WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES’ COURT

PARTIES ROSANNE BAKER

CLAIMANT

-v-

Nekros Pty Ltd

RESPONDENT

CORAM INDUSTRIAL MAGISTRATE G. CICCHINI

HEARD Thursday, 15 June 2006, Wednesday, 7 June 2006, Wednesday, 14 June 2006

DELIVERED Wednesday, 14 June 2006

CLAIM NO. M 34 OF 2006

CITATION NO. 2006 WAIRC 04712

CatchWords Section 8A Long Service Leave Act 1958; non award long service leave; calculation; qualification; entitlements; real estate agent paid by commission only.

Legislation  Long Service Leave Act 1958

Long Service Leave General Order 52 WAIG 16

Long Service Leave General Order 58 WAIG 1

Cases cited  Hayman v Donald F Munro & Associates Pty Ltd (2003) 83 WAIG 3666

Result Claim allowed

Representation 

Claimant Mr M FitzGerald appeared as agent for the Claimant

Respondent Mr P Watson appeared as agent for the Respondent

REASONS FOR DECISION

Facts

1         The facts in this matter are, save for the calculation of the Claimant’s income, not in controversy and can be stated as follows.

2         The Claimant is and was at all material times a real estate agent.  On 9 June 1994 she commenced working for the Respondent, trading as Hollow & Darcy Real Estate and remained in the Respondent’s employment until 31 December 2004.  It will be obvious that at termination she had completed ten years of continuous service.

3         The terms and conditions of the Claimant’s employment with the Respondent varied from time to time during its course but it suffices to say that her income throughout was derived from commissions earned with respect to the sale of real estate and the letting of properties.  Sometimes she also received performance bonuses.

4         The Respondent credited all commission earned by the Claimant to her account against which was debited all the associated expenses incurred in deriving her income.  Such expenses included but were not limited to those incurred for advertising, photocopying, printing, sign writing and telephone.   The Respondent also debited against the Claimant’s account all compulsory and voluntary superannuation payments made by it for her benefit to the Claimant’s superannuation fund.  From time to time the Claimant drew from the funds standing in credit in her account which were paid to her as an “allowance”. 

5         In the lead up to the introduction of the Goods and Services Tax in 2000, the Claimant and Mr Peter Hollow entered into discussions concerning the impact of the new tax on commissions.  As a consequence issues concerning the Claimant’s terms and conditions, including remuneration, were revisited.  During the course of those discussions Mr Hollow suggested that the Claimant enter into a workplace agreement and further that she contract out of various entitlements including long service leave. The Claimant did not agree with Mr Hollow’s proposition.  In the end result, the terms as to the Claimant’s remuneration were varied by agreement with effect from 1 January 2000 but the situation with respect to long service leave and other benefits remained unchanged. The parties did not enter into a workplace agreement.

Calculation of the Claimant’s earnings

6         During the 2004 calendar year the Claimant “earned” $221,154.68 by way of commission on sales plus the sum of $5,494.27 by way of lease or letting commissions.  She claims that the total of such represents her income for that period.  She does not claim as part of her income for that year the $12,000.00 in bonuses she received.  However when cross-examined, she conceded that the amounts credited to her account were in fact gross earnings from which deductions were made and that the periodic advances received during the year more accurately represented her income .

7         Mr Peter Hollow’s view is that the $197,628.00 the Claimant received by way of advances in the 2004 calendar year as shown on her ledger card (exhibit 1) was in fact her taxable income for that calendar year.  When cross examined he conceded that in his calculation of the Claimant’s taxable income he did not include superannuation payments deducted from her account and paid to her superannuation fund.  Such payments totalled $27,874 of which $10,000 was paid by way of a salary sacrificed voluntary payment.

8         The Claimant’s earnings for the 2004 year were top-heavy in that the majority of her income was either credited to her account or paid therefrom in the first nine months of that year.  The respondent asserts in that regard that her income for the last three months of her employment was only $16,500.  The quantum of the Claimant’s earnings for the last three months of her employment is a critical issue for the Respondent in the light of its submissions on this matter as hereinafter discussed.

Issues

9         It is common ground that when the Claimant left the Respondent’s employment she was not paid any pro rata long service leave entitlement.  The Respondent initially took the view that it was not obligated to pay the same but now concedes that the Claimant is entitled to a long service leave payment pursuant to the provisions of the Long Service Leave Act 1958 (the Act) which provides for the granting of long service leave to employees whose employment is not regulated under the Industrial Relations Act 1979 (the IR Act).

10      Section 8 of the Act is headed “Long service leave” and provides as follows:

 (1) An employee is entitled in accordance with, and subject to, the provisions of this Act, to long service leave on ordinary pay in respect of continuous employment with one and the same employer, or with a person who, being a transmittee, is deemed pursuant to section 6(4) to be one and the same employer.

11      Subsection 8(3) provides:

(3) Subject to subsection (5), where an employee has completed at least 10 years of such continuous employment since the commencement thereof, but less than 15 years, and the employment is terminated –

 (a) by his death; or

(b) for any reason other than serious misconduct,

the amount of leave to which the employee is entitled shall be a proportionate amount on the basis of 13 weeks for 15 years of such continuous employment.

12      Subsection 8(5) is not relevant with respect to this matter.

13      The dispute between the parties relates to how much the Claimant should be paid with respect to long service leave.   The Claimant contends that her pro rata long service leave entitlement should be paid at the ordinary rate as defined in subsections 4(1) and 4(2) of the Act.

14      “Ordinary pay” is defined in subsection 4(1) of the Act as follows.

“ordinary pay” means subject to subsection (2), remuneration for an employee’s normal weekly number of hours of work calculated on the ordinary time rate of pay applicable to him, as at the time when any period of long service leave granted to him under this Act commences, or is deemed to commence, and where the employee is provided with board and lodging by his employer, includes the cash value of that board and lodging, where such board and lodging is not provided and taken during the period of leave, but does not include shift premiums, overtime, penalty rates, commissions, bonuses, allowances, or the like.

15      Subsection 4(2) provides:

 (2) For the purpose of the interpretation of “ordinary pay” in subsection (1) –

(a)  where the employee is employed on piece or bonus work or any other system of payment by results, he shall be paid during any period when he is on long service leave at the ordinary rate of pay which would be applicable to him if he was employed in the industry appropriate to his calling on a time basis and not on piece or bonus work or other system of payment by results;

(b)  where no ordinary time rate of pay is fixed under the provisions of paragraph (a) the ordinary time rate of pay shall be deemed to be the average weekly rate earned by him while in employment during the period of 12 months –

(i) ending on the day immediately preceding that on which he commences long service leave or would but for payment in lieu of long service leave have commenced long service lave, if he is then in employment; or

(ii) ending on the day immediately preceding that on which he was last in employment, if he is not then in employment; or

(iii) ending on the day immediately preceding that of his death,

as the case requires; and

(c)  where the normal weekly number of hours have varied over the period of employment of an employee the normal weekly number of hours of work shall, subject to paragraph (a), be deemed to be the average weekly number of hours worked by the employee during that period of employment (calculate by reference to such hours as are ascertainable if the hours actually worked over that period are not known); and

(d)  the cash value of any board and lodging provided for an employee shall be deemed to be its cash value as fixed by or under the conditions of the employee’s employment, or, if it is not so fixed, shall be computed at the prescribed rate; and

(e)  where by agreement between the employer and the employee the commencement of the leave to which the employee is entitled or any portion thereof is postponed to meet the convenience of the employee, the rate of payment for such leave shall be at the ordinary time rate of pay applicable to him at the date of accrual or, if so agreed, at the ordinary time rate of pay applicable at the date he commences such leave.

16      The Respondent on the other hand suggests that the Claimant’s long service leave entitlement should be calculated in accordance with subclause 4(5) of the General Order made by the Western Australian Industrial Relations Commission on 15 December 1977 (58 WAIG 1) which provides:

(5) In the case of workers employed on piece or bonus work or any other system of payment by results the rate of pay shall be calculated by averaging the worker’s rate of pay for each week over the previous three monthly period.

17      The Respondent contends that the aforementioned provision has force by virtue of section 8A of the Act which states:

8A. Variation of qualifications and entitlement to long service leave

Notwithstanding any other provision in this Act in the event of a determination of the Commission in Court Session varying from time to time any of the provisions for qualifications or entitlement to long service leave as contained in volume 52 of the Western Australian Industrial Gazette at pages 16 to 21, both inclusive, for the majority of awards which those provisions have been incorporated in and form part of, the qualifications and entitlement of employees to long service leave shall forthwith thereafter be varied accordingly.

18      It is common ground that the order of the Commission in Court Session made on 23 September 1964, as is found in 52 WAIG 16, and as referred to in section 8A of the Act was varied by General Order made on 15 December 1977.

Determination

19      The pivotal question to be answered is whether section 8A of the Act has the effect of importing the provisions of the General Orders with respect to qualification and entitlements to long service leave to employees whose employment is not regulated under the IR Act and if so whether a provision therein concerning calculation can be considered an entitlement provision.

20      Section 8A, in my view, is aimed at maintaining consistency with respect to qualification and entitlement to long service leave between those employees whose employment is regulated by the IR Act and those employees whose employment is not so regulated.

21      Section 8A is an enabling provision which facilitates the importation of changes to long service leave qualification and entitlements for the sake of consistency.  It can have no other meaning.  I reject the Claimant’s contention that the provision has been enacted to facilitate the Commission in Court Session making variations to the General Order with respect to long service leave.  Given that such power exists within the provisions of the IR Act, the enactment of section 8A of the Act would in the circumstances have been unnecessary.  Section 8A is found within the Act to enable “employees” as defined in the Act to be treated in exactly the same way with respect to long service leave qualification and entitlement as those employees whose employment is regulated by the IR Act.  One can well understand that it is desirable from a public policy perspective that all employees, be they governed by awards or not, be treated in the same way with respect to such issues.  Section 8A facilitates the variation from time to time of the qualifications and entitlements of employees under the Act without the need to amend the Act each time there is a change made to the long service leave qualifications or entitlements of those employees regulated by the IR Act.  The provision achieves immediate consistency without the need to amend the Act.  In my view the wording of section 8A of the Act plainly reflects that to be so.

22      It follows that the next issue to be determined is that of what is meant by the terms “qualifications” and “entitlement” referred to in section 8A of the Act.  Section 8 of the Act grants, inter alia, 13 weeks long service leave to an employee who has been in continuous employment with the same employer for 15 years.  That, however, is subject to subsection 8(3) of the Act which grants pay in lieu of long service leave on a pro rata basis to employees who have been employed by the same employer for at least 10 years but less than 15 years in circumstances where their employment is terminated by death or for any other reason other than serious misconduct.  In such circumstances the employee is entitled to be paid the value of the proportion of the 13 weeks (full entitlement) that his or her period of employment bears to 15 years.  Ostensibly such is the qualification for the attainment of long service leave or pay in lieu thereof. 

23      It necessarily follows that an employee’s “entitlement” is the amount of long service leave which the employee can take upon qualification or alternatively the pro rata proportion of untaken leave where the employee’s employment is terminated after having completed 10 years of continuous service with the same employer.  The same must be measured in terms of weeks and, if applicable, part thereof. 

24      For present purposes the Claimant’s entitlement to leave is 10.67 8.67 weeks.  That figure is derived by applying the formula set out in subsection 8(2) of the Act.  The same may be represented as follows:

10 years divided by 15 years multiplied by 13 weeks equals 10.67 8.67 weeks.

25      The Claimant’s right therefore is to be paid the value of 10.67 8.67 weeks of long service leave.  “Entitlement” is that to which a person has a right to.  “Entitlement” is defined in the CCH Macquarie Dictionary of Employment and Industrial Relations to mean:

entitlement   that which a person has a right to, e.g. that which is specifically provided for in industrial awards and contracts of employment as the rights of employees.  The term is used especially for the additional payment received when leaving employment, consisting of a pro rata amount for accrued annual leave, long service leave where applicable, etc.

26      The Claimant’s entitlement as referred to in sections 8 and 8A can have no other meaning than the pro rata amount of long service leave measured in weeks and part thereof, with respect to which payment is to be made at the ordinary rate of pay.  The quantification of the entitlement measured in dollar terms does not relate to the Claimant’s entitlement.  The entitlement remains constant but the value thereof is dependant upon the statutory formula provided to give meaning to what is meant by ordinary pay. 

27      Subsections 4(1) and 4(2) of the Act and not subclause 4(5) of the General Order made on 15 December 1977 govern the quantification of the Claimant’s entitlement.  Subclause 4(5) of the General Order has no application because it is not a provision relating to “qualifications” or “entitlement” as envisaged by section 8A of the Act.  Section 8A of the Act does not therefore facilitate the importation of subclause 4(5) of the General Order.  Rather it is a discrete provision which creates the formula for calculation of payment in lieu of long service leave for employees who are employed on piece work or whose work is remunerated by the payment of bonuses or any other system of payment by results and whose employment is governed by the IR Act.  The Long Service Leave Act 1958 provides for its own method of calculation, which differs from that provided in the General Order, for employees falling within the Act who are employed on piece work or whose work is remunerated by the payment of bonuses or any other systems of payment by results.

28      In my view section 8A does no more than provide for equality with respect to the issue of qualification in terms of years and entitlements in terms of weeks for all employees whether they are within the award system or not.  It does not import the method of giving value in dollar terms to such entitlements.  Such gives meaning and effect to subsection 4(2) of the Act.

Conclusion

29      I find therefore that the calculation of the Claimant’s entitlement should be made in accordance with the method set out in subsections 4(1) and 4(2) of the Act.  Her ordinary pay must be calculated on the basis of the average weekly rate earned by her during the period of 12 months ending on the day immediately preceding that on which she was last in employment.

30      Pursuant to section 11 of the Act I determine that the Claimant’s ordinary rate of pay is her average weekly rate earned during the last 12 months of her employment, calculated by adding all those amounts standing to her credit of her account for the 2004 calendar year (as shown in exhibit 1) being sales and rental commissions and deducting therefrom all such sums that were debited to her account for sales expenses.

31      All the superannuation payments made are not to be deducted from the Claimant’s credit balance because it appears, from the 1997 agreement between the parties relating to superannuation which continues to have application, that the Respondent had the responsibility to pay for the Claimant’s superannuation.

32      The net amount achieved in accordance with what I have stated must be divided by 52 (weeks) and then multiplied by 10.67 8.67 to quantify in dollar terms the Claimant’s entitlement.

33      The parties have agreed that I should not calculate the amount in question and that the calculations should be left to them to achieve by agreement.  I will leave it to the parties to calculate the quantum of the Claimant’s entitlement by agreement.  If agreement cannot be reached I will, on the application of either party with notice to the other party, determine the issue of the quantum of the Claimant’s entitlement.

34      I will now hear from the parties with respect to the orders to be made.

G Cicchini

Industrial Magistrate