In Australian Education Union v State of Victoria
(Department of Education and Early Childhood Development)
 FCA 1196 (6 November 2015), the Federal Court found that the
Department of Education and Early Childhood Development
("DEECD") had breached the Fair Work Act2009 (Cth) ("Act") in deducting more than $20
million from the salaries of more than 40,000 teachers and
principals for laptops used primarily for work.
Factual Background. Between 1 July 2009 and 29
November 2013, the DEECD made fortnightly deductions of between $4
and $17 from the salaries of teachers and principals who
participated in a scheme whereby the DEECD provided the employees
with a laptop. More than 40,000 employees participated in the
scheme, and more than $20 million was deducted from the salaries of
Legal Background. Section 323(1) of the Act
requires an employer to pay its employee amounts payable for the
performance of work in full and in money, except where the
deduction is permitted under section 324(1). Section 324(1) allows
an employer to make deductions in specified circumstances,
including where the deduction is authorised by the employee in
accordance with an enterprise agreement or the deduction is
authorised under state law. Section 325(1) prevents an employer
from requiring an employee to spend amounts payable to the employee
in any way that is "unreasonable in the circumstances".
Additionally, section 326(1) invalidates any term of an enterprise
agreement or employment contract that enables an employer to make a
deduction which is for the benefit of the employer and is
"unreasonable in the circumstances".
The Australian Education Union ("AEU") challenged the
legality of the deductions and sought orders that the amounts
deducted be repaid to the participating employees. The parties had
agreed that the part of the claim relating to a sample group of 11
teachers, as well as a set of common questions, would be determined
at an initial trial, while all other issues raised would be
deferred to a later trial.
Decision. Firstly, Bromberg J held that the
deductions were not permitted under section 324(1) of the Act. His
Honour rejected the DEECD's contention that the deductions were
authorised by the teachers in accordance with their enterprise
agreement which provided for "salary packaging
arrangements". His Honour held that the subject of a salary
packaging arrangement is remuneration earned and its fundamental
feature is the substitution of one form of remuneration for
another. On that basis, his Honour concluded that the because the
laptops were not provided to the teachers as remuneration, it was
not a "salary packaging arrangement" and therefore not
authorised in accordance with the enterprise agreement.
Furthermore, his Honour rejected the contention that the deductions
were authorised under a state law, being a Ministerial Order made
on 19 December 2012 determining that section 324(1) did not apply
retrospectively to a scheme which commenced operation in July
Second, Bromberg J determined that even if the deductions were
authorised under section 324(1), they were inoperative under
section 326(1) on the basis that they were "unreasonable in
the circumstances". His Honour considered the deductions to be
unreasonable because there was a lack of genuine choice regarding
participation in the scheme, the rate of contribution to the cost
was excessive, the deductions were not primarily for the benefit of
the employees and the value of the benefit did not provide any
Although deciding that the deductions were unlawful, Justice
Bromberg's decision on orders to be made in relation to the 11
teachers as well as the disposition of the claims not yet decided
will be determined in a further trial for which a directions
hearing was listed for late November 2015.
Lesson for Employers. This case serves as a
reminder that when making deductions from an employee's
remuneration, employers must carefully consider not only whether
such deductions are authorised under the Act, but also whether the
deductions are reasonable in the circumstances and whether they
impermissibly benefit the employer. Deductions are unlikely to be
deemed reasonable if they are mandatory, excessive or detrimental
to the employee. In the case of employees who are not covered by an
enterprise agreement or award, the deduction must be authorised in
writing by the employee and be principally for the employee's
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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