2022 WAIRC 00156
CONTRACTUAL BENEFIT CLAIM
WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2022 WAIRC 00156

CORAM
: COMMISSIONER T B WALKINGTON

HEARD
:
WEDNESDAY, 9 JUNE 2021

DELIVERED : THURSDAY, 14 APRIL 2022

FILE NO. : B 119 OF 2020

BETWEEN
:
DANIEL WEGENER
Applicant

AND

THE TRUSTEE FOR COTTESLOE HOTEL TRUST & THE TRUSTEE FOR RICHMOND EQUITY FUND
Respondent

CatchWords : Contractual Benefits – contractual terms – entitlements under contract – stand down – usefully employed – job keeper enabling directions – variation of contract
Legislation : Fair Work Act 2009 (Cth)
Industrial Relations Act 1979 (WA)
Result : Order issued
REPRESENTATION:

APPLICANT : MR D WEGENER
RESPONDENT : MR R JONES (AS AGENT)

Case(s) referred to in reasons:
Ainsworth v Albrecht (2016) 261 CLR 167
Benge v Bluescope Steel (AIS) Pty Ltd (No 2) [2020] FCCA 515
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Cantor Fitzgerald International v Callaghan [1999] 2 All ER 411
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Vodafone Network Pty Ltd [2001] AIRC 1189
Construction, Forestry, Mining and Energy Union (CFMEU) v BHP Coal Pty Ltd (2016) 262 IR 176; [2016] FCA 1009
Hotcopper Australia Ltd v David Saab [2001] WAIRC 03827;(2001) 81 WAIG 2704
Landsheer v Morris Corporation (WA) Pty Ltd [2014] WASCA 186
Landsheer v Morris Corporation (WA) Pty Ltd [2014] WAIRC 00034
Nathan Bradley v Binder Group Pty Ltd [2016] WAIRC 00731
Re Carpenters and Joiners Award (1971) 17 FLR 330
Rigby v Ferodo Ltd [1987] IRLR 516; [1988] ICR 29
Sean Craig v University of Western Australia [2021] WAIRC 00093

Reasons for Decision
1 Mr Daniel Wegener claims his former employer, The Trustee for Cottesloe Hotel Trust & the Trustee for Richmond Equity Fund (trading as the Cottesloe Beach Hotel) denied him payment of $9,427.96 in salary being a benefit of his contract of employment. Mr Wegener asserts that the Cottesloe Beach Hotel (CBH) unilaterally reduced his salary by 20% for the period 6 May 2020 to 12 October 2020. Mr Wegener contends he did not agree to the reduction in salary and the reduction was not permitted under the terms of his employment contract.
2 CBH oppose Mr Wegener’s claim and say he was lawfully stood down under the terms of his employment contract and the Fair Work Act 2009 (Cth) (FW Act). CBH also contend that Mr Wegener agreed to a reduction in his salary.
3 Mr Wegener seeks an order for the payment of $9,427.96 being the remuneration under his contract of employment which was denied him by CBH.
Background
4 Mr Wegener gave evidence on his own behalf and Mr Garry Gosatti gave evidence on behalf of the CBH.
5 Mr Wegener commenced employment with CBH in August 2019 as a General Manager.
6 As a result of measures enacted by the State Government to limit the spread of COVID-19, the CBH closed its operations on 23 March 2020. That morning Mr Wegener received a notice from CBH stating that from midday he would be stood down in accordance with s 524 of the FW Act and the terms of his contract of employment.
7 Despite this notice Mr Wegener continued to work and undertook a range of tasks including management of staff during the remainder of March and throughout April. During this period, Mr Wegener was paid at full pay rates.
8 On 27 April 2020, Mr Garry Gosatti telephoned Mr Wegener and informed him that his hours would be reduced, and his salary would be reduced by 20%.
9 On 29 April 2020 Mr Gosatti emailed Mr Wegener informing him that:
· His salary would be reduced by 20% to $88,000 per year during the JobKeeper period.
· His working days would be 3 days per week or approximately 22 hours per week during the initial phase. The hours would be assessed when the easing of business restrictions was clearer or when the opportunity arose;
· He was tasked with overseeing the rollout and completion of agreed tasks utilising core staff who are part of the JobKeeper programme;
· He was responsible for the allocation of tasks to staff best suited and reporting back weekly on the progress and completion including rotating staff on rosters; and
· Activities at the venue be concentrated into particular workdays and it was suggested these be Tuesday, Wednesday and Thursday.
10 From 6 May 2020 to 12 October 2020 Mr Wegener’s salary payment was reduced by 20%.
11 The hotel remained closed until 13 June 2020 and gradually returned to full operations by October 2020.
12 On 30 June 2020 Mr Gosatti emailed two employees concerned with payroll operations notifying that Mr Wegener was now full time at 80% salary.
13 On 6 October 2020, Mr Wegener notified that he resigned from his employment effective on 2 November 2020.
14 From 13 October 2020 Mr Wegener’s salary was fully restored for the remainder of the time he was employed with CBH.
15 In this matter it is not contested that the contract of employment provided for a salary of $110,000:
9. SALARY
The Employee will receive a salary of $110,000.00 per annum payable on a weekly basis into the Employee's bank account nominated in writing by the Employee. No part of this salary is subject to any additional monies including penalties, shift allowances and the like.

Annual salary reviews do not automatically result in an increase to the Employee's salary.

The Employee acknowledges and agrees that in the event the Employee becomes entitled to any amounts pursuant to any Award or Statutory Entitlements the Company may apply and offset all or part of the base salary in full or part satisfaction of those amounts.

16 It is also not contested that Clause 18 of the contract of employment authorised the employer to stand down Mr Wegener in the circumstances set out in the clause:
18. STAND DOWN
Any strike or other industrial action or through a breakdown in machinery or any stoppage of work for which the Employee cannot be usefully employed and for which the Company cannot reasonably be held responsible may result in the Employee not being paid for that period of time. However, the Company will exercise its discretion in such a case and it is more likely that a period of time unpaid will only occur if the situation continues for one week (seven days) or more. The Employee may also be required to take available annual leave during such a period.
17 CBH contends that the stand down provisions of s 524 of the FW Act and the stand down provisions in the employment contract provided the authority to reduce Mr Wegener’s salary. CBH also submit that the authority to reduce Mr Wegener’s salary was consistent with the JobKeeper scheme. In the alternate CBH contend that Mr Wegener agreed to vary his contract to reduce his salary.
18 Mr Wegener claims that the terms of his contract do not provide the necessary authority for the reduction of his salary and that he did not agree to the variation of his contract to affect the reduction in his salary. Mr Wegener asserts that neither s 524 nor the JobKeeper Enabling Stand Down Directions authorised the reduction in his salary.
Questions to be Determined
19 The first question to be determined is did the contract of employment between Mr Wegener and CBH provide CBH the authority to reduce Mr Wegener’s salary.
20 If the answer to this question is no, the second question to be determined is did s 524 of the FW Act provide CBH the authority to reduce Mr Wegener’s salary despite the terms of the contract of employment.
21 If the answer to this question is no, the third question to be determined is did the JobKeeper Enabling Directions permit CBH to reduce Mr Wegener’s salary despite the terms of the contract of employment.
22 If the answer to that question is no, then the fourth question to determine is whether Mr Wegener agreed to vary the contract of employment to reduce his salary.
Denied Contractual Benefits – General Principles
23 In Hotcopper Australia Ltd v David Saab [2001] WAIRC 03827; (2001) 81 WAIG 2704 Sharkey P set out the principles to be applied in matters concerning claims that a benefit under a contract has been denied [34]:
The limitations (and/or conditions precedent to the exercise of jurisdiction and/or power) include the following —
(a) The claim must relate to an “industrial matter”, as defined in s.7 of the Act.
(b) The claim must be made by an “employee”, as defined in s.7 of the Act.
(c) The benefit claimed must be a contractual benefit, i.e. the claimant must be entitled to the claim under his/her contract of service.
(d) The subject contract must be a contract of service.
(e) The benefit must not arise under an award or order of the Commission.
(f) The benefit must have been denied by the employer.
The Commission’s task in such matters is to discover and enforce the relevant contract of employment.
24 I find that the benefits claimed relate to an industrial matter as defined by s 7 of the Industrial Relations Act 1979 (WA) (IR Act) and they arise under the applicant’s employment contract. I find that Mr Wegener was an employee, and his claim relates to industrial matters.
25 I find that the contract of employment provided for an entitlement to a salary of $110,000 which is a benefit. A reduction in salary is a denial of a benefit unless such a reduction is permitted or authorised by the terms of the contract, permitted, or authorised by a law that applies to the contract of employment or permitted or authorised by a lawful variation to the terms of the contract.
Stand Down Under the Terms of the Contract of Employment
26 CBH submit that Mr Wegener was employed under a written contract of employment. Clause 18 of the contract provides the authority for Mr Wegener to be stood down in the circumstances experienced at that time. That is, CBH was not able to operate and conduct its usual business activities because of a directive of the State Government to cease their activities. It is contended by CBH that clause 18 provides the necessary authority to reduce Mr Wegener’s salary.
27 Mr Wegener denies that he was stood down because he continued to undertake tasks as directed. Mr Wegener says that he was informed of an intention to stand him down, however this was not affected. Mr Wegener submits that in circumstances where he continued to work, his employer did not have the necessary authority to withhold all or a proportion of his salary. Mr Wegener contends that the contract term concerning stand downs, clause 18, does not provide authority to reduce salary. That is, the clause correctly understood, provides that in circumstances where an employee is not required to undertake any work and does not undertake any work, the employee is not to be paid at all.
28 Mr Wegener contends that in the circumstances that existed CBH did not have the authority to stand him down and could not withhold his salary. Further, that if he was stood down in accordance with clause 18 of his contract, this did not authorise CBH to reduce his salary.
Principles of the Interpretation of the Contract and the Stand Down Term
29 In this matter I need to construe the term of the contract concerning the parties’ agreement that CBH can stand down Mr Wegener in the circumstances set out in the relevant term of the contract, clause 18. The central issue is whether the circumstances were met and the action was in accordance with the relevant clause.
30 The interpretation of a contract is to be approached objectively in accordance with the ordinary and natural meaning of the words used in it, in the view of a reasonable person in the position of the parties. The Court of Appeal (WA) sets out the principles in Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42]:
(1) The process of construction is objective. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean.
(2) The construction of a contract involves determination of the meaning of the words of the contract by reference to its text, context and purpose.
31 The Full Court of the Federal Court considered the text ‘usefully employed’ in Re Carpenters and Joiners Award (1971) 17 FLR 330, 334:
It cannot be said that an employee cannot be usefully employed on a particular day if there is a day’s work available for him which, if performed on that day, will, having regard to the probable course of the employer’s business, contribute beneficially to the reasonable and efficient conduct thereof.
32 Clause 18 of Mr Wegener’s employment contract authorises CBH to stand down Mr Wegener in circumstances that he could not be usefully employed because of a stoppage of work.
33 The words of the clause given their ordinary meaning clearly enable CBH to not pay Mr Wegener when he is stood down because he cannot be usefully employed. The clause states that an employee may not be paid for that period, being the period of time for which the employee cannot be usefully employed.
34 It is not contested that Mr Wegener continued to undertake tasks as directed. The evidence is that, despite the notice to stand down, given on 23 March 2020, CBH required Mr Wegener to continue to work by attending to tasks involving the hotel and undertake tasks concerning the management of the hotel staff.
35 That is, evidently CBH was able to obtain some benefit or value from the work that Mr Wegener performed and like the Re Carpenters and Joiners case which considered the same language as that used in Mr Wegener’s contract of employment, it cannot be said that he was not usefully employed. I find Mr Wegener was not stood down in accordance with his contract of employment by the notice given on 23 March 2020.
36 The CBH assert that in May 2020 the number of hours worked by Mr Wegener was reduced from 38 hours to 22 hours and the reduction in pay reflects the reduced hours.
37 In Landsheer v Morris Corporation (WA) Pty Ltd [2014] WAIRC 00034, the Full Bench found that where a salary is expressed as an annual rate calculated as pay for each week there was no scope to imply a term on grounds of fact of a right to ‘reasonable remuneration for each hour of work’ [48]. In Landsheer, the employee was required to increase the hours worked each shift from 10 hours to 12 hours per day. The Full Bench confirmed the first instance decision, that the employee’s contract did not provide for an increase of two hours pay per shift because the rate of pay in the contract was expressed as an all up annual rate. The Industrial Appeal Court confirmed the determination of the Full Bench in Landsheer v Morris Corporation (WA) Pty Ltd [2014] WASCA 186.
38 In Landsheer, the issue concerned an increase in hours and whether the terms of the contract provided for a commensurate increase in remuneration. In this matter the number of hours was reduced, however the principle that where the contract provides for an annual rate regardless of the hours worked a variation in hours does not result in a change in remuneration applies.
39 Under the terms of Mr Wegener’s contract, the salary is expressed as an annual rate, setting out that the employee is required to work at least 38 hours and on weekends or public holidays. The terms do not contain a reference to an hourly rate. I find that Mr Wegener’s contract provided for an all up annual rate of $110,000.
40 Therefore, consistent with Landsheer a reduction in hours does not result in a reduction in the salary entitlement under the contract. I find the terms of the contract did not authorise CBH to reduce Mr Wegener’s pay in the circumstances of a reduction in hours of work.
Stand Down Under s 524 of the Fair Work Act 2009 (Cth)
41 The respondent additionally contends that Mr Wegener was lawfully stood down in accordance with s 524 of the FW Act.
42 Mr Wegener asserts that he was not stood down under s 524. Mr Wegener says despite being given written notice on 23 March 2020 that he was to be stood down under s 524 from midday on the same day, the stand down was not affected, and he continued to work and continued to receive full pay until 5 May 2020.
The Principles of Stand Downs under s 524 of the Fair Work Act 2009 (Cth)
43 Section 524 of the FW Act provides the authority for an employer to stand down employees in certain circumstances:
524 Employer may stand down employees in certain circumstances
(1) An employer may, under this subsection, stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances:
(a) industrial action (other than industrial action organised or engaged in by the employer);
(b) a breakdown of machinery or equipment, if the employer cannot reasonably be held responsible for the breakdown;
(c) a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
(2) However, an employer may not stand down an employee under subsection (1) during a period in which the employee cannot usefully be employed because of a circumstance referred to in that subsection if:
(a) an enterprise agreement, or a contract of employment, applies to the employer and the employee; and
(b) the agreement or contract provides for the employer to stand down the employee during that period if the employee cannot usefully be employed during that period because of that circumstance.
Note 1 If an employer may not stand down an employee under subsection (1), the employer may be able to stand down the employee in accordance with the enterprise agreement or the contract of employment.
Note 2 An enterprise agreement or a contract of employment may also include terms that impose additional requirements that an employer must meet before standing down an employee (for example requirements relating to consultation or notice).
(3) If an employer stands down an employee during a period under subsection (1), the employer is not required to make payments to the employee for that period.
Was the Stand Down Permitted by s 524 of the Fair Work Act?
44 Importantly s 524(2) of the FW Act modifies the power under subsection (1). That is, where a contract of employment applies to the employer and employee and the contract provides for the employer to stand down the employee, the employer cannot rely on s 524 to stand the employee down. The terms of the contract are the source of the entitlements to stand down. The respondent cannot rely on s 524 of the FW Act because the contract of employment provides for stand down.
45 Section 524(2)(b) stipulates that where an employment contract provides for an employer to stand down an employee because the employee cannot usefully be employed, then the power to stand down under s 524(1)(c) cannot be relied upon. The terms of the contract of employment are the source of the employer’s authority to stand down.
46 I find that CBH cannot rely on s 524 to permit it to stand down Mr Wegener because Mr Wegener’s contract of employment provides for a stand down in similar circumstances to that set out in s 524 and therefore, s 524(2)(b) provides that the term of the employment contract is the source of authority that permits stand downs.
Stand Down Under JobKeeper Enabling Directions
47 CBH contend that Mr Wegener was stood down for two days per week from 29 April 2020 and refer to the arrangements under the Commonwealth Government’s JobKeeper Scheme to authorise a reduction in salary by 20%.
48 On 29 April 2020 Mr Gosatti emailed Mr Wegener stating that during the JobKeeper period, his salary would be reduced by 20% to $88,000. Mr Wegener would be required to work three days per week for approximately 22 hours (57% of the full-time hours) and was tasked with duties to oversee the rollout and completion of agreed tasks utilising the core staff who are part of the JobKeeper programme. Subsequently as restrictions on peoples’ movements were reduced, Mr Wegener would be tasked with planning the work for re-opening and those tasks were outlined in an email from Mr Wegener to Mr Gosatti. CBH assert that some staff were not required to work at all, and others were engaged on reduced hours and duties. In its submissions, CBH refers to the stand down of staff being a direction to staff under JobKeeper arrangements. Given this, the question of whether the JobKeeper arrangements provided the necessary authority for CBH to reduce Mr Wegener’s salary ought to be considered.
49 The now repealed section 789GDC of the FW Act provided the authority for an employer who qualifies for the JobKeeper scheme to give a direction, a JobKeeper Enabling Stand Down Direction, to an employee to not work on a day or days on which the employee would usually work or work for a lesser period than the period which the employee would ordinarily work on a particular day or days or work a reduced number of hours compared with the employee’s ordinary hours of work.
50 The JobKeeper Enabling Stand Down Direction included a wage condition and stand down directions enabling an employer to reduce the hours of work provided the hourly rate is not reduced. Where the terms of the contract or instrument provides for an annual salary, the now repealed, ss 789GDB and 789GDB(4) provided for a formula to be applied to determine an hourly rate of pay for employees to which a modern award or enterprise agreement applied.
51 To be authorised, and therefore valid, under the FW Act, the JobKeeper Enabling Stand Down Direction for a period must meet all of the following specific requirements:
· Be a direction issued after the commencement of Part 6-4C.
· Be a direction for either a partial stand down on reduced days or hours, or a full stand down to work no hours.
· The Employer is qualified for the jobkeeper payment scheme when the direction is given.
· The Employee cannot be usefully employed for their normal days or hours during the JobKeeper enabling stand down period because of changes to the Employer's business attributable to the 2019 novel coronavirus disease pandemic or government initiatives to slow its transmission.
· Be a direction implemented safely both generally, and specifically having regard to the nature and spread of COVID-19.
· The Employer must be entitled to one or more JobKeeper payments for the employee for all or part of the JobKeeper enabling stand down period, or for periods that, when considered together, form all or part of the JobKeeper enabling stand down period.
52 These requirements apply in addition to, and interact with, the common requirements for all JobKeeper enabling directions.
53 Section 789GL(1) required that a direction will have no effect unless the employer has information before the employer that lead the employer to reasonably believe that the direction is necessary to continue the employment of one or more employees of the employer.
54 The now repealed s 789GM created notification and consultation obligations on employers prior to the issuance of a direction:
· The employer must give written notice of their intention to give a direction.
· The notice must be given at least three days before the direction is given, or where the employee genuinely agrees to a lesser.
· Before the direction is given, as distinct from the notice of intention to give the direction, the employer must consult the employee or their representative about the direction.
· A written record of the consultation must be kept.
55 Consultation does not confer a right of veto; however, the consultation should be genuine and should not be limited to perfunctory advice on what is to happen. Construction, Forestry, Mining and Energy Union (CFMEU) v BHP Coal Pty Ltd (2016) 262 IR 176; [2016] FCA 1009 at [23] [59] [60]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Vodafone Network Pty Ltd [2001] AIRC 1189.
56 The requirements are specific about the consultation which must take place. There is no evidence that CBH gave Mr Wegener written notice of its intention to give a direction pursuant to s 789GM and there is no evidence that consultation in the manner required as established in BHP Coal and Vodafone took place. CBH did not provide any written record of the consultation as required. Mr Wegener gave evidence that he was informed that a decision had been made to reduce his salary and that he was not consulted before the decision was taken. Mr Wegener’s evidence is that he did not accept the reduction in salary and raised issue with the decision several times. Mr Wegener says that his protests were not considered. There is no evidence before the Commission of the matters that lead CBH to believe that the direction was necessary nor that makes explicit the existence of the requisite state of mind of CBH.
57 Subsection 789GDB(4) of the FW Act provided for a mechanism for working out the hourly rate of pay for employees to whom a “workplace instrument” such as a modern award or enterprise agreement applies.
58 The contract of employment refers to the Hospitality Industry (General) Award 2010, however CBH submitted in its response that Mr Wegener was effectively award free. The Hospitality Industry (General Award) 2010 excludes an employee who is employed to undertake the duties of senior management or is responsible for a significant area of the operations of one or more hotels. Indicative position titles for such an employee include:
· company secretary;
· chief accountant;
· personnel or human resources manager;
· financial controller;
· industrial relations manager;
· venue manager;
· general/hotel manager;
· executive assistant manager;
· regional manager; or
· a manager to whom any of those positions report or are responsible.
59 Mr Wegener’s position title was General Manager and I find that the Hospitality Industry (General Award) 2010 did not apply and, therefore, a workplace instrument did not apply. Consequently s 789GDB(4) did not apply.
60 I find that CBH has not provided evidence of its state of mind and any record of consultation with Mr Wegener. CBH did not comply with the requirements of s 789GM and cannot rely on these provisions to authorise their actions and set aside the terms of the employment contract. I find that CBH can neither rely on the terms of the employment contract nor the JobKeeper Enabling Directions to establish an hourly rate of pay. Therefore, a reduction of hours worked does not lawfully affect a reduction in pay.
Was There a Variation of The Contract to Reduce Rate of Pay?
61 CBH asserts that Mr Wegener agreed to reduce his salary and contend that Mr Wegener indicated his agreement by an email on 5 May 2020.
62 Mr Wegener denies that he agreed to reduce his salary and that the email relied upon by CBH correctly understood in context does not evince his agreement.
63 The key issue to be determined is whether Mr Wegener and CBH agreed to vary the terms of their contract to reduce Mr Wegener’s salary.
Principles of Variation of Contract
64 A variation of contract occurs when the original contract remains in force and only some of its terms are varied. Variation must be the subject of agreement between the parties and does not significantly alter the substance of the agreement or go to the ‘root of the contract’. A variation of contractual rights and obligations is however a contract and therefore, the variation must meet the requirements of a binding contract, including the presence of consideration.
65 In Ainsworth v Albrecht (2016) 261 CLR 167 French CJ, Bell, Keane, Nettle and Gordon JJ, observed: ‘… parties to a contract cannot, generally speaking, be obliged to give up contractual rights without their consent …’.
66 In Benge v Bluescope Steel (AIS) Pty Ltd (No 2) [2020] FCCA 515 the Federal Circuit Court of Australia (FCCA) sets out the principles applying to variation of contracts:
[63] It is clear law that a contract may be varied either expressly or by implication. As Ellicott J stated in Commonwealth of Australia v Crothall Hospital Services(Aust) Ltd (1981) 36 ALR 567 at 576 - 577:
It is open to the parties to a written contract to vary it. This may be done in writing or, except where the contract is required by law to be evidenced in writing, by oral agreement. The agreement to vary may be express or implied from conduct:
[64] Likewise, in Moratic Pty Ltd v Gordon [2007] NSWSC 5 Brereton J said:
[21] The terms of a contract may be varied by implied agreement arising from a course of dealing between the parties, and a party that seeks to rely on a term incorporated as a result of a course of dealing need not show that the other had actual knowledge of the term [Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 at 90, 104-105 and 130; Proprietors Strata Plan 30102 v Energy Australia (NSWCA, 29 September 1997, BC9704799, p 5], because the issue depends not on the actual subjective intentions of each party, but on what each was reasonably entitled to conclude from the attitude of the other [McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125 (Lord Reid); Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (1992) 28 NSWLR 338 at 343-4 (Cohen J); Pondicil Pty Ltd v Tropical Reef Shipyard Pty Ltd (FedCA, Cooper J, 1994, BC9406064; Hardwick Game Farm v Suffolk Agricultural Poultry Producers Assn [1967] 1 WLR 287 (Lord Diplock)] … Moreover, contractual variation requires a mutual intention to vary the existing contractual terms, and consideration.
67 The FCCA considered the authorities concerning the removal or reduction of elements of remuneration in employment contracts and cited the decision of Lord Oliver in Rigby v Ferodo Ltd [1987] IRLR 516; [1988] ICR 29:
That the unilateral imposition by an employer of a reduction in the agreed remuneration of an employee constitutes a fundamental and repudiatory breach of the contract of employment, which, if accepted by the employee, would terminate the contract forthwith.
The FCCA found that the applicants did not accept the repudiation and continued to work under their employment contracts entitling them to the remuneration payable under the terms of their contract.
68 In Benge the FCCA citing the English Court of Appeal in Cantor Fitzgerald International v Callaghan [1999] 2 All ER 411 found that remuneration provided for in employment contracts is a fundamental term and a reduction in remuneration constituted a breach or repudiation of the contract. The FCCA found that the employees did not affirm or consent to any contract of employment that varied the terms and their continued employment entitled them to the entitlement that was purported to have been removed by the employer. That is, a reduction in remuneration requires affirmation and something more than in law than acquiescence.
Was There Mutual Agreement to Vary the Contract?
69 CBH contends that Mr Wegener agreed to the reduction in his salary and say this is supported by an email chain which includes Mr Wegener stating ‘It would be great to start new $88k salary from this week if possible. Thanks, Dan’.
70 Mr Wegener gave evidence that he did not agree to reduce his salary and the email relied upon by CBH ought to be understood in context. Mr Wegener’s evidence is that the email dated 5 May 2020 was not indicating his agreement to the reduction but is his request to delay the forced reduction in salary by one week. That is, given CBH had decided to reduce his salary he was requesting that the implementation be delayed. Mr Wegener submits this email ought not to be taken as his agreement to vary his salary. Mr Wegener’s evidence is that he raised the reduction of his salary several times with Mr Gosatti and that he did not agree nor accept the reduction.
71 The contract of employment included a term to facilitate the amendment of variation of the contract. Clause 22 Employment Agreement Variation requires that ‘Any amendment or variation to this Agreement is not effective unless it is in writing and signed by both parties’. CBH invite the conclusion that the email from Mr Wegener is in accordance with this clause.
72 Where the variation is said to be inferred from the conduct of the parties, the question is whether that conduct viewed in the light of surrounding circumstances evidences a tacit agreement. The conduct of the parties must be capable of proving all the essential elements of a variation.
73 In this matter it cannot be said that the reduction in salary was a variation to the contract. The essential elements of contract formation are not present. CBH unilaterally decided to reduce Mr Wegener’s salary and informed him of their decision. The character of the communication is not that of inviting or conducting negotiations to vary the rate of pay prescribed by the contract.
74 Mr Gosatti gave evidence that the CBH Executive discussed and decided that Mr Wegener’s salary would be reduced by 20%. Mr Gosatti agreed that Mr Wegener was informed of the decision to reduce his salary and that subsequently Mr Wegener raised this issue with him several times.
75 I find that Mr Wegener did not agree to vary his contract of employment to reduce his salary nor did he agree to a new contract with a lesser salary. The email relied upon by CBH is not sufficient to evince the affirmation required for such a change. There is no evidence of an intent to change the terms of the contract in such a fundamental way. There is no evidence of consideration flowing from Mr Wegener to CBH to support such a variation. Mr Wegener continued in employment and, as in Benge, he is entitled to the benefit denied by CBH. The conduct of Mr Wegener cannot be said to evince an intention to vary the contract of employment by reducing the remuneration he would receive.
The Respondent’s Authorities
76 The respondent submitted two decisions of the Commission as authorities to be considered in determining this matter: Sean Craig v University of Western Australia [2021] WAIRC 00093 and Nathan Bradley v Binder Group Pty Ltd [2016] WAIRC 00731.
77 The Craig decision is not relevant to this matter. The applicant in that matter sought an order of the Commission for the payment equivalent of 5 months pay being the balance remaining of his fixed term contract of employment following his resignation after 19 months of employment.
78 CBH submitted Nathan Bradley v Binder Group Pty Ltd as an authority for the consideration of the Commission. The respondent’s purpose in doing so is not clear. Bradley concerns whether a discretionary bonus scheme was an entitlement under a contract of employment. The facts in Bradley are not similar to this matter and the principles applied are not relevant to this matter.
Conclusion
79 For the reasons set out above, I find that Mr Wegener was an employee of CBH and under the terms of his contract was entitled to the benefit of an annual salary of $110,000. I find that CBH denied him payment of a proportion of his salary between 6 May 2020 and 12 October 2020. The denial of salary was not permitted by any authority which enabled CBH to set aside the term of the contract. I will order CBH pay Mr Wegener $9,427.96.