The Commission has found that a hospitality employer was in breach of the terms of its employment contract when it unilaterally varied the salary of its General Manager due to COVID-19 closures.

Background

The applicant was employed as the General Manager of the Respondent, a hospitality venue, from August 2019. The applicant’s contract provided for a salary of $110,000 per annum.

In March 2020, the respondent closed its operations in response to State Government COVID-19 restrictions. The applicant was notified that he would be stood down in accordance with s 524 of the Fair Work Act and the terms of his contract of employment, however continued to perform various tasks and was paid full rates.

In April 2020, the respondent notified the applicant that his hours and salary would be reduced. From 30 June 2020-12 October 2020, the applicant’s salary was reduced to 80%. The applicant resigned from his employment, and his full salary was restored from 13 October until his resignation took effect.

Contentions

The applicant claimed that he did not agree to the reduction in his salary, and that the terms of his contract; s 524 of the FW Act; nor the JobKeeper Enabling Stand Down Directions authorised the reduction.

The respondent contended that the FW Act, JobKeeper scheme and the contract of employment authorised the reduction in salary. In the alternate, the respondent submitted that the applicant agreed to vary his contract to reduce his salary.

Findings

The Commission, applying the principles in Landsheer v Morris Corporation (WA) Pty Ltd [2014] WAIRC 00034 (confirmed by the Industrial Appeal Court in Landsheer v Morris Corporation (WA) Pty Ltd [2014] WAIRC 01173), noted that where a salary is expressed as an annual rate, a variation in hours does not result in a change in remuneration. The Commission found that terms of the applicant’s contract provided for an annual salary, and accordingly did not authorise a reduction in remuneration.

The Commission noted that under s 524(2)(b) of FW Act, 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. As the applicant’s employment contract contemplated stand down provisions, the terms of the contract were to apply, and the respondent could not rely on s 524 to stand the applicant down.

The Commission noted that while JobKeeper Enabling Directions contemplated Stand Down Directions, that the respondent had failed to comply with the relevant consultation obligations.

The Commission reiterated that a reduction in remuneration is a fundamental term of an employment contract, and that the evidence provided by the respondent was not sufficient to evince an intention that the applicant had consented to the variation of the contract.

The Commission found in favour of the applicant and ordered the respondent pay $9,427.96 of the applicant’s salary that had been denied.

The decision can be read here.