter of doing the calculation. That is on the basis that Mr Robertson commenced work with the appellant on 7 February 2000 and continued until his dismissal on 14 October 2002.

PN381

THE SENIOR DEPUTY PRESIDENT: Okay.

PN382

MR LLEWELLYN: Then it is simply a matter of doing a calculation on the earnings again based on the gross earnings per week and then multiplying it by that sum and simply that is the way in which we achieved the result.

PN383

THE SENIOR DEPUTY PRESIDENT: Yes. What did you say the actual figure is?

PN384

MR LLEWELLYN: 39,669.25. You can get that by adding 1-4.

PN385

THE SENIOR DEPUTY PRESIDENT: By adding what, sorry?

PN386

MR LLEWELLYN: In terms of the table, it is taxed as Q1.

PN387

THE SENIOR DEPUTY PRESIDENT: Yes.

PN388

MR LLEWELLYN: The gross amounts identified for each of 1, 2, 3 and 4.

PN389

THE SENIOR DEPUTY PRESIDENT: Right.

PN390

MR LLEWELLYN: Of the amounts I've just walked you through add up to - - -

PN391

THE SENIOR DEPUTY PRESIDENT: I see. Right. So it is just a calculation error in bringing those figures together.

PN392

MR LLEWELLYN: Yes. I think what has happened is that using the redundancy calculations of what is tax free and what is not tax free based on the 5612 and 2800 and whatever it is. Using those amounts there was some redundancy that would have been taxed as eligible termination payment. Now, I'm assuming that is where I've done the error and not transferred that on to the - taxed as ETP 30 per cent figure which is why I think Mr Ellery's 20,545 and the 18,414, there is a discrepancy between the two.

PN393

THE SENIOR DEPUTY PRESIDENT: Right. All right. Thank you for that. Did you want to say anything else about it?

PN394

MR LLEWELLYN: No. As I understand, Mr Ellery has no problem with the gross figures. It is just how they are treated for tax purposes and I'm happy for the company to - I mean, don't trust my reading of the Tax Act by any extent.

PN395

THE SENIOR DEPUTY PRESIDENT: I don't know how anybody can get it right.

PN396

MR LLEWELLYN: If the Commission pleases.

PN397

THE SENIOR DEPUTY PRESIDENT: Yes. Mr Ellery, what do you say about the 39,669.25?

PN398

MR ELLERY: Well, that is the total of points 1, 2, 3 and 4 in table 3 and that is just plain arithmetic and we accept that. I do have a query however over the LAHA. I'm certainly instructed that the practice of the company has been that LAHA, L-A-H-A is not paid to employees while they are on annual leave nor has it been paid on the basis of redundancy. So to the extent that that answers a query raised and I think the answer would be that it is not therefore payable and that element of it would not be compensable for those purposes, we would say.

PN399

MR LLEWELLYN: Could I suggest you have a look at the award in the agreement? The award pays LAHA on the basis that they don't get annual leave loading.

PN400

MR ELLERY: In relation to the superannuation element, obviously we accept that it should be payable to the super fund.

PN401

THE SENIOR DEPUTY PRESIDENT: Which element?

PN402

MR ELLERY: The superannuation.

PN403

THE SENIOR DEPUTY PRESIDENT: Yes.

PN404

MR ELLERY: Obviously we accept that that is payable to the fund. Other than that, I mean, we are very much caught on the hop obviously and beyond that, we are not able to provide much more meaningful comment, I'm afraid, in the limited time we had available.

PN405

THE SENIOR DEPUTY PRESIDENT: What I might do is adjourn into conference and have some discussion about it because I would like to try and get it finalised as quickly as possible. I will go into conference, thank you.

SHORT ADJOURNMENT [9.20am]

RESUMED [9.25am]

PN406

THE SENIOR DEPUTY PRESIDENT: During the short adjournment I have had some discussion with the parties about the way in which the living away from home allowance should be treated as part of the compensation package or whether it shouldn't be treated as part of it at all. I will adjourn the further hearing of this matter to allow the company to check its records to see what its practice has been in the past with employees who have been made redundant.

PN407

In the event that it has been the practice to pay it to employees of a redundancy, then it is my tentative view that the compensation package ought to include the same amount in these proceedings. In adjourning the matter now, I will await further communication from Mr Llewellyn about the outcome about further - from further discussions between the parties today. As I say, I would like to try and get this wrapped up before the end of the year or before Christmas. Anything else? All right. We will adjourn. Thank you.

ADJOURNED INDEFINITELY [9.27am]