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Excerpt from this article first published in Human Resources Magazine, Issue 139 - 16 October 2007
The recent case of Mason v Citigroup (NSW District Court) is a timely reminder to corporate employers of the complexities of the WorkChoices amendments to the Workplace Relations Act (“WRA”).
Mr Mason was employed by Citigroup from 2001 until July 2006. His contract stated “You are entitled to annual leave … in accordance with legislation.” On commencement, the relevant legislation was the Annual Holidays Act (NSW) (“AHA") which provides for payment of leave based upon ‘ordinary pay’ (including bonuses and incentives). At termination, the WRA, governed annual leave entitlements. Under the Australian Fair Pay and Conditions Standard (“Standard”), payment for annual leave is based upon the “basic periodic rate of pay” (which does not include bonuses or incentives). Mr Mason’s remuneration included substantial commission - comprising over 80% of his earnings.
On termination, Citigroup paid Mr Mason’s annual leave based on his base salary only. He argued payment should be determined by the AHA, because it continued to apply as a Notional Agreement Preserving a State Award (“NAPSA”). Alternatively, he argued the AHA had been incorporated into the contract by reference.
Judge Toner held the AHA was a State Industrial Law which, prior to the WorkChoices amendments, determined Mr Mason’s entitlement to annual leave, and the AHA therefore became a NAPSA. His Honour found Mr Mason’s entitlement under the AHA was more generous than his entitlement under the Standard - observing that the ‘quantum (duration) of leave’ test in the regulations did not solely determine whether a leave entitlement was more generous. Accordingly, he held payment for Mr Mason’s leave should be made in accordance with the AHA.
JudgeToner also found the AHA had been incorporated into the contract by reference. He noted that, at the time the contract was entered into, the reference to ‘…legislation’ was to the AHA and the parties did not contemplate a dramatic reduction of Mr Mason’s annual leave entitlements as a result of legislative change.
Corporate employers must be aware that state leave legislation may be a NAPSA - whether or not an employee was covered by a state award.
Corporate employers may underpay an employee’s annual leave if payment is made based upon the employee’s base pay and the employee’s entitlement under state legislation is more generous.
Underpayment may result in a penalty in addition to back pay.
Richard Taylor
Special Counsel
