The employer must identify and specify the applicable award in
the contract of employment to minimise exposure to successful
Employers often elect to pay their employees an annualised
salary, with the intention of simplifying the employment
relationship and fully satisfying all entitlements the employee may
have under a relevant industrial award.
However, the recent decision of Simone Jade Stewart v Next
Residential Pty Ltd  WAIRC 00756 serves as a stark reminder
to employers that care is needed in drafting employment contracts
to avoid exposure to successful overtime and penalties claims for
What was the case about?
Ms Stewart, an employee of Perth building company Next
Residential Pty Ltd, claimed nearly $30,000 in unpaid overtime from
her employer, alleging that she was made to work through her lunch
breaks and other overtime hours.
Next Residential denied the claim and asserted that all
additional hours she worked were set off by early finishes or late
starts at other times. Further, Next Residential argued that Ms
Stewart was not entitled to the alleged amounts, as her employment
contract contained an annual salary.
Ms Stewart's contract also contained a clause which provided
that her $78,000 annual salary was "inclusive of any award
provisions/entitlement that may be payable under an
However, the Magistrate disagreed, finding that the contract did
not clearly indicate which award it referred to and which award
entitlements were intended to be included in the annual salary.
Magistrate Cicchini stated that it was "obvious" that the
parties were not alert to the applicable award, "let alone the
provisions which were to be included".
The relevant award (Clerks Private Sector Award 2010) provides
for an employer to pay an annualised salary to cover the minimum
wage, overtime, penalty rates and annual leave loading. However,
the award requires that "where an annual salary is paid the
employer must advise the employee in writing of the annual salary
that is payable and which of the provisions of this award will be
satisfied by payment of the annual salary."
Magistrate Cicchini also held that not all award entitlements
are capable of being included in an annual salary, including meal
Employer must be specific
The award provided that if an employee was to be engaged on an
annual salary, that salary must be no less than the employee would
have received under the award. As such, it was found that an
employee must be able to compare their annual salary to the award
to confirm that they are not disadvantaged, and this cannot be done
if it is not clear what entitlements are included in the
The Commission held that Ms Stewart's claim was not excluded
by her employment contract, as the contract was uncertain and did
not clearly indicate that the annual salary included overtime. As a
result, the door is now open for Ms Stewart to proceed with her
What should employers do to avoid a similar claim?
If employers intend to pay an annualised salary in satisfaction
of terms and provisions in a relevant award, the employer must
identify and specify the applicable award in the contract of
employment to minimise exposure to successful underpayment
For the avoidance of any doubt, the relevant employment contract
should also contain a clear clause that specifies which provisions
of the award will be satisfied by the payment of the annual
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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