Western Australian Industrial Relations Commission

Final rate of pay applies to the whole annual leave balance

Commissioner Matthews upheld an employee’s claim for annual leave as a contractual entitlement. 

Before the claimant was employed by the respondent, he was employed by a company of which he was a director and the controlling mind. The claimant accrued annual leave while working for the company.  In November 2015 the company was sold to the respondent.  As part of the sale the respondent offered employment to the claimant.  If the offer of employment was accepted the claimant’s accrued annual leave balance would be transferred and the business’ sale price would be reduced accordingly.

The claimant accepted the offer of employment with the respondent.

The value of the annual leave balance was calculated according to the rate the seller (being the company of which the claimant was a director) said it paid its employee (being the claimant) with that rate being calculated as $40 per hour. The sale price was reduced on that basis.   

When the claimant’s employment with the respondent ended the claimant’s hourly rate was over $60. 

When the employment ended, the respondent paid out the employee’s annual leave partly at $40 per hour and partly at $60 per hour.  The employee said, according to his contract of employment with the respondent, the whole leave balance should be paid out at the higher rate.  The employer said that as a matter of fairness, the higher rate should not be applied to the whole balance because if it was, the respondent would have paid too much for the business.  The respondent also argued that this employee’s annual leave was a statutory entitlement, not a contractual entitlement. 

The Commission found that the employee’s annual leave entitlement was a contractual entitlement, and that ‘any untaken annual leave’ would be paid out at the final rate of pay regardless of the source of the leave.  Commissioner Matthews found the Commission did not have jurisdiction to deal with the respondent’s argument that the business was overpriced if the higher rate applied to the whole annual leave balance.  That argument lacked any ingredient of industrial relations and therefore was not within the Commission’s jurisdiction. 

The Commission ordered the respondent pay the employee $23,760.22 less tax. 

The decision can be read here.

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