Wardman v Macquarie Bank Ltd

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FEDERAL COURT OF AUSTRALIA

Wardman v Macquarie Bank Limited [2023] FCAFC 13

Appeals from:

Arundell & Ors v Macquarie Bank Limited [2020] FCCA 2720

Wardman & Ors v Macquarie Bank Limited and Briody & Ors v Macquarie Bank Limited [2020] FCCA 2725

Arundell v Macquarie Bank Limited (No 2) [2020] FCCA 3313

Wardman & Ors v Macquarie Bank Limited(No 2) [2020] FCCA 3317

Briody & Ors v Macquarie Bank (No 2) [2020] FCCA 3318
File numbers: NSD 88 of 2021
NSD 89 of 2021
NSD 90 of 2021
NSD 91 of 2021
NSD 92 of 2021
Judgment of: BROMBERG, WHEELAHAN AND SNADEN JJ
Date of judgment: 17 February 2023
Catchwords:

INDUSTRIAL LAW — appeals and cross-appeals from five related decisions of the Federal Circuit Court of Australia in proceedings brought by former employees of Macquarie Bank Ltd (Bank) — where employees were remunerated by commission and a fixed monthly Basic Cost Responsibility (BCR) payment — where BCR included a fixed monthly payment to each employees — where employees claimed contraventions of the Banking, Finance and Insurance Award 2010 and the NES because they were remunerated by commission only and did not receive any wages or salary — where employees claimed BCR payments were advances on commission only — where primary judge found that Bank did not contravene NES or Award provisions regarding wages or salary, but failed to meet obligations regarding annual leave, public holidays and annual leave loading — whether monthly amounts paid to employees pursuant to contractual obligation to make BCR payments were effective to discharge concurrent statutory entitlements arising by operation of the Fair Work Act 2009 (Cth) — characterisation of agreed purpose of payments under relevant employment agreements — consequences, if any, of failure to engage annual salary or flexibility provisions in Award — whether primary judge erred in assessment of penalties — appeal allowed in part

CONTRACTS — STATUTORY INTERPRETATION — where several employees had entered into deeds of release with the Bank on termination of employment — whether deeds of release were effective to preclude employees from enforcing statutory rights under Fair Work Act — circumstances in which statutory entitlements may be bargained away in reaching a compromise of a dispute — consideration of Grant vJohn Grant & Sons Pty Ltd [1954] HCA 23; 91 CLR 112 and Felton v Mulligan [1971] HCA 39; 124 CLR 367

INTEREST — whether primary judge erred in ordering, without giving reasons, that interest should be calculated from commencement of proceedings rather than when amounts became due and payable

PRACTICE AND PROCEDURE — whether Bank was required, pursuant to Federal Circuit Court Rules 2001 (Cth) or the Federal Court Rules 2011 (Cth) to pay the amounts ordered within 14 days of the date of orders — where both parties conceded primary judge erred — error caused primary judge's assessment of penalty to miscarry

INDUSTRIAL LAW — whether primary judge made other sundry errors in the assessment of penalties
Legislation:

Fair…

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Details
Case
[2023] FCAFC 13
Decision Date

CaseChat Overview and Summary

In the case of Wardman v Macquarie Bank Ltd, the Full Court of the Federal Court of Australia addressed appeals and cross-appeals related to five decisions made by the Federal Circuit Court of Australia. These decisions pertained to the employment of former employees of Macquarie Bank Ltd, who had been remunerated by commission and a fixed monthly Basic Cost Responsibility (BCR) payment. The employees claimed that their remuneration did not constitute wages or salary as defined by the National Employment Standards (NES) and the Banking, Finance and Insurance Award 2010 (Award). They further asserted that the BCR payments were merely advances on commission. The primary judge ruled that the Bank did not contravene the NES or Award provisions concerning wages or salary, but had failed to meet certain obligations related to annual leave, public holidays, and annual leave loading. The court was required to determine whether the monthly payments made to the employees under the BCR arrangement were sufficient to discharge the Bank's concurrent statutory entitlements under the Fair Work Act 2009 (Cth), and to characterise the agreed purpose of these payments as per the relevant employment agreements. Additionally, the court needed to consider the consequences, if any, of the Bank's failure to engage with the annual salary or flexibility provisions in the Award, as well as whether the primary judge had erred in assessing the penalties.

The Full Court found that the primary judge had indeed erred in several respects. Firstly, the court held that the monthly BCR payments were not effective in discharging the Bank's statutory entitlements to pay annual leave, public holidays, and annual leave loading. Secondly, the court allowed the appeal in part regarding the characterisation of the purpose of the BCR payments. It ruled that these payments did not constitute wages or salary under the NES or the Award, and that the Bank had failed to meet certain obligations. Thirdly, the court found that the primary judge had erred in concluding that some of the employees had released the Bank from liability. The court held that the deeds of release were not effective to preclude the employees from enforcing their statutory rights under the Fair Work Act. Finally, the court determined that the primary judge had erred in assessing the penalties and in ordering that interest should be calculated from the commencement of the proceedings rather than when the amounts became due and payable. The Full Court allowed the appeal in part and made orders to give effect to these reasons.

Orders

Orders of the court

1. By 4.00pm on 3 March 2023, the practitioners for the parties are to confer and submit to the Chambers of the members of the Full Court via email proposed draft orders to give effect to these reasons.

2. If the parties are unable to agree on draft orders, then by 4.00pm on 3 March 2023, each party is to file and serve:

(a) proposed draft orders giving effect to these reasons; and

(b) written submissions, not exceeding three pages, in support of their respective proposed orders.

3. Subject to further order, the Court will consider the orders on the papers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Often, the best advocacy is selective and economical: Whisprun v Dixon [2003] HCA 48; 200 ALR 447 at [18] (Gleeson CJ and McHugh J). While each of the employees was the subject of a separate employment agreement, and while the circumstances of all the employees were not identical, it is apparent that the litigation both in the Court below and in this Court took a somewhat global approach where the focus was on some significant issues that were common to the circumstances of the employees. This approach no doubt had cost and efficiency benefits, and focused on the real issues. However, in taking a global approach individual employees may have made some compromises in the way their claims were advanced.Background The employees were employed by the Bank, in the main as “advisers”, although the position titles varied. The duties of the employees included the provision of advice to private clients of the Bank, executing share transactions on behalf of the clients, seeking out new clients, and generating revenue for the Bank as a result of share transactions on behalf of clients and other fees charged to clients for financial products and financial services. The employment of most of the employees began prior to the commencement on 1 January 2010 of the FW Act and the Award. It is not in issue that the employees were employed by the Bank for various periods from 1 January 2010 during which they were covered by the Award. It is also not in issue that the employees were entitled to the benefit of the National Employment Standards under the FW Act. The employees’ claims in the three proceedings were for amounts that were alleged to have accrued in the six year periods prior to the commencement of the proceedings, reflecting the limitation period in s 544 of the FW Act. The commencement dates of the three proceedings varied, and were as follows –(a)the Arundell proceeding – 31 October 2019;(b)the Wardman proceeding – 31 May 2018; and(c)the Briody proceeding – 29 March 2019. Each of the employees was the subject of a contract of employment, the terms of which were contained in documents such as letters of offer and employment agreements. However, the written terms took several different forms. All of the contracts of employment provided for the employees to be remunerated in accordance with a remuneration package that included a commission structure, and a component that was referred to as “Basic Cost Responsibility”, or “BCR”. The Bank claimed that the BCR represented an employee’s total cost of employment, including annual remuneration, superannuation, fringe benefits tax, payroll tax, workers’ compensation insurance premiums, salary continuance insurance premiums, and goods and services tax where applicable. Employees could elect how their remuneration should be packaged. During the relevant employment period of each employee, a fixed component of the BCR package was paid to the employees by 12 equal payments in the middle of each month, with half in advance and half in arrears. The Bank referred to these monthly payments as the “salary component” of the BCR. Pay advices given to the employees identified the payments as “Salaries Normal”. That form of pay advice included a heading rate with a specified hourly amount.

Evidence

Evidence Before The Court

Clauses 25 and 27 provided, respectively, that personal/carer’s leave and public holidays were provided for in the National Employment Standards.The evidence Owing to the number of claims, the written evidence at the hearings before the primary judge was extensive. In all proceedings, evidence was given by affidavit. Each employee made at least one affidavit, and most employees made two affidavits. In relation to issues other than penalty, in the Wardman proceeding 35 affidavits were read to the court below; in the Briody proceeding 43 affidavits were read to the court below; and in the Arundell proceeding 47 affidavits were read to the court below. Several other documents were received into evidence and marked as exhibits. The primary judge made rulings on objections to the affidavit evidence which were recorded in orders that his Honour made in the proceedings. Only one witness, Gamble, who was an applicant in the Arundell proceeding and who is both an appellant and a respondent in the relevant appeals, was cross-examined. Gamble was the subject of a successful cross-claim by the Bank, which established that it had mistakenly overpaid him upon the termination of his employment.

Decision

Reasons for decision

Clause 24.3 of the Award required the Bank to pay a loading of 17.5% during a period of annual leave. For the reasons given by Wheelahan J, the obligations upon the Bank to pay leave loading were not discharged other than in respect of Mr Haslem, Mr Mackenzie and Mr Ryan.Conclusion For those reasons, orders should be made to give effect to the conclusions expressed in the reasons of Wheelahan J at [285]. These five appeals were heard together. The appellants in all appeals challenge decisions of the Federal Circuit Court of Australia (as it was then known) in three proceedings in the Fair Work Division of that Court that were heard by the same judge. Two of the five appeals are brought by 48 former employees of Macquarie Bank Ltd (the Bank) who were applicants in the three proceedings below. The Bank, which was the respondent in the three proceedings below is the appellant in the other three appeals. There are 50 former employees who are respondents to those appeals, who include two former employees who are not among the 48 employee appellants. It is convenient to refer to the former employees as the employees, and without intending any disrespect, to refer to them individually by their surnames. The main questions on appeal concern whether payments made by the Bank to the employees pursuant to their contracts of employment were effective to discharge concurrent statutory obligations arising under the Fair Work Act 2009 (Cth) (FW Act), namely obligations to comply with a modern award, the Banking, Finance and Insurance Award 2010 (the Award), and obligations to comply with the National Employment Standards (NES). The primary judge held that in several respects the payments made to the employees were ineffective to discharge the Bank’s statutory obligations, and made declarations, orders for payment to a number of the employees, and orders imposing civil penalties upon the Bank. The employees challenge the primary judge’s findings in relation to claims of non-payment of Award-based wages that the primary judge rejected. Correspondingly, the Bank challenges the primary judge’s findings of non-payment of statutory entitlements relating to leave, public holidays, and loadings that were adverse to the Bank. There are also a number of ancillary issues raised on the appeals, including whether the primary judge was in error in holding that some of the employees had released the Bank from liability, whether the judge was in error in assessing penalties, whether the judge’s reasons in relation to the calculation of interest were adequate, and whether the judge was in error in making orders for costs against some of the employees on the ground that their claims were brought without reasonable cause.The appeals I will identify the three proceedings below as follows –(a)SYG 2834 of 2019 (the Arundell proceeding);(b)SYG 1540 of 2018 (the Wardman proceeding); and(c)SYG 781 of 2019 (the Briody proceeding). As I have mentioned, there are 48 appellants who were employees of the Bank. The 15 employees who are the appellants in appeal NSD 92 of 2021 were amongst the 21 applicants in the Arundell proceeding in the court below. The Arundell proceeding was the subject of separate consideration of contravention (including liability to pay additional amounts) and penalties: Arundellv Macquarie Bank Ltd [2020] FCCA 2720 (contravention); Arundellv Macquarie Bank Ltd (No 2) [2020] FCCA 3313 (penalties). The hearing relating to the contravention and liability issues in the Arundell proceeding took place on 28 and 30 September 2020, and judgment was given on 2 October 2020.

Ratio Decidendi

Legal Principle Established

Turning then to Mr Marr’s contract. That contract relevantly states (emphasis added):2. Remuneration 2.1 Remuneration Package You will be employed under the Bank's Commission Based Structure. This structure provides a base package (BCR), combined with structured commission payments. Employees remunerated under a Commission Based Structure are not eligible to claim overtime or other penalty rates. 2.2 Base Package (BCR)Under this structure, a base package remunerated under the Bank's Basic Cost Responsibility Plan (BCR) will be treated as an advance on commission. The BCR represents the total cost of employment inclusive of superannuation, fringe benefits tax, payroll tax, and workers compensation insurance. BCR levels are reviewed annually, and effective 1 July. To the extent that an employee does not earn enough commission to cover their base BCR in a given year, they will not be required to repay MBL, for the given year in any subsequent years, however their BCR rate will be revised and may reduce in line with Clause 2.3 below 2.3 Minimum Performance Criteria Individual employees' minimum performance levels will be set in consultation with the Adviser and then reviewed annually to establish levels at which an Adviser must consistently perform.If the adviser does not meet their individual performance criteria as determined in the annual performance review and has not repaid their annual BCR advance, effective the next remuneration year the rate of BCR will reduce. In this instance where BCR was $80,000 per annum, the reduced BCR would be $60,000 per annum. Where BCR was $60,000 the reduced BCR would be $40,000 per annum. BCR would not reduce below $40,000 per annum.Where minimum performance criteria are not achieved formal performance counselling will commence. 2.4 Commission Structure... 2.6 Payment of Commission Commission will be paid quarterly in arrears. All commission payments (as outlined in the Commission Structure) will be applied to the advanced BCR amount for the quarter, until the advanced balance is reduced to zero.The commission year will be specified as the period 1 April in a given year to the following 31 March.Once the BCR advance amount for the quarter has been reduced to zero, the remaining commission balance will be paid in full. Payroll tax and workers compensation charges on commission payable (minus BCR advance) will be borne by the business. Commission payments can not be credited to the individual's BCR entitlement to provide a surplus or rollover for the subsequent year. Commission payments can not be credited to the individual's BCR to increase the base BCR. It appears to me that the terms of cl 2.1 expressly acknowledge that there are two components to Mr Marr’s remuneration – a “base package” being the BCR and secondly remuneration by way of commission payments. There is no reference made to Mr Marr being paid a salary, the word salary is not found at all, but it is clear enough that the Bank is to provide the “base package” by paying to Mr Marr what clause 2.2 describes as his “base BCR”, being the sum paid to Mr Marr which is retained by him irrespective of whether any off-setting commissions are generated.