In two recent decisions, FWC members have chosen to prefer the ruling of a Federal Court judge over their own Full Bench, by seeking undertakings to alter terms that relate to ‘pre-paying’ leave entitlements.
In the first decision (BM & KA Group as trustee for BM & KA Group Unit Trust AG2013/4567), Commissioner Cribb refused to approve an agreement application which contained a provision that allowed employees to be paid a loading that compensated them for paid annual and personal leave. The clause operated in such a fashion that employees received a loaded rate and accrued entitlements to leave which could be taken, however the leave period itself would be unpaid.
The Company’s representative reasoned that the clause did not breach the National Employment Standards (NES) as it did not ‘cash out’ leave entitlements, as employees under the agreement would still be entitled to take their leave entitlement, it would just be unpaid.
The Company contested that the agreement should be approved as the clause was not materially different to the clause approved in an ‘on point’ majority decision of the Full Bench of the Commission in the Hull-Moody case.
The Commissioner preferred to follow the decision of Justice Gray in the Jeld Wen case – which found that pre-payment and unpaid leave entitlements where not the same as paid leave entitlements under the Fair Work Act 2009 (the Act). Not providing paid annual and personal leave was viewed as a contravention of the Act.
The Company had the opportunity to provide undertakings to modify the clause.
In a very similar decision (Fortress Systems Pty Ltd AG2013/6481) Commissioner Ryan also found that pre-paying leave, in this case by way of a ‘loaded’ salary, did not meet the requirements of the Act. It was Ryan C’s view that a loaded salary which pre-pays leave entitlements is not incidental, ancillary or supplementary to paid leave entitlements, as it directly alters the paid leave provisions altogether. Ryan C preferred to follow the authority of Justice Gray’s Jeld Wen [4] decision, going as far as to say he believed “…the majority in Hull-Moody made a simple but fundamental error of statutory interpretation.”.
Lessons for Employers - Advertorial
It is critical that employers seek assistance with their enterprise bargaining to avoid technical contraventions of the Act or relying too heavily on FWC precedents for approval.
We are highly experienced in having our clients' agreements approved before the FWC. Call us on 02 8907 3838 for expert advice and assistance.
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