Kent v Tal & Ors
[2018] FCCA 3218
•9 November 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KENT v TAL & ORS | [2018] FCCA 3218 |
| Catchwords: INDUSTRIAL LAW – SMALL CLAIMS – Storage Service and Wholesale Award 2010 – consideration of proper respondent in the proceedings – consideration of applicable award – unpaid overtime and weekend penalty rates – unpaid annual leave entitlements and annual leave loading – scope of small claims jurisdiction. |
| Legislation: Fair Work Act 2009, ss.90(2), 325, 548 Fair Work Regulations 2009, reg.4.01 General Retail Industry Award 2010 Storage Service and Wholesale Award 2010, cls.12, 22, 24, 26 |
| Cases cited: Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry [2015] FCAFC 99 Textile Clothing and Footwear Union of Australia v Givoni [2002] FCA 1406 |
| Applicant: | NEHA KENT |
| First Respondent: | SHMUEL TAL |
| Second Respondent: | YOSSI ALIA |
| Third Respondent: | T2M FASHION PTY LTD T/AS GOD MADE ME FUNKY |
| File Number: | MLG 2830 of 2017 |
| Judgment of: | Judge Mercuri |
| Hearing date: | 4 June 2018 |
| Date of last submission: | 4 June 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 9 November 2018 |
REPRESENTATION
| Advocate for the applicant: | In person |
| Solicitors for the applicant: | None |
| Advocate for the respondents: | In person |
| Solicitors for the respondents: | None |
ORDERS
T2M Fashion Pty Ltd trading as ‘God Made Me Funky’ be added as the third respondent to these proceedings.
The parties have liberty to apply with respect to order (1) herein within 7 days of these orders and prior to order (3) herein coming into effect.
If no application is made under order (2) above;
(a)within 21 days of the making of these orders, the third respondent pay to the applicant:
(i)the sum of $8,399.49 in lieu of unpaid overtime and weekend penalty rates; and
(ii)the sum of $582.73 in respect of annual leave loading; and
(b)the application against the first and second respondents be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 2830 OF 2017
| NEHA KENT |
Applicant
And
| SHMUEL TAL |
First Respondent
| YOSSI ALIA |
Second Respondent
| T2M FASHION PTY LTD T/AS GOD MADE ME FUNKY |
Third Respondent
REASONS FOR JUDGMENT
Introduction
The applicant seeks orders for payment of various entitlements arising from her employment as an account manager with ‘God Made Me Funky’.
The application was brought in the court’s small claims jurisdiction and, as such, is regulated by the provisions in Division 3 of Part 4.1 of the
Fair Work Act 2009(Cth) (“the FW Act”) and Regulation 4.01 of the
Fair Work Regulations 2009(“FW Regulations”).
Neither party was legally represented although, by leave of the court, the applicant was assisted by her fiancé.
Background
The applicant was employed as an account manager from 11 July 2016. She tendered her resignation from this role by email dated
25 August 2017 with immediate effect. In her letter of resignation, the applicant relevantly stated as follows:
I wish to inform you that I am resigning from my Position at T2M Fashion effective today.
Please consider my accrued annual leave in lieu of my notice.
I request that outstanding monies be paid into my account as per my contract.
The applicant claims that her employment was covered by the
Storage Service and Wholesale Award 2010(“Wholesale Award”) and that:
a)
during her employment, she was regularly required to work more than 38 hours per week and did not receive overtime payments for work performed over and above her ordinary hours
(“overtime claim”);
b)during her employment, she was required to work on various weekends and was not paid penalty rates for weekend work (“weekend penalty claim”);
c)she was not paid her annual leave loading (“loading claim”);
d)she was required to purchase a jacket to the value of $300 from the employer which she did not wish to purchase (“jacket claim”);
e)she was not provided with her accrued annual leave on termination of her employment (“annual leave claim”);
f)
she had two hours of her pay deducted improperly for having arrived late for work when she in fact made up the time
(“unlawful deduction claim”); and
g)she was not paid commission owing to her under her contract of employment (“commission claim”).
The applicant further alleged that:
a)she was not provided with breaks as required by the wholesale award and sought the imposition of a penalty for that breach; and
b)her employer failed to provide her with copies of her employment records (although it is not clear whether she sought the imposition of a penalty for this breach).
Preliminary issues
Before turning to deal with the applicant’s claims, the following preliminary issues arise for determination in this matter, namely:
a)who is the proper respondent to these proceedings?
b)which award applies to the applicant’s employment?
Proper respondent
In her application, response to the question regarding the proper respondent, the applicant has named Mr Shmuel Tal
(“the first respondent”) and Mr Yossi Alia (“the second respondent”) as the respondents to this claim. In her application, she identifies her employer in the following terms:
God Made Me Funky T/A (Partnership) Mr Yossie Alia and Shmuel Tal ABN 96 371 312 356.
The individually named respondents filed a response in which they opposed the orders sought by the applicant. The first respondent also filed a number of affidavits with documents annexed in support of his response and he appeared at the hearing on behalf of the respondents. In his affidavits, he identifies himself as ‘Director, God Made Me Funky’.
As none of the parties were legally represented, no issue was taken as to the identity of the employer in these proceedings; however, it is apparent from the letter of employment tendered in these proceedings that the applicant was employed by T2M Fashion Pty Ltd trading as ‘God Made Me Funky’ (“the employer”). It is also apparent from the evidence given that the first and second respondents are the directing mind and will of the employer.
In the circumstances, I propose making an order adding T2M Fashion Pty Ltd trading as ‘God Made Me Funky’ as the third respondent to these proceedings. As this matter was not raised by or with the parties, I will give the parties liberty to apply to make any submissions on the proposed orders should they wish to do so within 7 days of these orders and prior to the substantive obligations in the final orders coming into effect.
Proper award
The applicant claimed that her employment was regulated by the
Storage Services and Wholesale Award 2010(“Wholesale Award”). The first respondent claimed that the applicant’s employment was subject to the General Retail Industry Award 2010 (“Retail Award”).
Having considered the coverage terms of each of these awards and the evidence given by the first respondent as to the nature of the business in which his company is involved, I am satisfied that the Wholesale Award applies to the work performed by the applicant.
The first respondent gave evidence that the employer is an international fashion distribution business and that the employer’s clients are predominantly fashion store owners. He further deposed to the following:
…we are in a forward ‘indent’ order based business model, meaning we have clients that order from samples items that are yet to be produced. These orders are sent to the relevant brands we distribute and they then collect all the orders globally from other re-sellers and go into production. Once production is complete we are then shipped the clients orders and … we then ship the items to clients.[1]
[1] Annexure 3 of the first respondent’s affidavit sworn 9 May and filed 1 June 2018.
The Wholesale Award applies to the ‘wholesale industry’. The term ‘wholesale’ is defined as “the sale of commodities in large quantities other than to final consumers”. I am satisfied on the basis of the evidence before me that the definition of the word ‘wholesale’ applies to the employer in that it does not supply ‘final consumers’. As such, I find that the Wholesale Award applied to the applicant’s employment at all relevant times.
Applicant’s claims
Overtime claim
As stated above, the applicant says that her employment contract provided that she would work an average of 40 hours per week. She gave oral evidence to the effect that she regularly worked more than 40 hours per week and did not receive any overtime payment as required by the wholesale award.
In response, the first respondent gave the following evidence:
a)the applicant was required to work more than 40 hours per week during two busy periods in the year, which he said occurred generally over August/September and February/March, but at other times, the applicant was given much greater flexibility with her hours and often left work early to attend to personal matters. By way of example, he gave evidence that the applicant had converted to Judaism and therefore had to leave work at about 4:30pm on a number of Wednesdays and Fridays to attend classes and undertake other duties. In addition, the applicant also left early or arrived late if she had a personal appointment such as the dentist or the doctor; and
b)the applicant was paid well in excess of the award entitlement and therefore even if she was entitled to be paid any overtime, this was more than compensated for by the over-award payment she received.
The applicant’s letter of appointment is, to say the least, brief and lacking in detail. The first respondent indicated that he operates a small business, which may explain, to some extent, the lack of detail.
The letter of appointment provided for the following remuneration:
$50,000 plus super plus 1.5% commission on all sales to new and existing clients. Salary to be paid weekly on Fridays. Commission to be paid once clients have paid their accounts and superannuation to be paid quarterly.[2]
[2] Exhibit C.
The first respondent tendered a document in evidence which he says reveals what the applicant was paid during her period of employment.[3] The exhibit shows that the applicant was paid $792.54 net per week from 15 July 2016 and then $855.69 net from 1 May 2017.[4] In her evidence, the applicant conceded that she was paid consistently with the contract.[5]
[3] Exhibit F.
[4] Exhibit F.
[5] Transcript page 9 at line 29.
The applicant’s letter of appointment also provided that her hours of work would be “40 hours per week (on average)”.[6]
[6] Exhibit C.
Clause 22 of the Wholesale Award provides that an employee’s ordinary hours of work will be an average of 38 hours per week spread over a four week period.[7] It also contains a number of other restrictions as to when ordinary hours can be worked, namely:
a)they must be worked between Monday and Friday, unless there has been an agreement reached between the employer and a majority of employees concerned or between the employer and the employee for such hours to be worked on a Saturday or Sunday;[8]
b)an employee cannot work more than 10 ordinary hours per day;[9] and
c)ordinary hours are to be worked between 7:00am and 5:30pm unless otherwise agreed.[10]
[7] Storage Services and Wholesale Award 2010, cl. 22.1(a).
[8] Storage Services and Wholesale Award 2010, cl. 22.1(d).
[9] Storage Services and Wholesale Award 2010, cl. 22.1(c).
[10] Storage Services and Wholesale Award 2010, cl. 22.2(a).
Clause 24.1 then deals with overtime and relevantly provides:
All time worked by an employee in excess of or outside the ordinary hours of work prescribed by this award will be paid at the rate of time and a half for the first two hours and double time after that.
Clause 24.3 provides for an employee to take time off in lieu of overtime but requires that any such agreement be in writing. There is no evidence in this case of any written agreement with respect to the applicant taking time off in lieu of any accrued overtime.
Weekend claim
The applicant claims that she was regularly required to work on weekends but did not receive payment for that weekend work.
Clause 24.5(a) provides:
a)that all work on Saturdays is to be paid at the rate of time and a half; and
b)where an employee is required to work overtime on a Saturday, they are to be provided with at least three hours work (or paid for three hours at the appropriate rate unless that overtime is immediately prior to or at the conclusion of ordinary hours of work).
Similarly, clause 24.5(b) provides:
a)that all work on a Sunday is to be paid at the rate of double time; and
b)where an employee is required to work on a Sunday, they are to be given at least four hours of work (or paid at the appropriate rate for four hours unless that overtime is immediately prior to or at the conclusion of ordinary hours of work).
At the hearing, the applicant tendered two documents setting out the hours that she claimed to have worked between August and October 2016 (“the 2016 period”) and during August 2017 (“the 2017 period”).[11] The applicant therefore claimed an underpayment of $5,216.32 in respect of overtime worked in the 2016 period and $3,183.17 in respect of the 2017 period. These figures include work performed on a weekend and appear to relate to both the overtime claim and the weekend penalty rate claim dealt with below.
[11] See exhibits A and B.
As stated above, clause 24.3 of the Wholesale Award does permit time off in lieu of overtime in circumstances where a written agreement is made between employer and employee. On the evidence before me, there is no such agreement in writing.
I accept the applicant’s evidence that she was in fact required to work overtime as set out in Exhibit A and Exhibit B. I also accept the applicant’s evidence that on occasion, she was required to work on Saturdays and Sundays, as set out in Exhibit A and Exhibit B. There is no dispute between the parties that she was not paid any additional payment in respect of either the overtime or weekend work performed, other than her agreed annual salary.
Moreover, whilst the first respondent gave evidence, which was uncontested and I therefore accept that the applicant did leave work at 4:30pm on a few afternoons to attend to her course, the applicant appears to have worked over 236 hours of overtime. There is insufficient evidence however, to establish that the applicant was permitted time in lieu to compensate for all overtime worked by her.
Legal principles
The issue which arises in considering the claims made by the applicant in respect of both overtime and weekend penalty rates is whether the employer can properly offset any over-award payment made against its obligations to pay overtime and penalty rates as prescribed by the Wholesale Award.
Put simply, the parties’ respective positions are as follows.
The applicant states that in the absence of an ‘offset’ clause in her employment contract, the employer is not entitled to offset any over-award payment against any obligation to pay overtime or weekend penalty rates, or indeed any other monetary sum under the wholesale award.
On the other hand, the first respondent submits that he pays his staff well over the award and that this amount is inclusive of any overtime or other penalty rates which would be payable under the wholesale award. The first respondent pointed to the minimum wage prescribed by the wholesale award ranging from $19.53 to $20.02 per hour depending on the level of experience and stated that the applicant was employed on a rate far above those rates.[12] He deposed to the fact that the applicant was paid more than $10,000 above what she would have received under the Wholesale Award had she received the award rate of pay. He stated that those over-award payments ought to offset any claims she seeks to make for overtime or weekend penalty rates.
[12] Annexure 1 of the first respondent’s affidavit sworn 9 May and filed 1 June 2018.
The applicable law in this area is well settled. In Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry [2015] FCAFC 99 at [39]-[67] and [117] the Full Court of the Federal Court recently reviewed the relevant principles which apply. I do not propose to set that analysis out in detail, but have had regard to it in coming to my decision.
The applicable principles were aptly summarised in Textile Clothing and Footwear Union of Australia v Givoni [2002] FCA 1406 at which Goldberg J said after considering the relevant authorities:
…Where a payment is made to an employee in discharge of an award obligation, which payment is in fact in excess of the amount of the obligation, the amount of the excess cannot be set-off against a claim in respect of a different award obligation unless at the time of the payment of the excess the employer designates that the excess is payable in respect of a purpose of an obligation different from the purpose for which the initial payment is made.
Put shortly, where there is a payment made for, or in respect of, ordinary hours of work which is in excess of the award obligation, the excess cannot be set-off against a claim for underpayment of overtime unless at the time of the payment of the excess, the employer designates that that excess over the amount of the award obligation is paid for the purpose of satisfying any entitlement to overtime payments.[13]
[13] Textile Clothing and Footwear Union of Australia v Givoni [2002] FCA 1406 at [60]-[61].
In this case, the letter of appointment did not make any reference to required overtime nor to any over-award payment being able to set-off against any such overtime payment. Had it done so, the employer may well have been able to point to the over-award component as satisfaction of its obligations in respect of overtime and weekend work. Further, there is no evidence to show that at the time the payments were made, it was made clear to the applicant that she was being compensated for overtime and weekend work.
In the absence of an express term in the employment contract permitting set-off, I find that any over-award payment received by the applicant cannot be set-off against the overtime and weekend penalty rates she is entitled to receive under the Wholesale Award.
I accept the applicant’s claimed hours as outlined in Exhibit A and Exhibit B and therefore find that the employer is required to pay the applicant the sum of $8,399.49 in respect of unpaid overtime and weekend penalty rates, being amounts which the employer was required to pay under the Wholesale Award.
Annual leave and annual leave loading claim
The applicant also claims that she was not paid:
a)her accrued annual leave on termination; and
b)her annual leave loading.
Clause 26.1 of the Wholesale Award stipulates that annual leave is provided for in the National Employment Standards (“NES”). Moreover, it provides that an employer will pay each employee in advance before the commencement of any annual leave “the employee’s ordinary pay for the holiday period together with the applicable loading”.[14] The applicable loading is specified as 17.5%.[15]
[14] Storage Services and Wholesale Award 2010, cl. 26.2.
[15] Storage Services and Wholesale Award 2010, cl. 26.5.
In addition, section 90(2) of the FW Act relevantly provides:
If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
The first respondent conceded that the employer incorrectly failed to pay the applicant’s annual leave loading and agreed to pay that loading.
In relation to the claim for annual leave, the first respondent gave evidence that when the applicant tendered her resignation, she did not give the requisite notice but rather invited the employer to treat her outstanding leave as her notice. Under the NES, she was only required to give two weeks’ notice.
Clause 12.2 of the Wholesale Award relevantly provides:
…If an employee fails to give the required notice the employer may withhold from any monies due to the employee on termination under this award or the NES, an amount not exceeding the amount the employee would have been paid under this award in respect of the period of notice required by this clause less any period of notice actually given by the employee.
I agree that in those circumstances, the employer was entitled to withhold two weeks of the applicant’s annual leave entitlements.
In light of this finding and the concession made by the first respondent in relation to his failure to pay the applicant’s annual leave loading, I find that the employer is required to pay the applicant the sum of $582.73 in respect of annual leave and annual leave loading, being an amount which the employer was required to pay under both the Wholesale Award and the FW Act.
Jacket claim
The applicant claims that she was forced to purchase a jacket from the employer in the sum of $300, being an item of clothing required for her duties as an employee. She says that this was in breach of section 325 of the FW Act.
Section 325 of the FW Act relevantly provides as follows:
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:
(i)the requirement is unreasonable in the circumstances; and
(ii)for a payment – the payment is directly or indirectly for the benefit of the employer or a party related to the employer.
Section 325 is a civil remedy provision.
The applicant’s evidence in relation to this claim is as follows:
a)the applicant stated that she did not wish to purchase the jacket but was forced to do so in cash;
b)
when asked who forced her, she said that it was Mr Tal and
Ms Anna Lee Wild. In response to a question as to what she was told, she said:
They said I had to purchase the jacket because I went – because Mr Tal told me I had to go on the road to find new accounts because they had lost two accounts that day and they told me to wear the jacket and the rule is that if you wear something – if you wear a product outside of the showroom, you have to purchase it.[16]
[16] Transcript page 27 at lines 17 to 20.
The first respondent’s evidence was as follows:
Ms Kent claims that she was forced to buy a… jacket… for the wholesale price of $300. So I said that we never do… things like that because it’s the nature of our business and we don’t care if she does buy or doesn’t but at the same time, on that last couple of weeks that she worked, she did take a pair of shoes that she ordered and she needed to pay $225 for it. She didn’t.[17]
[17] Transcript page 18 at lines 33 to 38.
On the basis of the evidence before me, the applicant has not established, on the balance of probabilities, that she was in fact forced to purchase a jacket to the value of $300 as alleged.
I therefore do not propose to make any orders in relation to the jacket claim.
Unlawful deduction claim
The applicant initially alleged that the employer had unlawfully deducted two hours of her pay for having been late to work one day. She relied upon an email from him that he intended to deduct two hours of pay from her wages.
The first respondent conceded that he sent the email saying that he was going to deduct two hours’ pay from her wages, as she had not attended for work until 12:30pm one day. However, he says that at the end of the day, he did not do so. He produced a payslip for the relevant period, which showed that the applicant was paid her usual weekly wage for that period and no deduction was made.
On this basis, the applicant quite properly, withdrew this claim.
Commission claim
The applicant’s contract of employment provided that she would be paid “1.5% commission on all sales to new and existing clients.”[18] The applicant claims that she has not received commission payments in respect of sales that she contributed to whilst employed.
[18] Exhibit C.
Written submissions put forward on the applicant’s behalf claim that:
…the respondents have failed to provide details of the commission owed to her and she does not have access to sales data enabling her to calculate these commissions. We estimate commission owed to be approximately $10,000.
There is a question as to whether this part of the applicant’s claim can properly be dealt with under the court’s small claims jurisdiction.
Section 548(1)(b) of the FW Act provides that a proceeding may be dealt with as a small claim if the order sought relates to an amount referred to in subsection (1A). It is not entirely clear how the unpaid commission falls within section 548(1A).
In any event, the applicant has not established that she has an entitlement to any commission payment under her contract. The contract refers to payment of commission on all ‘sales’. It also provides that “commission will be paid once clients have paid their accounts”.[19] In my view, the proper interpretation of the applicant’s contract is that commission only becomes payable once the sale has been effected.
[19] Exhibit C.
The first respondent’s evidence was that commission is only payable to existing employees. The applicant states that there is nothing in the contract itself which says that commission is not payable once the employment has ceased.
In addition, the first respondent gave evidence that the employer did not have a written policy dealing with the payment of commissions. However, he said that when employees were engaged, the basis on which commissions were payable was explained to them and it was made clear that they were paid when the company received payment.
I prefer the interpretation to the contract proffered by the first respondent. An employment contract regulates the relationship between an employer and an employee. Once that relationship ends, generally speaking, the terms of the employment contract ceases to apply. The duty of fidelity which an employee owes to his or her employer is one example of an obligation which can survive the end of an employment contract.
There is no provision in the employment contract which specifies that, notwithstanding the employment relationship having come to an end, any sales which were referable, even in part, to work performed by the applicant, would be payable to her. Such a provision also cannot be implied into the employment contract.
Such a term is not necessary to allow the employment contract to have effect. Moreover, such a term would inherently be uncertain.
The applicant has failed to establish to the requisite standard, that the employer owed her any outstanding commission at the date of her resignation. As such, this part of the applicant’s claim fails, even assuming it could properly have been dealt with in the small claims jurisdiction.
Penalty proceedings
The applicant also alleged that she was not provided with breaks as required by the wholesale award and seeks the imposition of a penalty for that breach.
As stated above, certain claims cannot be dealt with under the court’s small claims jurisdiction. A claim for the imposition of a penalty for a breach of a civil penalty provision, is one such claim.[20]
[20] Fair Work Act 2009 (Cth), s 548(1)(a).
General comments
During the course of the hearing, the applicant also raised concerns about the employer’s failure to provide appropriate employment records so that she could properly calculate her entitlements. There is some merit to this concern.
It is for this reason that to the extent that I have found in favour of the applicant’s claims for overtime and underpayment of weekend rates, I have relied upon the applicant’s calculations.
The employer was on notice of the nature of the claims made and had an opportunity, even at this late stage, to provide evidence to support the claims it made about the applicant’s actual hours of work. It did not do so. The applicant ought not be prejudiced in being able to make out her claim because the employer has failed to keep records as required by the FW Act.
Whilst the first respondent provided some evidence of payments made to the applicant during her period of employment, he failed to produce any evidence of the hours worked by the applicant.
Conclusion
For each of these reasons, I make orders in the following terms:
a)T2M Fashion Pty Ltd trading as ‘God Made Me Funky’ be added as the third respondent in these proceedings and the parties have liberty to apply within 7 days of these orders in relation to that addition; and
b)Unless any party seeks to make submissions in relation to the addition of T2M Fashions Pty Ltd within the time permitted:
i)the third respondent is to pay, within 21 days of the date of the orders, to the applicant:
1.the sum of $8,399.49 in respect of unpaid overtime and weekend penalty rates; and
2.the sum of $582.73 in respect of annual leave loading; and
ii)the application against the first and second respondent be dismissed.
I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of Judge Mercuri
Date: 9 November 2018
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