The Western Australian Industrial Magistrates Court's
decision in Stewart v Next Residential Pty Ltd 
WAIRC 00756 could have significant implications for businesses
across the country. The decision affects employment contracts that
seek to offset allowances employees are entitled to under their
relevant industry award.
Almost every employee is covered by an industry award which, in
conjunction with the Fair Work Act 2009 (Cth), provides
minimum employment wages and conditions. Offsetting is a common
practice used by businesses, whereby employees receive more than
the minimum award wage through an annualised salary, or above award
weekly or hourly payments, in lieu of receiving prescribed award
entitlements. However, unless the employee's contract describes
the offset arrangement required in the award with the required
specificity, businesses will be exposed to claims for underpayment
of award entitlements.
In this decision, the Applicant was seeking $29,000 against her
former employer for non-payment of overtime and lunch breaks, in
line with requirements under the Clerks—Private Sector
Award 2010 (Clerks Award). Prior to the substantive matter
being heard, the Magistrate ruled on whether or not the claim
should be struck out because the Applicant's contract provided
that she be paid an annualised salary instead of award
The employer submitted that the Applicant's contract stated
her salary was "inclusive of any award provisions/entitlements
that may be payable under an award". Clause 17.1(a) of the
Clerks Award permits an employer to pay an annual salary in
satisfaction of allowances, overtime, penalty rates and leave
loading. However, Clause 17.1(b) provides an employer must advise
an employee in writing that they will be paid an annualised salary
and which award provisions will be offset by the annual salary. The
Magistrate found there was no basis to strike out the claim because
the Applicant's contract lacked the specificity required under
Clause 17.1(b) to offset the entitlements claimed.
The substantive matter will now be listed for hearing if
settlement cannot be agreed upon at the upcoming conciliation.
To ensure your business is not exposed to under-award
entitlement claims or an adverse action claim for breach of award
provisions, we recommend:
identifying which of your employees are covered by an award,
auditing those employees' contracts to identify whether the
contracts seek to offset award entitlements and, if so, are
compliant with the award offsetting provisions.
Seek legal advice if you are uncertain about whether your
contracts are compliant with the offsetting provisions or if you
have questions about offsetting entitlements.
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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