Australia: Employer Unable to “Offset” Penalty Rates and Overtime Payments Against Higher Base Salary
The Federal Circuit Court of Australia has held that an account manager was entitled to overtime and weekend penalty rates despite being paid an annualised salary that exceeded the corresponding minimum rate of pay prescribed under the relevant Award.
In Kent v Tal & Ors [2018] FCCA 3218, an account manager claimed, amongst other things, that her employer, a fashion wholesaler, had failed to pay her overtime payments and penalty rates for work performed on weekends in accordance with the Storage Service and Wholesale Award 2010 (“Modern Award”).
The account manager claimed she was owed approximately $8,400 in respect of these Modern Award-based entitlements.
In the letter of appointment issued to the employee upon commencement, the employer expressed the account manager’s remuneration as follows:
“$50,000 plus super plus 1.5% commission on all sales to new and existing clients. Salary to be paid weekly on Fridays. Commission to be paid once clients have paid their accounts and superannuation to be paid quarterly.”
The letter of appointment also stated the account manager’s hours of work would be:
“40 hours per week (on average)”.
The Court accepted the account manager’s minimum rate of pay under the Modern Award would have amounted to approximately $20 an hour.
Accordingly, the employer submitted it had paid the account manager more than $10,000 more per year than the minimum rates she was entitled to receive under the Modern Award and, further, that her claim for overtime and penalty rates should, therefore, be “offset” against her above-Award rate of pay.
After accepting the account manager had indeed worked overtime and on weekends during the course of her employment, the Court noted the real issue to be determined was whether the employer could “properly offset any over-award payment made against its obligations to pay overtime and penalty rates as prescribed by the Wholesale Award.”
Following a review of the relevant authorities, the Court ultimately held the employer’s letter of appointment did not expressly state the account manager’s weekly salary would be inclusive of her overtime and penalty rate entitlements.
The Court accordingly found:
“… There is no evidence to show that at the time the payments were made, it was made clear to the applicant that she was being compensated for overtime and weekend work.
In the absence of an express term in the employment contract permitting set-off, I find that any over-award payment received by the applicant cannot be set-off against the overtime and weekend penalty rates she is entitled to receive under the Wholesale Award.”
The Federal Circuit Court’s judgment follows the Western Australia Industrial Relations Court’s recent decision in Simone Jade Stewart v Next Residential Pty Ltd [2016] WAIRC 00756.
In Simone Jade Stewart v Next Residential Pty Ltd, the Court similarly held that, in the absence of an express “offset” clause, an employee should not be denied their entitlement to overtime and penalty rate payments, even in circumstances where they received an annualised salary which was higher than the minimum rate payable under an applicable Modern Award.
