Only if the award expressly allows it! If the award does not expressly permit payment on a commission-only basis, instead of weekly wages, then employers need to pay weekly wages of at least the minimum amount and ensure that there is an effective contractual “set-off” available.
In Manchee v BTIG Australia Limited  FedCFamC2G 813, the Federal Circuit and Family Court of Australia (FCFCA) found that an employer who had paid an employee substantially in excess of award minimum wages, could not rely on those payments to satisfy its obligations to pay minimum weekly wages and annual leave. This was largely because the contractual arrangement did not clearly set out that the commission was in satisfaction of those statutory/award entitlements.
Take home message
Employers should always:
- Capture above award payments using an effective contractual ‘satisfaction’ and ‘set-off’ provision to ensure they may be applied in satisfaction of award entitlements.
- Confirm award coverage for all employees prior to commencing employment. Unless an award allows, employers can’t engage award covered employees on a commission-only basis, without making provision for payment of minimum weekly wages. One example where commission only employment is permitted under an award, is the Real Estate Industry Award 2020. However, that award carries certain minimum qualifying criteria before an employer may employ a “commission only” employee, including a minimum experience level, and a “Minimum Income Threshold Amount” for the preceding 12 months.
- Remember that failing to comply with Fair Work Act 2009 (FW Act) or award obligations can result in potential compensation payments and pecuniary penalties. The maximum penalties are presently $133,200 for individuals and $666,000 for corporations.
Mr Manchee was employed as a sales trader by BTIG Australia Limited (BTIG) and was covered by the Banking, Finance and Insurance Award 2020 (and its predecessor) (Award). Under his employment contract he was paid on a commission-only basis, with the amount calculated on the amount of brokerage commission earned each year.
The arrangement worked on a “debit/credit” style arrangement where:
- Mr Manchee was paid a fixed monthly amount (referred to as a ‘draw’) which was tied to the amount of monthly commissions he was required to earn for BTIG.
- At the end of each month, if his commissions for that month exceeded the draw amount, he would be paid an amount comprising of the draw amount plus the amount of commissions exceeding the draw.
- If he earned less than the monthly draw amount, that shortfall would be carried forward and deducted from the commissions earned in the next month.
The Award did not provide for commission-only payment.
Mr Manchee brought proceedings and claimed:
- BTIG had breached the Award by failing to pay him the minimum wage and annual leave loading provided under the Award;
- BTIG has breached the NES under the FW Act by not providing annual leave; and
- he was entitled to compensation, being the Award minimum wages, annual leave, and annual leave loading.
He also sought declarations relating to BTIG’s breaches of the FW Act and the Award.
BTIG argued that the amounts paid satisfied its Award obligations because the commission payments were for the same purpose as wages that are paid under the Award: work performed by the employee. It justified this position by arguing that, because it had never attempted to recover a commission deficit, the commissions were the same as wages, as both are unrecoverable.
Ultimately, the question was whether BTIG was entitled to set-off its “above award” payments against the claims.
Commission payments did not satisfy Award obligations
The FCFCA reaffirmed that if an employer pays an amount to an employee for a particular purpose or in satisfaction of a particular obligation, that amount may not be applied instead to another purpose or obligation.
In this case, the Court found that BTIG’s payments were only applied to satisfy the contractual obligation to pay Mr Manchee a portion of brokerage commissions earned. As such, BTIG could not apply those payments in satisfaction of Award entitlements. It was therefore in breach of the Award.
No compensation despite breaches
Mr Manchee had made his application under section 545 of the FW Act which allows for the FCFCA to order compensation for breaches of (amongst other things) Award obligations if it considers it appropriate.
Despite finding that there had been a breach of the Award, the FCFCA did not award Mr Manchee any compensation, as his commission payments far exceeded the Award minimum wage requirements and there was no compensable loss.
Civil penalty question to be dealt with later
But, watch this space.
The FCFCA found that BTIG had committed several breaches including:
- breaching the NES by failing to provide Mr Manchee annual leave; and
- breaching the Award by failing to pay the minimum wage and annual leave loading.
The question of civil penalties is still open, and will be dealt with at a later date.
If you have any queries or would like further information regarding this article, please contact:
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Published: 14 December 2022