The Australian Workers Union (claimant) brought proceedings in the Industrial Magistrates Court of Western Australia (Court) on behalf of a former employee, alleging that his employer (the respondent) unlawfully deducted money from his wages, therefore failing to pay him in full in relation to the performance of work as required under s 323(1) of the Fair Work Act 2009 (Cth) (the Act).

The deduction arose due to the employee being paid an incorrect allowance, resulting in an overpayment of approximately $1,195.50. Upon identifying the error, the respondent recovered the overpayment by deducting $597.75 from the employee’s wages over two fortnightly pay periods.

The claimant alleged that the deductions breached the Act because the employee had not authorised the deductions in writing nor had the deductions been for the employee’s benefit. The claimant sought orders requiring the respondent to repay the deducted amount, together with interest and a civil penalty. 

The respondent accepted that the overpayment had occurred and that the deductions were made. However, it argued that the deductions were lawful because the employee’s employment contract contained a term allowing the recovery of overpayments, or alternatively, because the applicable industry award permitted deductions. It also relied on a telephone conversation in which the employee was advised of the overpayment and did not object to the proposed repayment arrangement.

The Court found that while the employment contract contained a general provision allowing the recovery of overpayments, this did not satisfy the requirements of the Act. The legislation requires an employee’s written authorisation of particular deductions, and the employee had not signed or otherwise provided written authorisation for the deductions that were made. The Court also found that the deductions were principally for the benefit of the respondent, as they enabled it to recover its own money without needing to commence separate legal proceedings. For substantially the same reasons, the Court rejected the respondent’s reliance on the industry award, finding that any deduction authorised by the award was ineffective because the deductions were for the respondent’s benefit and were not reasonable in the circumstances.

Having found that the deductions were not authorised under the Act, the Court concluded that the respondent had failed to pay the employee in full for work performed during the relevant pay periods, amounting to a contravention of the Act. The Court ordered the respondent to repay the employee the full amount deducted, being $1,195.50, and to pay a further $105.92 in interest. The claimant’s claim for a civil penalty was not determined as part of this decision, with the issue of a penalty to be dealt with at a later hearing. 

The full decision can be read here.