Employer's people director said the employer is incorporated in Saudi Arabia and does not engage in trading or financial operations in Australia
A sales manager working in Saudi Arabia for a company incorporated in Saudi Arabia challenged his dismissal, arguing the employer was a national system employer due to its relationship with an Australian parent company.
The employer maintained it was not a national system employer as the employment relationship lacked sufficient connection with Australia, and the worker's earnings exceeded the high income threshold.
The worker contended his role involved Australian clients and Australian-based personnel, making the employment relationship sufficiently connected to Australia. The employer argued the worker was a Pakistani national who never worked in Australia, performed all duties in Saudi Arabia, and was governed by Saudi Arabian law.
Employment details and contract terms
The worker was a Pakistani national who commenced employment with the employer in early 2023 as a sales manager pursuant to a work visa. He was responsible for managing bids, proposals and engaging with internal and external stakeholders. This was a non-executive position, and the worker reported to senior management.
The worker was paid in Saudi riyal currency. His total monthly salary was SAR 40,000, which was inclusive of allowances for housing, transportation and living expenses. He stated he had no written guarantee of annual earnings.
The worker confirmed he had never worked in Australia nor visited Australia. All the duties performed by him for the employer were performed in Saudi Arabia. Following his dismissal, he was required to leave Saudi Arabia pursuant to his visa conditions.
Contract governed by Saudi Arabian law
The worker agreed that the written terms of his employment agreement stated that any dispute arising between the employer and the employee regarding the implementation of the contract shall be governed by and construed in all respects in accordance with the laws of Saudi Arabia.
The worker agreed that he had taken leave in accordance with the laws of Saudi Arabia. His manager was in Saudi Arabia.
The worker stated that the employer's procedures emanated from Australia. He sometimes did bid work for Australian bids, but it was not the majority of his time. He estimated he performed 70% of the work on non-Australian work.
The worker submitted that the employer was a national system employer as he considered it was involved in various commercial trade activities in Australia.
He submitted that the employer provides engineering, consultancy and project delivery services in Australia, meeting the definition of a constitutional corporation. Evidence of this was not provided.
Worker's arguments about connection to Australia
The worker submitted that the employer employs Australian citizens and engages in commercial relationships with Australian businesses and clients. He submitted that the employer's workforce contributes to projects and services delivered in Australia.
Evidence of this was not provided beyond reference to one company and the email addresses of individuals employed by another company.
As the parent company is an Australian entity, the worker submitted that it ultimately assumes liability on behalf of the employer. Accordingly, the worker submitted that the employer is integrated into the global operations of the parent company.
In his role, the worker argued that he regularly reported to and interacted with global proposal teams, including those based in Australia, and contributed to Australian-led bids and operations.
While acknowledging that his employment contract was executed in Saudi Arabia, the worker submitted that it operated under a corporate structure centrally governed from Australia. He submitted that the employer engages with clients jointly serviced by Australian teams and shares in the commercial benefit led from Australia.
Arguing that his employment relationship was "in and of Australia" and had a sufficient connection with Australia such that the employer is a national system employer, the worker referred to factors including corporate structure, business development platforms managed from Australia, and work performed for Australian clients.
Living allowance dispute
The worker provided a copy of a letter from the employer which outlined his remuneration, including a basic salary, living allowance, and visa flight allowance totalling SAR 40,204 per month.
The worker argued that the living allowance should be considered "a location-based compensatory payment, not earnings in the ordinary sense", as it was a living subsidy and not performance-based. He noted that the allowance did not increase his wealth, but rather was a cost offset.
Notwithstanding that the living allowance was paid regardless of actual expenses, the worker submitted that it nevertheless functioned as a cost-of-living adjustment and should therefore be treated as a reimbursement.
The worker argued that the allowance specifically addresses reimbursable costs such as housing, transport and food. He also noted that the employer adjusts the allowance for employees based on their place of residence, and that the employer has discretion to withhold or replace the allowance with employer-provided accommodation or transport.
The worker, therefore, submitted that the living allowance should be excluded from the calculation of his annual rate of earnings.
Similarly, the worker submitted that the visa and flight allowance are a reimbursement for specific travel expenses and should be excluded from the calculation of his earnings.
The worker argued that the non-executive nature of his role is relevant in determining whether his earnings exceed the high-income threshold.
Employer's evidence and position
The employer's people director stated that the employer is incorporated in Saudi Arabia and is not a registered foreign corporation with the Australian Securities and Investments Commission.
It does not engage in trading or financial operations in Australia, maintain an office in Australia or employ any individual in Australia. The employer is owned in a 75% shareholding by an Australian company which carries on a separate business.
The worker was employed under an employment contract executed electronically and physically upon his commencement. He was employed in the role of inside sales manager, performing duties in the employer's offices in Saudi Arabia.
The worker was not required to perform his work from anywhere other than Saudi Arabia, and the employer held no record of the worker travelling to Australia.
The people director agreed that the worker's total monthly remuneration package was SAR 40,204, amounting to SAR 384,448 annually. The worker received the living, visa, and flight allowances in all circumstances, including during periods of paid leave and his notice period. The worker's remuneration was paid into a Saudi Arabian bank account.
Employer's submissions on the national system employer
The employer submitted that the worker's unfair dismissal application ought to be dismissed as he is not a person protected from unfair dismissal because he is not an employee for the purposes of the Act, and his annual rate of earnings exceeded the high income threshold.
On the question of whether it is a national system employer, the employer submitted that for the Act to apply, the employment relationship must be "in and of Australia", and that this was not the case in respect of its employment of the worker.
The employer submitted that the worker's relationship with the employer did not have the requisite link with Australia and was not at any time "in and of Australia".
The employer identified factors, including that it is not a registered foreign corporation, does not carry on business in Australia, the worker is not an Australian citizen, the employment contract was governed by the laws of Saudi Arabia, the worker was paid in Saudi riyal, and all work was undertaken within Saudi Arabia.
The employer submitted that these circumstances are consistent with cases that dealt with employees employed by foreign entities not registered in Australia. The employer referred to a case holding that the employment relationship, not the employer or employee, must have the requisite connection with Australia.
Accordingly, even if the employer has a connection to Australia through its relationship with the parent company and other Australian entities, the employer submitted that this has no bearing on whether the worker's employment relationship had the requisite connection with Australia.
The employer rejected the worker's assertion that it carries on commercial and trading activities within Australia. In relation to the worker's claim that the employer employs Australian citizens, the employer accepted that while this is occasionally true, it does not determine the governing law of the employment contract or relationship.
Employer's submissions on living allowance
The employer submitted that the living allowance was paid to the worker regardless of whether the relevant expense was incurred and was therefore not a "reimbursement".
The employer noted that the living allowance was paid during periods of leave, during the period between the worker leaving Saudi Arabia and the end of the employment, and as part of the worker's contractual compensation for the involuntary termination of his employment.
The employer submitted that the living allowance should be treated in the same manner as the Commission has treated "location allowances" and "job allowances".
The employer referred to cases in which location allowances were determined to be earnings because they were guaranteed payments, the amount of which was known in advance.
The employer submitted that the worker's contract provided that the living allowance was included in his remuneration, which was comprised of his basic monthly salary and the living allowance. In that sense, the allowance was not a separate item in the contract and was instead incorporated into his remuneration.
In accordance with the worker's employment contract, the living allowance was paid "to assist in meeting accommodation, transport and food costs" and "to contribute towards the costs associated with accommodation, transport and food".
The employer submitted that these are personal expenses, and the worker's base salary also would have applied to such expenses. The employer also noted that it was not empowered to vary or cease the living allowance except where it provided temporary accommodation to the worker for a maximum of 30 days.
No sufficient connection with Australia found
The Commissioner noted that a constitutional corporation is one to which the Australian Constitution applies, including foreign corporations. The Act and awards apply to employment relationships rather than simply to particular work, so it is necessary first to identify an appropriate connection linking the employment relationship sufficiently with Australia.
The worker required a visa to perform work in Saudi Arabia. He agreed to perform work in Saudi Arabia, with his employment contract to be governed by the laws of Saudi Arabia.
He was paid in the local currency into his bank account, with relevant deduction of local taxes. He resided in Saudi Arabia and was paid a living allowance to ensure he had adequate accommodation in the locality where he was required to work. The living allowance also provided adequate payment for the worker to travel and to eat, and all personal expenses.
The highest that the worker can contend that his employment has a connection in and of Australia is that he sometimes worked with Australian citizens in Saudi Arabia, did a minority of his work on Australian bids, and his employer's parent company is an Australian company.
The worker and his colleagues performing work in Saudi Arabia for the employer are strangers to Australia, albeit performing some work on some Australian bids. They have no greater connection to Australia than employees in foreign lands sewing products that will then be sold in Australian retail stores.
The worker was not paid in Australian currency, nor would he have been entitled to superannuation, which is paid in Australia to workers performing work in Australia.
He would be unable to nominate in the state or territory jurisdiction where he would have been employed for the purposes of workers' compensation insurance and payroll tax. The Commissioner found that the employer is not a national system employer within the meaning of the Act.
Living allowance is part of earnings
The Commissioner was not satisfied that the worker could demonstrate an appropriate connection linking the employment relationship with Australia. The Commissioner was not satisfied that the employment relationship was "in and of Australia". Accordingly, the jurisdictional objection was upheld, and the application was dismissed.
If it had been necessary to determine if the worker's earnings exceeded the high income threshold, the Commissioner would have had no hesitation in so finding. The living allowance took the worker's monthly earnings to SAR 40,000. At an average exchange rate, this brings the worker's annual earnings to approximately $196,800.
The Commissioner was satisfied that the living allowance was a fixed amount, known in advance and for the benefit of the worker. He could spend all or as little of the allowance as he deemed necessary. It was not a reimbursement for his cost of living, and at no time was he required to produce receipts as to his accommodation and other expenses.
