How one missed detail cost $30,000

By Andrew Hobbs on December 6th, 2017
  1. Employee Management
  2. Employment Contracts


EMPLOYERS should be warned that a catch-all provision in your employment contracts won’t necessarily cover everything, as one company found out to the cost of almost $30,000.

In Simone Jade Stewart v Next Residential Pty Ltd (2016), an administrative co-ordinator took her employer to court the day after she had been let go, saying she was owed another $28,984 in overtime and lunch breaks.

The company disputed the claim, saying the worker had accepted a higher annualised salary in lieu of the overtime, as was allowed under the Clerks – Private Sector Award 2010.

The Award permits a “set-off provision,” which allows companies to pay a higher salary, which takes the place of other entitlements like overtime and penalty rates.

In the award, the clause states that the employer “must advise the employee in writing of the annual salary that is payable and which of the provisions of [the] award will be satisfied by payment of the annual salary”.

The devil’s in the detail

In other words, the Clerks Award required the contract to spell out which entitlements would be given up for the higher salary package.

By contrast, the company contract said only “(y)our salary is inclusive of any award provisions/entitlements that may be payable under an award”.

The Western Australian Industrial Magistrates Court (WAIMC) found that this was not good enough – and as a result, it found in favour of the co-ordinator and allowed her to pursue her underpayment claim.

What this means for you

While this decision is not necessarily binding on other courts, it does indicate that there is a risk with the practice of using set-off provisions to cover all entitlements.

As a result of this decision, you should review your employment contracts to:

  • check whether there is a relevant award that applies to your employees;
  • check the specific entitlements under that award that can be set off by providing an annual salary; and
  • amend and reissue employment contracts where this is not clear, or send out a letter to employees clarifying this.

The specific award entitlements should be included as a minimum and be as specific as possible.

Where to from here?

Chapter E1 Employment Contracts in the Employment Law Practical Handbook outlines a number of the conditions that you should consider when drafting an employment contract when an award is involved.

Aside from outlining what entitlements an over-award payment is designed to cover, the contract should cover the employee’s classification under the award, a guarantee of earnings, any stand down provisions and the specified working hours.

With two template contracts and a series of case studies to consider, the chapter is a valuable guide for any employer looking to navigate this complex field.

Order your copy of the Employment Law Practical Handbook today on a 14-day obligation-free trial to get access to this information, and much more.


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