WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT

PARTIES JANE CHRISTINE CARGILL

CLAIMANT

-v-

RE/MAX HARBOUR CITY REAL ESTATE PTY LTD

FIRST RESPONDENT

 CECILY ROBERTSON

              SECOND RESPONDENT

CORAM iNDUSTRIAL MAGISTRATE PM HOGAN

HEARD wEDNESDAY 7 mAY 2008

DELIVERED tHURSDAY 22 mAY 2008

FILE NO. M 51 OF 2007

CITATION NO. 2008 WAIRC 00355

CatchWords Order for payment of damages; Pre-judgment interest; Imposition of penalties.

Representation 

Applicant Mr G McCorry of Labourline – Industrial and Workplace Relations Consulting appeared as Agent for the claimant

Respondent Ms E Needham (of Counsel) instructed by Sparke Helmore appeared for the respondent

SUPPLEMENTARY REASONS FOR DECISION

INTRODUCTION

1       On 26 February 2008 the Court delivered its reasons for decision regarding the construction of the “undertaking included” Australian Workplace Agreement (“AWA”) effective from 18 March 2006.  A further hearing was conducted on 7 May 2008 to address the issues of damages and penalty.

DAMAGES

2       It is agreed that the amount of unpaid wages is $34,382.02 and the amount of unpaid superannuation is $3,094.38.  However issues arise as to entitlement to annual leave, credit for certain payments made to the claimant and the quantum of any damages arising from the non-payment of superannuation.  The respondents seek credit for the amount of $201.06 already paid to the Westscheme Superannuation Fund and credit for the $4,597.59 paid to the claimant by way of commission.

Annual Leave

3       Counsel for the respondents submits that the claimant was employed on a commission only basis and that under the AWA the claimant was entitled to a minimum wage if her commission earnings did not exceed that minimum wage. 

4       Clause 4.1.2 of the AWA provides:

You agree that if the basis of your remuneration is “commission only” clause 4.1.1 of this AWA will not apply.  That is you agree to opt out of 4.1.1 because you are on “commission only” (see clause 16.3.2(b)(i)(A) of the award).

5       Counsel for the respondents submits that the undertaking incorporated in the AWA guaranteed only the minimum wage applicable, not any other conditions or entitlements.

6       Given the Court’s construction of the undertaking the guarantee contained in the undertaking must be taken as having met the no-disadvantage test, hence enabling the claimant to be employed on a commission only basis.

7       Having been employed on that basis, the Court agrees with the submission that clause 4.1.2 does exclude the claimant from any entitlement to annual leave.

8       The agent for the claimant submits that, as the undertaking guarantees a minimum wage, the claimant was not engaged on a commission only basis.  However the whole point of the undertaking was to satisfy the no-disadvantage test (in relation to the fact that the employer sought to pay the employee on a commission only basis rather than a minimum wage basis).

Credit for Commission Paid

9       The agent for the claimant submits that it is not possible to set off the commission paid against the entitlement to wages and points to clause 13.3(g)(ii) of the Property Sales Award Queensland – State 2005 (“the Award”).  As referred to in the Court’s reasons dated 26 February 2008 that was the Award against which the AWA was assessed.  Clause 13.3(g)(ii) provides:

Commission shall not be offset against paid leave entitlements.

10    This clause of course refers to offset against paid leave entitlements not the minimum rate of pay.

11    The agent for the claimant also refers the Court to James Turner Roofing Pty Ltd v Peters (2003) 83 WAIG 427 where at paragraph 21 Anderson J summarised the principles to be extracted from a number of authorities relating to the manner in which amounts which had been paid to a worker should be credited to the employer’s obligations under an award.  Those principles are as follows:

1. If no more appears than that (a) work was done; (b) the work was covered by an award; (c) a wage was paid for that work; then the whole of the amount paid can be credited against the award entitlement for the work whether it arises as ordinary time, overtime, weekend penalty rates or any other monetary entitlement under the award.

2. However, if the whole or any part of the payment is appropriated by the employer to a particular incident of employment the employer cannot later claim to have that payment applied in satisfaction of his obligation arising under some other incident of the employment.  So a payment made specifically for ordinary time worked cannot be applied in satisfaction of an obligation to make a payment in respect to some other incident of employment such as overtime, holiday pay, clothing or the like even if the payment made for ordinary time was more than the amount due under the award in respect of that ordinary time.

3. Appropriation of a money payment to a particular incident of employment may be express or implied and may be by unilateral act of the employer debtor or by agreement express or implied.

4. A periodic sum paid to an employee as wages is prima facie an appropriation by the employer to all of the wages due for the period whether for ordinary time, overtime, weekend penalty rates or any other monetary entitlement in respect of the time worked.  The sum is not deemed to be referable only to ordinary time worked unless specifically allocated to other obligations arising within the employer/employee relationship.

5. Each case depends on its own facts and is to be resolved according to general principles relating to contracts and to debtors and creditors.

12    Relying on these principles, the agent for the claimant submits that the payment of commission on sales is different to the obligation under the AWA to pay the minimum wage.  Counsel for the respondents submits that the circumstances of this case are very different to those referred to in the authorities considered by Anderson J.  In those cases certain above award payments were sought to be setoff against payments in relation to distinct incidents of employment.

13    The Court notes the observation of Anderson J at point 5.

14    Here the employment was on a commission only basis guaranteed (for the purpose of satisfying the no-disadvantage test) by the payment of a minimum rate of pay.  Clearly if the commissions earned equalled or exceeded 125% of the prescribed rate of pay for the claimant’s Award classification there would be no entitlement to any further income.  It is implicit in the undertaking that, should there be any shortfall between commissions earned and 125% of the prescribed rate of pay then the difference between the two amounts will be paid, not the entire 125%.  The Court agrees with the submission that credit should be given for commission paid.

Superannuation

15    The Court agrees that credit should be given for superannuation paid.  The agent for the claimant submits that further damages should be awarded for loss of earnings on the unpaid superannuation calculated at 19% (being the rate applicable to the Westscheme Fund for the financial year 2006/2007).  Any calculation should be made net of any contributions tax payable.  The Court agrees that to allow any additional amount for interest to date of judgment would amount to “double dipping”.

16    Hence damages are assessed at:

• $29,784.43 (representing the agreed amount of underpaid wages of $34,382.02 less the amount of $4,597.59 paid to the claimant by way of commission) plus interest at 6% to 26 February 2008.  In this regard the Court will hear the parties in relation to the commencement date for the calculation of such interest.

• $2,893.32 (representing the agreed amount of underpaid superannuation of $3,094.38 less the amount of $201.06 already paid to the Claimant’s superannuation fund) plus interest at 19% for the period of 12 months (March 2006 to March 2007) in the sum of $549.73.

PENALTY

17    The Court has a discretion to impose a penalty in relation to breach of a provision of the Workplace Relations Act 1996 (“the WR Act”)  The Court has found that the first respondent has contravened the AWA by failing to pay the claimant 125% of the prescribed rate of pay and that the second respondent was involved in that contravention.

18    The first respondent is an independent franchise of Re/Max Australia.  At the relevant time the second respondent was the owner and sole director of the first respondent.  The second respondent signed the undertaking in her capacity as licensee of the first respondent.

19    The undertaking is dated 7 July 2006.  The Employment Advocate approved the AWA by notice dated 12 July 2006.  It is accepted that the AWA has effect from the date the claimant commenced as a real estate salesperson on 18 March 2006.  The AWA had in fact been agreed between the first respondent and the claimant in February 2006.  At that time the second respondent was one of three directors of the company.

20    There can be no dispute that at the time the AWA was agreed the claimant understood that she was to be paid on a commission only basis.  The claimant has an impressive work history and clearly expected to succeed in real estate.  For reasons that are in dispute (and unnecessary to resolve for the purposes of these proceedings) she did not.

21    It is not entirely clear why the respondents sought to have the claimant enter into an AWA.  The Court assessed the second respondent’s evidence as vague and unreliable.  This assessment applied both to her evidence regarding the introduction of AWAs and her intention at the time of signing the undertaking.  Nevertheless there is no evidence to support a conclusion that the only rational inference that could be drawn from the circumstances is that the reason for having the claimant enter into an AWA was to avoid payment of the Federal Minimum Wage upon introduction of the Work Choices Legislation.

22    The second respondent’s unchallenged evidence was that she had discussed the introduction of AWAs on a commission only basis with the franchise company prior to the introduction of the Work Choices Legislation.  That the franchise company had some involvement in the issue is supported by the fact that Mr Tepper, an industrial relations manager for the Real Estate Employers Federation, was engaged to prepare AWAs.  It was he who sent the email (Exhibit 11) enclosing the undertaking for signature.  That email advised:

1.  This is a standard email to RE/MAX offices in QLD & WA who did AWAs last Feb/Mar.

2.  The Employment Advocate is poised to approve the agreements subject to an undertaking by the employer.  The undertaking is in relation to salespersons who are being paid “commission only” under the AWA.

. . .

4.  Normally you can bargain out of award criteria but for some reason the Employment Advocate is not prepared to allow that on this occasion.

. . .

6.  I need is (sic) your approval to make the undertaking on your behalf and then the Employment Advocate will approve the agreements.

. . .

23    It is relevant to note that the AWA negotiated with the claimant was in a context where it is common in the real estate industry for salespersons to be employed on a commission only basis.  Indeed counsel for the respondents informed the Court that shortly after the claimant ceased her employment the Australian Industrial Relations Commission created a standard for commission only employment in the real estate industry.

24    It is also relevant that the claimant understood the agreement between herself and the first respondent and actually negotiated an amendment to it.

25    Having said that, it must be remembered that the undertaking itself was required to satisfy the Employment Advocate as to the no-disadvantage test.  Until that could be satisfied the AWA could not come into affect.  The Court was unable to accept as reliable the second respondent’s evidence that the second respondent signed the undertaking having evaluated the four alternatives in relation to the claimant.  The Court’s assessment is that the second respondent signed the undertaking without taking care to consider the nature and purpose of the no-disadvantage test.  The distinct impression gained after observing the second respondent under cross-examination was that she signed the undertaking because she was asked to.  The document was poorly drafted.  One would have expected a careful employer to seek clarification as to exactly what was being undertaken and what the implications were for the particular employee.  It is this lack of care that has led to a serious situation whereby the respondents have not complied with their obligations under the Act.

26    The contraventions have led to the claimant being underpaid a significant amount in wages and superannuation.  Although the failure to pay the minimum rate of pay was ongoing it clearly arises out of the same set of facts.  The contravention should be dealt with on a global basis.  Sentencing principles also require that regard be had to the fact that the second respondent is the sole director of the first respondent, was the person who signed the undertaking and appears to have been the person who introduced the requirement that the claimant enter into an AWA.  In such circumstances it is appropriate to apportion between the two respondents the penalty that would have been imposed if there were only one respondent.

27    It is accepted that the first respondent is a franchise business.  It is noted that the second respondent will need to borrow to pay damages and any penalty.

28    Counsel for the respondents submits that whether or not contrition has been demonstrated is irrelevant in the circumstances.  The Court accepts that the respondents were entitled to seek a favourable interpretation of the undertaking.  However it is noted that despite negative observations as to the reliability of the second respondent’s evidence in the Court’s reasons delivered on 26 February 2008, submissions have persisted in terms of the second respondent evaluating the provisions of the undertaking.  Also noted is the lack of appreciation of the consequences of failing to carefully consider the rationale of the no-disadvantage test.

29    The Court understands this to be a one off situation for the respondents.  Despite the observation in the preceding paragraph, specific deterrence is not considered to be of particular relevance.  However the principle of general deterrence is.  The Court has characterised the behaviour of the second respondent in terms of carelessness.  It is a serious matter to fail to take sufficient care in assessing the applicability of an AWA in relation to a particular employee and in particular to fail to take sufficient care to address the requirements of the no-disadvantage test.  The Court considers that in such circumstances a penalty should be imposed.  The penalty needs to take into account the many mitigating factors referred to above including the fact that there is no evidence to indicate that the respondents believed they were not acting in accordance with the law.  It must also be recognised that it is a serious matter, albeit through carelessness rather than a deliberate act, to contravene the provisions of an AWA.  The penalties are set at a penalty of $4,000.00 payable by the first respondent and $1,000.00 payable by the second respondent.

30    Counsel for the respondents submits that the penalty should be paid to the Commonwealth rather than the claimant.  The Court disagrees with this proposition.  As the agent for the claimant submits, one rationale for awarding a claimant any penalty is to encourage workers to bring actions in relation to contraventions.  This is particularly pertinent in a regime that promotes self regulation.

CONCLUSION

31    The Court will now issue a Schedule of Proposed Orders which will be completed with the insertion of the amount for interest in Order 2 following submissions from the parties

PM Hogan

Industrial Magistrate