Bhagwandas and Secretary, Attorney-General's Department
[2021] AATA 3509
•30 September 2021
Bhagwandas and Secretary, Attorney-General's Department [2021] AATA 3509 (30 September 2021)
Division:GENERAL DIVISION
File Number: 2020/6503
Re:Nihal Bhagwandas
APPLICANT
AndSecretary, Attorney-General's Department
RESPONDENT
DECISION
Tribunal:Dr Stewart Fenwick, Senior Member
Date:30 September 2021
Place:Melbourne
The Tribunal sets aside the decision dated 1 September 2020 and remits the matter to the Respondent for reconsideration in accordance with the direction that the Applicant is entitled to an advance in respect of the balance of any commissions outstanding for properties sold in the wages entitlement period.
...[sgd]....................................................................
Dr Stewart Fenwick, Senior Member
Catchwords
FAIR ENTITLEMENTS GUARANTEE – real estate agent – commission payments are wages entitlement – work done in the wages entitlement period – decision under review set aside and remitted
Legislation
Administrative Appeals Tribunal Act 1975
Corporations Act 2001Fair Entitlements Guarantee Act 2012
Cases
Roberts and Secretary, Attorney-General’s Department, Re [2020] AATA 1494
Soueid and Secretary, Department of Employment, Re [2015] AATA 320
Secondary Materials
Explanatory Memorandum, Fair Entitlements Guarantee Bill 2012 (Cth)
REASONS FOR DECISION
Dr Stewart Fenwick, Senior Member
30 September 2021
BACKGROUND
Mr Bhagwandas applied to the Tribunal on 16 October 2020 for review of a decision of a delegate of the Secretary dated 1 September 2020, affirming an earlier decision on 22 May 2020. It had been determined that the Applicant is not eligible for financial assistance in respect of employment entitlements under the Fair Entitlements Guarantee Act 2012 (the Act).
Mr Bhagwandas was employed as a real estate agent, and his employment was terminated on 15 May 2019. His employer, a property development company, went into administration on 30 October 2019. In accordance with his employment contract, Mr Bhagwandas was paid part-commission following the sale of certain properties. In issue is the status of the balance of the commissions which was to be paid upon settlement, where settlement occurred after the developer went into administration.
Mr Bhagwandas lodged a Statement of Facts, Issues and Contentions (SFIC), including several attachments being sales records. At the hearing the following material was admitted: statement of Jack Roberts, dated 3 June 2021, with attachments (Exhibit A1); email from Lauren Collins, dated 27 May 2021 (Exhibit A2); and email of James Cirelli, dated 28 May 2021 (Exhibit A3).
The Secretary lodged a SFIC and documents pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (T documents).
LEGISLATION
Eligibility for an ‘advance’ of financial assistance in respect of employment entitlements arises under s 10 of the Act. The relevant form of employment entitlement here is a wages entitlement (s 5).
Under s 6(6) of the Act, a ‘wages entitlement’ is defined as: ‘the amount of wages the person is entitled to under the governing instrument from the employer for work done … in the wages entitlement period’. Here, this period is the 13 weeks up to the termination of employment (s 5).
For the purposes of the Act, (s 7):
(1)Wages includes the following:
(a)allowances;
(b)loadings;
(c)amounts payable for overtime;
(d)amounts payable at penalty rates;
(e)other amounts that the governing instrument for the relevant employment identifies separately and makes payable regularly.
(2)However, the following are not wages:
(a)discretionary payments (such as bonuses);
(b)reimbursements;
(c)payments of expenses relating to travel or relocation.
(3)Amounts that are payable on an ongoing basis are not wages, unless they are amounts described in subsection (1).
EVIDENCE
The ‘governing instrument’ in this matter is Mr Bhagwandas’s contract of employment (T13). Remuneration is addressed in clause 12, which also makes allowance for payment of Superannuation contributions. Clause 12.5 provides for the payment of a bonus ‘at the discretion of the Employer’, and also the discretionary payment of incentives.
Schedule 1 to the contract specifies as follows:
(a)Allowances – not applicable;
(b)Pay – $45,000 plus superannuation;
(c)Bonus – discretionary up to 10% paid on performance against KPI’s; and
(d)Incentives and Initiatives – ‘Sales made on or after 1st January 2017: 25% of Stellar Residential 2% sales contract commission Where a deposit of 10% is secured against the sale, 50% of the commission will be paid upfront and balance on settlement’.
In his evidence at the hearing Mr Bhagwandas confirmed that he sold properties off-the-plan. He stated that there was a delay between sale and settlement, which could be up to three to four years. Mr Bhagwandas stated that his work continued after sale, and included contract variations, dealing with lawyers and banks, and generally ensuring the purchaser gets what they want.
Mr Bhagwandas stated that he was engaged on a retainer of $45,000, paid fortnightly. This meant that his income was dependent upon commission. He confirmed that he received 50% upfront, on sale, and 50% upon settlement. Mr Bhagwandas explained that his retainer was deducted from commissions paid.
SUBMISSIONS
It was submitted on the Secretary’s behalf that in this matter the commissions could only be considered wages under the Act. It was accepted that the definition in the Act was somewhat at odds with the nature of commission payments. However, it was submitted that the Tribunal has previously found that real estate commissions are wages (citing Soueid and Secretary, Department of Employment, Re [2015] AATA 320 at [8] (Soueid), and Roberts and Secretary, Attorney-General’s Department, Re [2020] AATA 1494 at [100] (Roberts)).
The principle submission for the Secretary was that the outstanding commission payments do not meet the requirements of the Act as the entitlement only arose upon settlement of a property sold. In this case, other than two sales referred to in the Mr Bhagwandas’s materials, the properties in question did not settle during the defined wages entitlement period. The Secretary, again, cited Soueid (at [21]), and Roberts (at [113] and [115]). Given the lack of agreement about the two additional properties identified by Mr Bhagwandas, it was submitted that in the event of a decision adverse to the Secretary, the matter should be remitted for calculation of the appropriate amount.
Mr Bhagwandas’s representative observed that he was not in a position to make submissions on the issue of whether commissions were wages. However, it was noted that real estate agents are dependent upon commissions, and it was submitted that Mr Bhagwandas was not paid a regular wage. Mr Bhagwandas’s SFIC also notes ([12]) that the commission entitlements are recognised by the liquidators of the property developer as priority entitlements, being ‘wages’ pursuant to the Corporations Act 2001.
It was submitted that the industry standard is that commission is payable when a property is sold, which means when a binding offer is made. If a sale fell through, that was only a matter of contract frustration. It was also put in Mr Bhagwandas’s SFIC ([17]) that an employee’s entitlement to a wage arise prior to the actual payment date. Material lodged with the Tribunal was evidence to the effect that commissions were earned upon sale, and indeed it was the practice for commissions to be passed on to former employees ([18]).
CONSIDERATION
The issue in this matter is whether a wages entitlement exists. Despite the agreement of the parties as to the general eligibility of Mr Bhagwandas, I consider it also necessary to first address the question of what constituted the Applicant’s wage.
I do not accept the contention on Mr Bhagwandas’s behalf, that the definition of wage in the Corporations Act 2001 should guide decision-making under the statutory scheme governing this matter.
I am unable to identify in Soueid any sustained reasoning to support the conclusion that the commission payments to a real estate agent met the definition of ‘wage’ in the Act. I note that in Roberts the Tribunal observed (at [100]) that a real estate agent’s commissions were to be treated as wages because they were clearly meant to form part of that Applicant’s regular earnings for work done (referring to s 7 of the Act).
In the case of Mr Bhagwandas, his contract provided for ‘pay’, which also attracted the compulsory Superannuation contribution. The Act specifically excludes from the definition of wages amounts not paid on an ongoing basis, unless they are specified in s 7(1). As seen above, this provision requires the ‘other amount’ to be identified separately, and made payable regularly.
I would need to be satisfied that a percentage commission is to be understood as an identified amount, and also that it was payable regularly. It is not immediately apparent to me that a commission payment is an ‘amount’, as this word implies a specific quantity or value. Besides this issue of variability, it is also not apparent that a payment dependent upon periodic, and unpredictable, sales performance would ordinarily be considered ‘regular’; noting also they are described in the governing instrument as ‘Incentives and Initiatives’.
Documents at T16 contain some relevant material. This includes an email from a former financial controller (T16, p 274) stating that commission payments were paid fortnightly, and that Mr Bhagwandas received a ‘small retainer’. It also includes bank statements between February 2016 and May 2017 (p 292–338). I note that the statements record fortnightly payments of an almost uniform amount, and also payments of other varying amounts. Payslips (T16) record a ‘year to date’ total for ‘base salary’, but appear to consistently record the salary received as $0.00.
Consideration of the entitlements that are not deemed as wages may assist. The Act provides that discretionary payments such as bonuses are not wages, and I note Mr Bhagwandas was entitled to bonuses. One of the less regular payments in the bank statements is labelled a bonus. The Act also identifies reimbursements and expenses as outside the definition of wages. Thus other outgoings related to work are not included.
Further assistance may be found by reference to the manner in which amounts are to be determined under Division 2 of the Act. Section 27(3) provides for a mechanism in the situation where a governing instrument does not specify the amount to be paid. In relation to this, the Explanatory Memorandum to the Fair Entitlements Guarantee Bill 2012 (at [106]) states that this provision would apply to individuals who work under a commission-based pay structure.
I accept that in this case, Mr Bhagwandas’s income consists of two somewhat interchangeable streams. On the basis of the submissions made, given the totality of the evidence, and taking into account wider provisions of the Act referenced above, I consider that it is appropriate to find that commission payments are, in this case, captured within the Act’s definition of wages entitlements.
Returning to the principal issue, is there an entitlement for work done in the wages entitlement period, being the 13 weeks up to 15 May 2019?
It appears to me that both Soueid and Roberts were decided on the particular circumstances applying in those matters respectively. In both decisions it is apparent that the entitlement did not arise until settlement, based on the respective governing instruments (and in Roberts there was a further definitional issue regarding types of sales).
In contrast, in the case of Mr Bhagwandas, the act that initiates the payment of commission is the securing of a deposit. The parties differ about how to treat the balance.
There was an emphasis in Mr Bhagwandas’s case on the work of an agent continuing beyond the signing of a contract. I accept that this is likely the case, particularly in an off-the-plan development. The division of the commission appears to be a logical incentive to ensure sales do not fall through.
Equally, this approach invites some form of assessment of effort against the various relevant contracts, to identify in which instances work was done to earn the balance of the commission. This would be unworkable in practice.
Critically, the governing instrument provides for the sales commission to be derived from the company’s sales contract commission. That is, as the entitlement appears in Mr Bhagwandas’s contract, the commission is paid in two parts, from a sum being 25% of the 2% sales commission obtained by the vendor. As this single commission is the root of the entitlement, I do not consider it appropriate to divide this into two separate entitlements, as the Secretary’s case appears to require.
On this basis, and despite the submissions made on Mr Bhagwandas’s behalf in respect of work done, the proper focus is on the work performed in securing a sale, and so the head sales commission. Accordingly, I find that Mr Bhagwandas is entitled to an advance under the scheme in respect of the balance of any commissions outstanding for properties sold in the wages entitlement period.
DECISION
For the reasons given above, the Tribunal decides to set aside the decision dated 1 September 2020 and remits the matter back for reconsideration in accordance with the direction that the Applicant is entitled to an advance in respect of the balance of any commissions outstanding for properties sold in the wages entitlement period.
I certify that the preceding 32 (thirty -two) paragraphs are a true copy of the reasons for the decision herein of Dr Stewart Fenwick, Senior Member
...[sgd].....................................................................
Associate
Dated: 30 September 2021
Date of hearing: 2 August 2021 Advocate for the Applicant: Mr Stefan Chelper Solicitors for the Applicant: Tisher Liner FC Law Counsel for the Respondent: Mr Stephen Reeves Solicitors for the Respondent: Australian Government Solicitor
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