Is there a problem with earning too much money?

Employment Law Column - 4 July 2017

Money can’t buy happiness… but it sure doesn’t hurt!  Finally, you can afford to make all your dreams come true. The dream house. The ultimate car. Buying that final Woolworths Marvel disc off eBay to complete your “child’s” collection (we don’t judge).

So what’s the catch, beyond having the difficulty of having to choose between “Jeeves” or “Giles” as being the preferred nickname for your new butler?

For its part, the Fair Work Act describes the “high income threshold”, to mark the point at which you become a member of its version of the ‘one percent’. Newly set at $142,000 for the 2017/2018 financial year, the high income threshold operates to set apart “high income employees” from the other “ninety-nine percent”. To be a high income employee, you must have a guarantee of annual earnings greater than the high income threshold in a financial year. There’s no use anyone crossing their fingers for a Christmas bonus, as discretionary payments won’t help get them over that high income line.

 

Can high income employees bring an unfair dismissal claim?

What’s the point of having a high income threshold, other than making the vast majority of us feel bad about being on a ‘not high’ (ie. low) income?  Most people think that a high income employee cannot bring an unfair dismissal claim. This is true – to a point. Coverage of a high income employee by a modern award can give that employee another motherlode, as it were, in the form of accessibility to the unfair dismissal jurisdiction.

It is a little-known fact that high income employees can still be “covered” by a modern award, if their duties do not go beyond those described in the award. This means that if a high income employee is covered by an award (among the rest of the bling adorning them), they will be able to bring an unfair dismissal claim, just like those who report to them!

Now before you pick up your pitchforks and storm the gates of the Fair Work Commission in outrage at this inequality, you should know that it is not common for high income employees to make unfair dismissal claims. For one, they are limited by the same compensation cap as the rest of us – up to six months’ salary, or $71,000, whichever is lower. This leads to, in our experience, most of them choosing to bring an adverse action or breach of contract claim instead, which has no limit as to the (further) riches they might be able to recover.

 

High income threshold and modern awards

The other main effect of the high income threshold is felt in relation to modern awards. Now, here’s the hitch that many miss: modern awards do not “apply” to high income employees, meaning that those employees are not subject to the provisions and protections under a modern award that they might have otherwise been entitled to. For example, a modern award’s consultation provisions do not need to be followed for a high income employee in a redundancy situation.

These are the 3 key things your business needs to remember in relation to its high income employees.

  • They may be entitled to protection from unfair dismissal, if they are covered by a modern award.  The “principal purpose” test must be considered when examining a relevant award’s classification provisions.
  • They are not subject to the provisions of any modern award, including any terms relating to annual leave loading, overtime or consultation requirements.
  • Even if a high income employee is determined to not be protected from unfair dismissal, don’t forget that they are still eligible to bring an adverse action or breach of contract claim!

The high income threshold, as you can see, can be both be a blessing (more money!) and a curse (no unfair dismissal option if an employee is not covered by a modern award). We might not have given high income employees a reason to cry all the way to the bank, but we hope that the above will prove useful guidance when you’re considering their rights and protections.

 

This article is part of a regular employment law column series for HRM Online by Workplace Relations & Safety partner Aaron Goonrey and Lawyer Luke Scandrett.  It was first published in HRM Online on 4 July 2017. The HRM Online version of this article is available here.

 

 

Further information

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