In a recent decision of the Full Bench of the Fair Work Commission the wording of a clause in an enterprise agreement which purported to ‘set-off’ overpayments and another which required employees to work on public holidays was held to either exclude the NES or to be detrimental in comparison.

Contracts of employment often include clauses which deal with these two matters and those contracts should be reviewed and amended where necessary.

Thumbs down for ‘set-off’ clause

‘Setting-off’ is when an employer pays an employee a higher amount compared to their minimum entitlement (for example a higher hourly rate of pay) and then later seeks to rely on this ‘over payment’ to make up for not paying the employee another entitlement.

In the case, clause 5.5 of the proposed enterprise agreement provided:

Any payment or benefit which an Employee receives from [the employer], which exceeds an entitlement under this Agreement, can be set off against a claim for underpayment of another entitlement under this Agreement.”

The Full Bench found that this clause had a detrimental effect on employees. Were an employee to make a valid claim for underpayment of an NES entitlement (e.g. annual leave or redundancy pay) the clause would allow the employer the right to refuse to pay the amount claimed.

The clause therefore undermined the NES and would be of no effect.

NES protection excluded by public holiday clause

The wording of clause 7.5 of the proposed enterprise agreement provided:

“Employees will be required to work on public holidays that fall within Rostered Hours. Employees agree that a request by [the employer] to work on a public holiday is reasonable, having regard to the operational requirements of the business. The Composite Hourly Rate includes compensation in recognition of the need for Employees to work Rostered Hours on public holidays.”

The NES does allow an employer to request that an employee work on a public holiday, but it also permits an employee to refuse this request if:

(a) the employer’s request is not reasonable; or

(b) if the employee’s refusal is reasonable.

The Full Bench held that clause 7.5 of the enterprise agreement did not comply with these requirements of the NES because it “compelled” employees to work on a public holiday and left “no room” for them to refuse to work on those days.

Review of your contracts and enterprise agreements

An employer seeking to rely on the strict application of a set off clause or a clause requiring work on a public holiday could find itself facing significant civil penalties (up to $54,000 for corporations and $10,800 for individuals) for a breach of the NES.

Employers are accordingly encouraged to review any template employment contracts and contracts already in place which contain similar clauses.

Employers can also use this opportunity for a general review of their template contracts, for example, to consider whether clauses authorising deduction from wages meet the NES requirements. 

CFMEU v CSRP Pty Ltd [2017] FWCFB 2101