Restrictions on employers asking employees to contribute to costs

 

Employers should be very wary of requiring employees to contribute financially to any aspect of employment.

“Obligation to pay amounts payable – s 323

  1. Section 323 of the FW Act imposes obligations upon employers in respect of the payment of employee entitlements, such as wages. It provides:

323 Method and frequency of payment

(1)          An employer must pay  an employee amounts payable to the employee in relation to the performance of work:

(a)          in full (except as provided by section 324); and

(b)          in money by one, or a combination, of the methods referred to in subsection (2); and

(c)          at least monthly.

Note 1:     This subsection is a civil remedy provision (see Part 4-1).

Note 2:      Amounts referred to in this subsection include the following if they become payable during a relevant period:

(a)          incentive-based payments and bonuses;

(b)          loadings;

(c)          monetary allowances;

(d)          overtime or penalty rates;

(e)          leave payments.

(2)       The methods are as follows:

(a)          cash;

(b)          cheque, money order, postal order or similar order, payable to the employee;

(c)          the use of an electronic funds transfer system to credit an account held by the employee;

(d)          a method authorised under a modern award or an enterprise agreement.

(3)          Despite paragraph (1)(b), if a modern award or an enterprise agreement specifies a particular method by which the money must be paid, then the employer must pay the money by that method.

Note:    This subsection is a civil remedy provision (see Part 4-1).

  1. The section imposes an obligation upon the employer to pay any amount or amounts payable to an employee. Each entitlement, whether as to wages, overtime, or leave loading, will give rise to a separate contravention of s 323 where it is not paid: Stratton Finance Pty Limited v Webb (2014) 314 ALR 166; [2014] FCAFC 110 at [47] (Allsop CJ, Siopsis and Flick JJ).
  1. As the High Court (Crennan, Kiefel, Bell, Gageler and Keane JJ) observed in Construction Forestry Mining and Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619; [2013] HCA 36 at [45], the section (and others in the Division) address the same mischief as that addressed by the “Truck Acts” — the prospect that an employer may attempt to satisfy its obligations to pay wages by making payments in kind.

Unreasonable requirement by employer that employee pay or spend money – s 325

  1. From the commencement of the employment of Mr Basi and Mr Haider by Namitha Nakul, until 15 September 2017, s 325 provided:

325 Unreasonable requirements to spend amount

(1)          An employer must not directly or indirectly require an employee to spend any part of an amount payable to the employee in relation to the performance of work if the requirement is unreasonable in the circumstances.

Note:    This subsection is a civil remedy provision (see Part 4-1).

(2)          The regulations may prescribe circumstances in which a requirement referred to in subsection (1) is or is not reasonable

  1. In Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) (2015) 239 FCR 461; [2015] FCA 1196 (AEU), Bromberg J proceeded on the basis, without deciding, that the reference to “spend” in s 325 was capable of having application to monies deducted from wages or salary, noting that the section refers to amounts “payable” to an employee: see [340]-[341].
  1. Since 15 September 2017, s 325 has (relevantly) provided as follows:

325 Unreasonable requirements to spend or pay amount

(1)          An employer must not directly or indirectly require an employee to spend, or pay to the employer or another person, an amount of the employee’s money or the whole or any part of an amount payable to the employee in relation to the performance of work, if:

(a)          the requirement is unreasonable in the circumstances; and

(b)          for a payment–the payment is directly or indirectly for the benefit of the employer or a party related to the employer.

Note:    This subsection is a civil remedy provision (see Part 4-1).

(2)          The regulations may prescribe circumstances in which a requirement referred to in subsection (1) or (1A) is or is not reasonable.

  1. Justice Bromberg considered the question of unreasonableness in AEU, which involved a deduction by the employer from teachers’ wages for the provision of laptop computers. In that judgment, his Honour said, as to the question of what was “unreasonable”:
  1. The Explanatory Memorandum to the FW Bill provided the following examples of requirements which may be reasonable or unreasonable:
  2. For example, it is likely to be unreasonable for an employer to require an employee to donate a proportion of his or her pay to a charitable or religious organisation nominated by the employer. It may be reasonable, however, for an employer to require an employee who is a tradesperson to purchase tools required to perform his or her duties (unless the employer is otherwise required to provide those tools).
  3. I agree with the approach taken by both the AEU and DEECD, that “unreasonable in the circumstances” was likely to have been intended to have the same meaning in s 325(1) as in s 326(1)(c)(ii). For the same reasons that I found the deductions were “unreasonable in the circumstances” when determining the s 326(1)(c)(ii) question, I would find that the requirements made by DEECD of the Group 11 teachers to spend parts of the amounts payable to them in relation to their performance of work were “unreasonable in the circumstances”. In summary:

(i)          the spending required occurred in the absence of genuine choice;

(ii)         the rate of spending was set at an excessive rate of contribution;

(iii)        the deductions made were not principally for the benefit of the Group 11 teachers; and

(iv)         the value of the benefits actually received by them did not provide a countervailing justification.

  1. The Explanatory Memorandum to the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (which introduced the amendment to s 325) provided examples of circumstances where it would be unreasonable for an employer to receive an employee’s money, including the practice of paying employees the ostensibly lawful rate and then coercing payments back in cash in exchange for not terminating employment or in order to undercut minimum entitlements and compelling an employee to spend their money in a manner which involves undue influence, duress or coercion.
  1. In Ahmed v Al-Hussain Pty Ltd t/as The Cheesecake Shop (No 2) [2019] FCA 670 (Cheesecake Shop) at [72], Rares J found that a cash payback arrangement constituted a contravention of s 325.”

 

Extracts from Basi v Namitha Nakul Pty Ltd [2022] FCA 712 delivered 21 June 2022 per Halley J