|Employers often pay their employees wages in excess of those stated in a modern Award. But does this automatically absolve the employer from any obligation to pay entitlements such as allowances and penalty rates? This area is somewhat fraught, but in short the answer is generally “NO”.
In Chinese Australian Services Society Ltd v Sun  FCCA 1293 (CASS v Sun), a Sydney language school learnt a hard lesson when the Federal Circuit and Family Court of Australia (at trial) and Federal Court (on appeal) found that an employee earning above award rates of pay was still entitled to receive Saturday penalty rates.
The school advanced two arguments in support of its position that an employee’s rate of pay should be considered when determining an employee’s entitlement to receive award wages and allowances:
1. The employee was paid a “salary package” under the terms of clause 14 of the Social, Community, Home Care and Disability Services Industry Award (2010) (SCHADS Award), which was inclusive of all allowances under the SCHADS Award (First Argument); and
2. Payment of wages in excess of the minimum rates specified in the SCHADS Award discharged its obligation to pay Saturday penalty rates (Second Argument).
Justice Snaden of the Federal Court rejected both arguments.
With respect of the First Argument, His Honour noted that Clause 14 of the SCHCDS Award applied only to “salary”, as provided for in clauses 14 to 17 of the SCHCDS Award. Since penalty rates for Saturday work appeared at clause 26 of the Award, they were not captured by the salary packaging clause.
As to the Second Argument, His Honour noted that the school could not demonstrate that the employee’s salary had been paid with the agreed purpose of set off the Saturday penalty rates. The employee’s contract did not contain a set off clause to this effect. Furthermore, the employee never executed an individual flexibility arrangement which set out what allowances were included in her salary.
Consequently, His Honour found that the school had contravened the SCHCDS Award by failing to pay Saturday penalty rates.
Employers must be careful to not assume that paying their workers above regular award rates does not automatically mean their workers are not being underpaid. As such, employers must be cautious to observe penalty rates, overtime, and other loadings specific to the Modern Award applicable in their industry.
Stevens & Associates Lawyers offers a Modern Award Audit Package which is designed to ensure businesses are adhering to all requirements set out in their applicable Modern Award to avoid any wage underpayment claims.
For employers and employees seeking guidance on worker entitlements to penalty rates, overtime and other loadings specific to their applicable Modern Award, do not hesitate to contact Nick Stevens, Peter Hindeleh, Daphne Klianis or Josh Hoggett.