Deferred Bonuses and Forfeiture Conditions Found to be Unlawful by the Federal Court

In the recent Federal Court of Australia decision of Wollermann v Fortrend Securities Pty Ltd [2025] FCA 103 (the Decision) an employer’s attempt to defer payment of an employee’s contractual bonus to which they were already entitled to has been found to be in contravention of the Fair Work Act 2009 (Cth) (the FW Act).

Background

Christoper Wollerman (the First Applicant) and Stephen Lyle (the Second Applicant) (together, the Applicants) were employed as financial advisors by Fortrend Securities Pty Limited (the Respondent). In their role as financial advisors, both the Applicants performed trades on behalf of the Respondent’s clients, with the Respondent obtaining revenue by way of commission earned on the trades performed.

Both the First and Second Applicant’s employment contracts contained a clause stipulating each employee’s bonus entitlement (the Bonus Clause). The Bonus Clause contained in the First Applicant’s employment contract is extracted below.

“4.3 Bonus

a. You would receive a bonus in the event of Fortrend receiving more than USD50,000 per month in commissions through the clients and accounts allocated to you. This bonus would be equal to 10% of the commissions above 50,000. For the avoidance of doubt, commissions are calculated on the basis of trades settled in a particular month.

For example, if Fortrend receives a commission of USD 60,000 in a month, your bonus would be USD1,000 which is 10% of 10,000.

b. The bonus for a particular month will be paid in the following manner:
     i. 50% on the fifteenth day of the following month; and
    ii. 50% after a period of seven months.

c. If you resign or if your employment is terminated, you will not be entitled to receive the unpaid bonus.”

The Second Applicant’s employment contract contained an almost identical clause, albeit with a higher payable bonus of 15% of commissions above $50,000.00 USD and 20% of commissions above $100,000.00 USD per month.

After earning over $50,000.00 USD in commissions across several monthly periods, both the Applicants became entitled to the Bonus and were paid the first 50% accordingly. However, following the Applicants’ resignations, the Respondent refused to make payment of the remaining unpaid 50% of the Bonuses (the Unpaid Bonus).

The FW Act

The Applicants commenced proceedings against the Respondent, alleging that the Respondent had acted in contravention of section 323 of the FW Act by withholding the Unpaid Bonus upon termination of the Applicants’ employment.

Section 323(1) of the FW Act stipulates the method and frequency to which employers must pay their employees. As such, employees must be paid in full, in money and at least monthly. Importantly, the FW Act expressly stipulates that this will include any incentives and bonuses which become payable during the relevant period.

The Decision

The Respondent argued that the Clause expressly stipulated that payment of the Unpaid Bonus would be forfeited following the Applicants’ termination of employment with the Respondent and that therefore, the Applicants were not entitled to payment of the Unpaid Bonus following the termination of their employment.

However, Justice O’Callaghan accepted the Applicants’ construction of the Clause, stating that as the Clause stipulated the Applicants “will be paid” the Bonus in accordance with the timeframes outlined, the obligation to pay the Applicants the Bonus crystallised once the threshold amount of $50,000.00 USD in commissions was exceeded. Pursuant to the Clause, it was found that there was no further obligation imposed on the Applicants to perform further work to become entitled to the remaining 50% of the Bonus once the Bonus had crystalised. Rather, the Clause merely outlined the timeframes in which the Applicant’s would be paid.

Therefore, as the Clause attempted to forfeit the Applicants’ owing contractual entitlements, being the Bonus, or otherwise make payment of these entitlements beyond the one-month statutory requirement, the Clause was found to be in contravention of section 323(1) of the FW Act. Consequenly, Justice O’Callaghan found the Clause to be invalid.

Key Takeaways

Following the Decision, employers must be careful in drafting bonus arrangements within employment contracts, particularly where these arrangements provide for deferred or forfeited payments. Where a bonus payment is not discretionary, attempts by an employer to forfeit or defer payment of the bonus are likely to be in contravention of section 323(1) of the FW Act and consequently, the contractual term will be invalid.

If you have any questions about the Decision and what it could mean for you or your business, please do not hesitate to contact Nick Stevens, Josh Hoggett, Evelyn Rivera or Ayla Hutchison.