Common Sense Prevails on Use of Common Law Exemption Clauses
You are here:Fair Work Australia recently issues a decision regarding salary exemption clauses that makes us feel a lot more confident about use of salary exemption clauses.
The Full Bench rejected an application by the ASU to vary the Clerks - Private Industry Award to state that annualised salary arrangements may only be entered into by consent of both parties.
In previous articles, we have expressed the concern that a tribunal member would eventually reach the conclusion that the only way to offset overaward payments against award entitlements was via an Individual Flexibility Arrangement (an 'IFA').
The Full Bench commented that "Awards operate in conjunction with contracts of employment. It is generally accepted that clerical employees are commonly remunerated by way of annualised salaries whether the relevant award expressly provides for such arrangements or not. It is also generally accepted that if the salary is expressly paid in compensation of all award entitlements and the amount paid exceeds the amount due under the award then the arrangement is not inconsistent with the award. The intention of the ASU in making its application is that the only arrangements which can legally be entered into are those expressly provided for in the award. "
In rejecting the ASU application, the Commission went on to say, "we are concerned that the variation sought by the ASU may reduce existing flexibility and require changes in practices which have operated for many years. The ASU has not made a case for imposing a limitation on existing arrangements."
ERS Comment - this is a practical, common sense decision by FWA. It would have been a strange result for award modernisation to impose significant inflexibility into the overaward area under a method used by most employersfor many years.
However, it is important for employers to use properly drafted employment contracts to ensure they can offset overaward payments against award entitlements. ERS has a wide range of standard employment contracts which can be accessed via our Online HR Resources Service, or our EPAS - Employer Protection Advisory Service.
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