On 29 March 2019 I posted a piece about the doctrine of set off in fair work law. The following extract from a judgement of the Federal Court of Australia on appeal from the Federal Circuit Court of Australia constitutes the second part of the post and should complete an analysis of the elements of the legal concept of set off in this context.
“The next argument advanced by the Corporate Respondents (and Mr Silverbrook and Ms Lee) asserted error on the part of the Federal Circuit Court Judge when calculating the underpayment of wages and other entitlements. The error alleged is the failure to bring to account (for example) an overpayment of wages and entitlements for one period when calculating an underpayment for a different period.
The argument confronts a number of difficulties.
First, there was no analysis on the part of those who advanced this argument as to the circumstances in which compliance with a statutory obligation of an employer to pay wages and entitlements as required by s 323 of the Fair Work Act could be met by payments made at a future point of time by some person or entity other than the employer. Nor was there any analysis as to those circumstances in which a past overpayment could be “set-off” against a statutory requirement to currently pay wages and entitlements.
There is, however, “a body of jurisprudence … which explains how payments made to employees are to be taken into account in claims for amounts due under industrial awards or instruments”: Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate  FCAFC 99 at  to  FCAFC 99; , (2015) 240 FCR 578 at 585 to 595 per North and Bromberg JJ.
Part of that body of jurisprudence supports the conclusion that an over-award payment cannot later be used to offset subsequent underpayments: Lynch v Buckley Sawmills Pty Ltd  FCA 306; (1984) 3 FCR 503. Keely J there accepted as correct (at 509) the following concession that:
… an employer who has paid, by agreement with an employee, an over-award payment cannot later use that over-award payment to offset a subsequent payment of an amount less than that prescribed by the award.
- In the absence of greater assistance being provided, the preferable course is to leave open for future consideration any question as to the relevance of any overpayments in the circumstances of the present case.
- Second, and even if it were to be assumed that it were permissible to set-off overpayments in a period of payment against the periods of non-payment in issue in the present proceedings, further difficulties would be encountered. One of the submissions advanced in support of the argument was that:
… by selecting a time period which is unrepresentative of the employer’s history and conduct, the [Fair Work Ombudsman] is able to paint a picture more prejudicial to the Corporate Respondents than if a financial year or calendar year or employment year were selected.
Even though it may be accepted that the selection of the “time period” may affect the comparison undertaken, it was left unexplained why the Fair Work Ombudsman should have undertaken an audit of a period of time which was not the subject of complaint by the employees and thereafter compare that period to the period when the employees were not in fact being paid. The period of time during which employees of each of the corporate employers remained unpaid was largely uncontroversial.
The submissions with respect to set-off and compensation are rejected.”
FWO v Priority Matters Pty Ltd (2017) FCA 833 delivered 25 July 2017 per Flick J