Set offs Part 1

Set offs Part 1

The legitimacy of set offs is a difficult concept. A set off in this context arises when an employer seeks to rely upon an over award payment to offset the employer’s obligations under a modern award or enterprise agreement to pay other award entitlements. A simple example of this in practice to comprehend is where an employee is paid an annualized salary instead of the award wage plus other award entitlements, for example penalty rates and overtime.
Perhaps self evidently, there are no circumstances in which an over award payment can override an employer’s obligation to comply with non-monetary obligations in a modern award.
There are of course a number of statutory ways in which an employer may vary its need to strictly comply with all of the provisions of a modern award, for example with the use of individual flexibility arrangements and guarantees of high income earnings.
“Awards operate in conjunction with contracts of employment. It is generally accepted that clerical employees are commonly remunerated by way of annualised salaries whether the relevant award expressly provides for such arrangements or not. It is also generally accepted that if the salary is expressly paid in compensation of all award entitlements and the amount paid exceeds the amount due under the award then the arrangement is not inconsistent with the award. The intention of the ASU in making its application is that the only arrangements which can legally be entered into are those expressly provided for in the award”……Clerks – Private Sector Award 2010 (AM2009/185) Fair Work Australia [2010] FWAFB 969.

Additionally, some modern awards even expressly adopt the practice.

For example sub-clause 3.1.8(3) of the Wine Industry (WA) Award 2005 provides that

“Time Off Instead of Payment For Overtime
(a) The employer and the employee may agree to take time off instead of payment for overtime at
a time or times mutuallyagreed. The agreement must be in writing and recorded in the time and
wages record at the time when the agreement is made.
(b) If an employee takes time off instead of payment for overtime then one hour may be taken as
time off for each hour of overtime worked.
(9) Flat Rate Payments
(a) An employer and employee may agree in writing to the payment of one single ”

“2.2 The monetary obligations imposed on employers by this award may be absorbed into overaward payments. Nothing in this award requires an employer to maintain or increase any overaward payment.”

Sub-clause 22.5 of the Wine Industry (Modern) Award 2020 provides

22.5 Time off instead of payment for overtime

(a) An employee and employer may agree in writing to the employee taking time off instead of being paid for a particular amount of overtime that has been worked by the employee.

(b) Any amount of overtime that has been worked by an employee in a particular pay period and that is to be taken as time off instead of the employee being paid for it must be the subject of a separate agreement under clause 22.5.

(c) An agreement must state each of the following:

(i) the number of overtime hours to which it applies and when those hours were worked;

(ii) that the employer and employee agree that the employee may take time off instead of being paid for the overtime;

(iii) that, if the employee requests at any time, the employer must pay the employee, for overtime covered by the agreement but not taken as time off, at the overtime rate applicable to the overtime when worked;

(iv) that any payment mentioned in clause 22.5(c)(iii) must be made in the next pay period following the request.

NOTE: An example of the type of agreement required by clause 22.5 is set out at Schedule F—Agreement for Time Off Instead of Payment for Overtime. There is no requirement to use the form of agreement set out at Schedule F—Agreement for Time Off Instead of Payment for Overtime. An agreement under clause 22.5 can also be made by an exchange of emails between the employee and employer, or by other electronic means.

(d) The period of time off that an employee is entitled to take is the same as the number of overtime hours worked.

EXAMPLE: By making an agreement under clause 22.5 an employee who worked 2 overtime hours is entitled to 2 hours’ time off.

(e) Time off must be taken:

(i) within the period of 6 months after the overtime is worked; and

(ii) at a time or times within that period of 6 months agreed by the employee and employer.

(f) If the employee requests at any time, to be paid for overtime covered by an agreement under clause 22.5 but not taken as time off, the employer must pay the employee for the overtime, in the next pay period following the request, at the overtime rate applicable to the overtime when worked.

(g) If time off for overtime that has been worked is not taken within the period of 6 months mentioned in clause 22.5(e), the employer must pay the employee for the overtime, in the next pay period following those 6 months, at the overtime rate applicable to the overtime when worked.

(h) The employer must keep a copy of any agreement under clause 22.5 as an employee record.

(i) An employer must not exert undue influence or undue pressure on an employee in relation to a decision by the employee to make, or not make, an agreement to take time off instead of payment for overtime.

(j) An employee may, under section 65 of the Act, request to take time off, at a time or times specified in the request or to be subsequently agreed by the employer and the employee, instead of being paid for overtime worked by the employee. If the employer agrees to the request then clause 22.5 will apply, including the requirement for separate written agreements under clause 22.5(b) for overtime that has been worked.

NOTE: If an employee makes a request under section 65 of the Act for a change in working arrangements, the employer may only refuse that request on reasonable business grounds (see section 65(5) of the Act).

(k) If, on the termination of the employee’s employment, time off for overtime worked by the employee to which clause 22.5 applies has not been taken, the employer must pay the employee for the overtime at the overtime rate applicable to the overtime when worked.

NOTE: Under section 345(1) of the Act, a person must not knowingly or recklessly make a false or misleading representation about the workplace rights of another person under clause 22.5.

 

What however are the technical requirements for a set off to be lawful and effective? I will deal with this issue in the next several days.