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unfair dismissal

Are you employing on a Commission Only Basis? Think about whether you are breaching the Fair Work Act

Are you employing on a commission only basis? Or do you have a commission only position.  It could be that you are breaching the Fair Work Act.  The only positions that exist for commission only that I know of is under the Real Estate Industry Award 2010 MA 000106.  This means that unless your position or job is under an Award that allows for commission only, that employment may be in breach and therefore attract penalties not to mention the employee can go back 6 years and attempt to recover any unpaid entitlements from the employer.

What’s the problem if everyone agrees?

It is typical for an employee who is under a lot of pressure to find a job to take the first thing that they are offered.  That employee may be thinking that if it doesn’t work out and they don’t get the money anticipated at least they are working and can look for another job.  Sound familiar?  There are 100 scenarios in which it looks like a good idea at the time for the employer and employee.  Another way that businesses get around this problem is by turning the employee into a contractor.  This has its pitfalls too and you could be entering into a sham contracting arrangement which the ATO will be very interested in.

What’s the down side?

A fairly recent case outlines the pitfalls of taking commission only workers.  This case involved an employer Longridge Group Pty Ltd who was in the business of constructing and selling new residential homes.  The employees were employed to sell those homes on a commission only basis.  The entire matter ended up in the Federal Circuit Court because of, among other things, failure to pay minimum wages and other entitlements, and breaching the Fair Work Act and Award.

The court took a dim view of these breaches and after a lengthy decision and penalised Longridge Group Pty Ltd $29,790 in penalties.  The Court also said that the purpose of the penalties was to deter other from doing this as well as for this specific company doing it again.

What can you learn?

The lesson is simple… don’t employ or be employed on commission only basis unless the specific award allows for it.  Even then the Award will stipulate how that commission is set out and how much.  The penalties are high, it can go back as far as 6 years and for contractors you may be penalised by the ATO if it is found that the contracting arrangement is a sham.

What can you do next?

If you are thinking about employing or being employed on commission only basis give the Fair Work Ombudsman a call and have a chat to them first.  Don’t worry everything remains confidential and as they are there to provide information only you can be certain that they will at least point you in the right direction.

Have a chat to the person who does your payroll, make sure they have up-to-date information on what the rules are.  Finally have a quick word with your accountant, they may be able to steer you in the right direction with regards to sham contracting arrangements.

How can MJT Law help?

We can help you navigate the Awards and the system to make sure you are on the right path and are not leaving your business open to litigation and taxation risks.  Give us a call if you have any questions, we are here to help.

Unfair Dismissal – how to calculate damages

When filling in the Form F2 Unfair Dismissal Application you will be asked a simple but important question “what outcome are you seeking by lodging this application?”.

This is complicated because almost always an ex-employee will be seeking damages but the problem is how much?

Under section 392 of the Fair Work Act 2009 (the Act) states that the maximum amount of compensation that can be awarded is capped at the lessor of either 6 months’ pay or half the high-income threshold.  But what does this really mean.

Section 392(2) of the Act sets out the criteria as:

  1. the effect of the order on the viability of the employer’s enterprise;
  2. the length of the applicant’s service;
  3. the remuneration that the person would have received if the person would not have been dismissed;
  4. the efforts of the applicant to mitigate the loss suffered because of the dismissal;
  5. the amount of remuneration the applicant would have earned from employment or other work during the period between the dismissal and order for compensation;
  6. the amount of income the applicant would have earned between the order for compensation and when the compensation is paid; and
  7. any other relevant matter.

The above is a lot to think about.  To make matters even more complicated there is also a formula developed called The Sprigg Formula which is used to work out the appropriate amount of compensation.  The Sprigg Formula was developed out of a case back in 1998 which is still good law today as proved by a recent decision made on 6 January 2017 following the formula.

The Sprigg Formula is as follows:

  1. estimate the likely amount the applicant would have received if the employment has not been terminated;
  2. deduct any earnings accrued since termination of the employment;
  3. deduct an amount to account for any contingencies;
  4. calculate the impact of any taxation; and
  5. apply the legislative cap.

In Bob Millard v K & S Freighters Pty Ltd t/as K&S Freighters [2017] FWC 105 the above test played out as follows:

  1. notwithstanding past issues of misconduct Millard’s employment would have continued for at least another 6 months = $83,200
  2. Mr Millard found alternative employment on a lower salary and was unemployed for 5 weeks. This was deducted and the figure was reduced to $67,288;
  3. Mr Millard received 3 weeks pay in lieu of notice, this was deduced from the overall figure making it $57,688; and
  4. Mr Millard’s earnings involved overtime which may or may not have continued and the Commissioner deducted 20% for contingencies making the total figure to be $46,151.

When coming to a figure that you will likely receive in a decision is difficult but with some genuine consideration of the situation and using the above as a guide hopefully you will be able to come to a figure that you can put the form and take to a conciliation conference.

If you have any questions about the above or want some help just give me a call.  Remember MJT Law has a fixed fee of $600 to attend the conciliation conference and act as your advocate.

What happens at conciliation stays at conciliation

Once an unfair dismissal application is filed, the Fair Work Commission will then notify the parties (usually the applicant employee and respondent employer) that conciliation is to be conducted.   Generally, a conciliation is conducted over the phone and it is the way the Commission provides an informal method of resolving the unfair dismissal claim.  Conciliation is usually done privately so the discussions don’t go public.

There is no obligation to reach a settlement if you do not want to.  It is the rights of the parties to maintain the position stated in the Application and have the matter proceed to a hearing.  Settlement can be a good way to resolve the matter avoiding further stress and delays.

Any party that is unrepresented is offered a 3-day cooling off period following the conciliation so that they can make a decision whether to opt out of the agreed settlement.

Preparing for conciliation

It is important that you prepare for conciliation, it is important to make sure that the Commission has the right phone number to call and you know the day and time of conciliation.  Consider the following to prepare:

  1. make sure you are available on the day;
  1. set aside a place to have a private conversation as conciliation will take about 45-90 minutes;
  1. make sure you are able to be reached on the telephone you give;
  1. bring all the paperwork you need to participate in the conciliation including your application, any letter of termination and employment contract;
  1. have a good idea as to what you will accept at conciliation in terms of a settlement;
  1. bring a pen and paper to make your own notes during conciliation.

What happens if conciliation is successful

If an agreement is met at conciliation, then the conciliator will prepare an agreement for all parties to sign.  This agreement is usually a deed of settlement and release.  If signed the matter comes to an end and whatever is agreed during conciliation will be in the deed and will make up the entire settlement.

Once it is fully executed the conciliator should provide both parties of a copy of the signed agreement.

What happens if conciliation is not successful

If the parties cannot agree, then the conciliator will consider conciliation to have failed.  Once this occurs the matter will be sent to a formal conference or hearing.  There is still time for the employee to discontinue the application but if this doesn’t happen then a hearing date may be set.

How we can help

There are a number of ways we can help you get the best result from your unfair dismissal application from attending the conciliation with you to running the hearing.  If you want you can get some tips from me.

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