Issue (4): Set-off of payments in some fortnights against payments in other fortnights
112 Given the conditionality of Issue (4) it must be addressed on the assumption that there has been no agreement to an average annualised wage for the purposes of cl 20 of the enterprise agreements and therefore each of the Selected Employees was required to be paid according to the ordinary wages method based upon actual hours worked in each payment fortnight.
113 The parties agree that if the total of all the payments made in the relevant period (16 October 2016 to 22 October 2017) are taken into account, then the Selected Employees were paid amounts in excess of the total amount payable according to the ordinary wages method over the whole period. However, the Union says that the Selected Employees are entitled to claim additional amounts for each of those fortnights where payment according to the actual hours worked would result in a greater payment in that fortnight to that which was actually made by the Authority in relation to that fortnight (whilst still retaining the higher payments made in those other fortnights where payment according to the actual hours worked in that fortnight would have produced a lower payment). That is to say, the Union claims that the employees covered by the enterprise agreements can take the best of two different worlds.
114 The claim advanced by the Union if there had been no agreement to an average annualised wage involved a number of steps. First, if there was no such agreement the ordinary wages method applied. So much can be accepted. Second, the ordinary wages method required fortnightly payments for hours actually worked in the fortnight. So much can also be accepted. Third, there were fortnights in which the amounts paid to each of the Selected Employees were less than the amount required to be paid in that fortnight if that amount is required to be determined according to the ordinary wages method. So much is admitted by the Authority. Finally, it was said that the set-off claim advanced by the Authority was to the effect that payments made in one fortnight that were specifically attributed to satisfying obligations in one pay period can be later reallocated by the employer to satisfy obligations in a different pay period. This was said to be impermissible because the payments in the different fortnights had been made to discharge different obligations. For the reasons which follow, it is this final proposition concerning the character of the fortnightly payments that must be rejected.
115 Even if (contrary to the conclusions I have reached) the fortnightly payments were not paid pursuant to an agreement that required payment according to the average annualised wage approach, that does not mean that the fortnightly payments actually made by the Authority were paid specifically for satisfying obligations performed in a fortnightly period. They were still payments that were made in respect of an agreed annual salary amount which was to be paid fortnightly. A salary amount paid by fixed regular payments, but determined as a total amount to be paid each year to undertake the contracted employment on an agreed rostering arrangement is not referable only to the work done in the period preceding the interval for each payment. Rather, those payments, if made fortnightly, are one twenty-sixth of the annual amount to which each employee is entitled based upon working on terms that include a specified rostering arrangement. As has been explained, it is a rostering arrangement which means that in any fortnight the hours required to work may vary considerably. However, the fortnightly payments do not fluctuate according to the hours worked in the fortnightly pay period. They are the same irrespective of the work that is done in the pay period.
116 By reason of the agreed rostering arrangements, the work to be done in each fortnight is not the same. Therefore, the annual salary paid according to the terms of the contract of employment for each of the Selected Employees is not paid on the basis that it is specifically attributable to work done in the fortnight to which the pay period relates. In some fortnights it will relate in part to work done in other fortnights.
117 Therefore, in every fortnight where the amount paid is greater than an amount which would have been paid according to hours worked, the difference (or surplus) is an amount that is paid in respect of work to be undertaken in those other fortnights where the amount which would have been paid according to the hours worked would be less than the fortnightly payment of the annual salary.
118 The principles to be applied when a set-off claim of the kind advanced by the Authority in the present case is made in respect of the discharge of obligations under an award were considered by Wheelahan J in Wardman v Macquarie Bank Limited [2023] FCAFC 13 at [126]-[131] (Snaden J agreeing at [290]). For present purposes they may be assumed to apply equally to amounts said to be required to be paid by the terms of an enterprise agreement that covers the circumstances of a particular employee.
119 As explained in Wardman, the term 'set-off' is applied in such cases to describe the extent to which a payment made in discharge of a contractual obligation can be brought to account in determining whether the payment may be treated as discharging a concurrent statutory obligation when calculating the amount properly due to an employee: at [128]. It requires regard to the objective contractual intent in respect of the relevant contractual payment that is said to discharge the statutory obligation (as discerned from the contractual terms as properly construed). Each case will turn upon its particular facts: Wardman at [130]. The factual question concerns the proper attribution of the payment, that is to say the identification of the nature of the liability that the payment discharged or to which it related. So, part or all of a payment which, as a matter of fact, is to be attributed to ordinary hours worked could not discharge a different type of statutory obligation such as the payment of a weekly allowance.
120 In the present case, the issue is whether the fortnightly payments made to discharge agreed annual remuneration might be said to discharge the obligation to remunerate the employees according to the ordinary wages method (an obligation which requires payment of an amount calculated by reference to the hours actually worked in each fortnight).
121 As has been explained, the character of the contractual payments actually made was to remunerate the employee for the work undertaken according to a particular rostering arrangement. The contractual payments were not properly viewed as payments for work done in the payment fortnight. Rather, the fortnightly contractual payments actually made by the Authority were intended to remunerate the employee for the hours worked according to a roster which would cause the hours worked in any fortnight to fluctuate. In those circumstances, the purpose or character of the fortnightly contractual payments actually made to each of the Selected Employees was to remunerate the employee for working the hours required by the rostering arrangement. It follows that, the fortnightly payments actually made under the contracts of employment were not confined to payment for work done in the payment fortnight. Rather, there were unders and overs as to payment for the work done.
122 Therefore, it is not correct in the circumstances of the present case to attribute the fortnightly payments made under the terms of the contract to payment for work done in the payment fortnight. Once those payments are properly attributed, it is clear that in the fortnights in which there was more work done, the contractual payment was insufficient payment for that work. Further in those fortnights when less work was done, the contractual payment was partly attributable to the work done in that fortnight and partly attributable to work done when there was insufficient payment. It follows that the contractual payments made in each fortnight are properly attributable to the obligation under the enterprise agreements to pay for work done according to hours worked according to the applicable roster.
123 Indeed, as has been explained, the way in which the average annualised wage is calculated is to ensure that it covers the entirety of the obligation to pay the employee the amounts due to the employee if payments were made based upon the hours worked in each fortnight (with the added benefit of superannuation contributions on overtime worked as part of the usual rostering arrangement). So much is apparent from the express terms of cl 20 of the enterprise agreements, particularly cl 20(b) which requires the average annualised wage to incorporate the amounts to be paid for hours worked (including regular or averaged overtime), allowances and applicable shift penalties. That is to say, there is an express correspondence between payment for hours worked as rostered and payment of the average annualised wage.
124 The Union placed reliance upon the reasoning of Goldberg J in Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd [2002] FCA 1406. In that case, the employees had worked 60 hours a week under agreed arrangements. There was evidence that the arrangements had been entered into 'for the purpose of giving the employees a specific continuous level of remuneration by evening out the peaks and troughs which had occurred hitherto': at [63]. However, on the findings made, in entering into those arrangements neither the employees nor the representative of the employer had turned their minds to the issue of award entitlements to overtime: at [64]. In those circumstances, Goldberg J concluded that none of the payments that had been made according to the arrangements made could be designated as having been made to discharge overtime entitlements. Therefore, they could not be said to be payments allocated in any way to meeting that liability.
125 In consequence, the case considered by Goldberg J was very different to the present case where, as has been explained, the average annualised wage was itself determined as an amount that would cover the entitlements of an employee according to the ordinary wages method. Here, there was a direct and expressly intended correspondence between the entitlements according to the two methods.
126 The above distinction must be borne in mind when considering what was decided by Goldberg J in Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd. His Honour considered whether over-award payments in some weeks should be set-off against under-award payments in other weeks when compared to payments actually made under the agreed arrangements for the 60 hour week. Based upon weekly calculations of all award entitlements for each week compared to payments actually made under the agreed arrangements, there were some weeks in which the calculations showed under-award payment and some which were over-award. The employer claimed that there should be a set-off as between the weeks. The union claimed that the employees were entitled to claim the under-award week amounts without making any adjustment for the over-award weeks. After a review of the authorities, Goldberg J concluded (at [60]-[61]):
These authorities make it clear that 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 or 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.
(emphasis added)
127 As has been explained, the present case is not one in which the payments have not been designated to meet the relevant entitlements. The calculation of the average annualised wage was undertaken to include all of the entitlements under the ordinary wages approach and then convert them to an amount to be paid equally over the course of employment such that the entitlements are the same (with the additional superannuation). This was common ground. In those circumstances, the reasoning in Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd must be distinguished.
128 The Union also sought to rely upon the express provisions as to errors in payment as a reason why there could not be a set-off. The provision has already been quoted and is repeated here for ease of reference:
Any error in an employee's pay shall be adjusted as soon as practicable following advice of the error. In the case of hardship every effort shall be made to ensure adjustments are made without delay.
Adjustments to overpayments will not be made without consultation with the employee involved.
129 Reliance upon the above provision misconceives the nature of the 'set-off'. It is not a claim by the Authority that there has been any error in payment. Rather, it is a claim that the discharge of the contractual obligation by making the fortnightly payments also discharged the concurrent obligation under the enterprise agreements to pay the Selected Employees for hours worked. As has been explained, that claim has been made out.
130 Finally, the Union advanced a pleading point in respect of the set-off claim made by the Authority. It claimed that the Authority had admitted that the sum of money paid each fortnight was for work performed in the fortnight identified in the payslip. In particular, it said that there was an admission as to the temporal purpose of the fortnightly payments such that it could not be concluded that any part of a payment made in one fortnight related to hours of work in a different fortnight. Even if there was found to be no formal admission to that effect, it was claimed that the terms of the payslips showed that to be the case.
131 As to the pleading point, the allegation made by the Union was that in each fortnight, each employee 'was paid a sum of money by [the Authority] for work performed in that fortnight'. The allegation in those terms was admitted. It was submitted for the Authority that the admission reflected the general terms in which the plea was cast. It was an admission only that 'a sum of money' for work in the fortnight was paid not that the whole of the amount paid in each fortnight related to work done in the fortnight. Indeed, given the nature of the dispute between the parties, an admission that the whole of the amount paid related to work done in that fortnight would be fundamentally inconsistent with the whole basis for the dispute, namely that the payments made were a form of equalised payment that was the same in each fortnight irrespective of the work undertaken in the fortnight. When there is regard to the nature of the dispute, the admission would be fundamentally inconsistent with the way in which the parties have joined issue, particularly the premise upon which the issues were formulated by the parties. The position of the Authority was made clear in later pleas in which it alleged, as to the amounts claimed in respect of particular employees that 'there was a close correlation between the purpose of the payments [made in the fortnights of alleged underpayment] and the purpose of the payments made [in each and every fortnight]'. The pleading point is entirely without merit.
132 As to the pay slips, they each identified a fortnightly pay period. However, they also differentiated between 'normal time' and other payments such as overtime worked in addition to rostered overtime, annual leave or allowances. It is common ground that normal time is determined on the basis of the average annualised wage. It does not fluctuate with the hours actually worked. Therefore, I do not accept that the terms of the pay slips describe payments for work performed in the fortnight. Rather, they include normal time. The question is whether normal time payments correlate only to payment for work undertaken in the fortnight for the 'pay period'. For reasons that have been given, they do not.
133 Therefore, if the Union had succeeded as to Issue (2) it would not have succeeded as to its claim because, for the above reasons, the set-off claim made by the Authority must be upheld.