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Kartelo v Sciacca's Lawyers Pty Ltd[2019] QIRC 55

Kartelo v Sciacca's Lawyers Pty Ltd[2019] QIRC 55

QUEENSLAND INDUSTRIAL RELATIONS COMMISSION

CITATION:

Kartelo v Sciacca's Lawyers Pty Ltd [2019] QIRC 055

PARTIES: 

Kartelo, Vincent John

(Applicant)

v

Sciacca's Lawyers Pty Ltd

(Respondent)

CASE NO:

B/2018/27

PROCEEDING:

Application to recover unpaid wages

DELIVERED ON:

1 April 2019

HEARING DATE:

3 September 2018

2 October 2018 (Applicant's submissions)

16 October 2018 (Respondent's submissions)

MEMBER:

Knight IC

ORDERS:

  1. The Respondent is to pay the Applicant the sum of $50,000.00.
  1. The amount is to be paid within 21 days of the date of the release of this decision.

CATCHWORDS:

INDUSTRIAL LAW – APPLICATION TO RECOVER UNPAID WAGES – Employee resigned from employment after more than ten years – where employee claims he was not paid his long service leave entitlement – whether long service leave cashed out in accordance with the relevant Act – whether employee received the benefit of the entitlement.

LEGISLATION:

Fair Work Act 2009 (Cth)

Industrial Relations Act 1990 (Qld)

Industrial Relations Act 1999 (Qld)

Industrial Relations and Another Amendment Act 2001 (Qld)

Industrial Relations Act 2016 (Qld)

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Review (2009) 239 CLR 27

CASES:

Australian Liquor, Hospitality and Miscellaneous Workers' Union, Queensland Branch, Union of Employees v Wilson Parking Australia 1992 Pty Ltd (2002) 171 QGIG 323

Dallow v Queensland Police Service [2004] QIRComm 165; 177 QGIG 255 (17 September 2004)

Day v Hutcheon [2014] QIRC 084

Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215

Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120

Nelson v Nelson (1995) 184 CLR 538

Review of Long Service Leave Entitlement [2000] QIRComm 83; 124 QGIG 236 (27 June 2000)

Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410

William Love, Long Service Leave in Queensland (Queensland Confederation of Industry Limited, 1992)

New South Wales, Parliamentary Debates, Legislative Assembly, 1951

Hugh Selby, Long Service Leave (Law Book Co, 1983)

APPEARANCES:

Mr. C. Muir of Employer Services, agent for the applicant

Mr. G. Arnold of Effective Workplace Solutions, agent for the respondent

Decision

  1. [1]
    This decision concerns an application by Mr Vincent John Kartelo ("the applicant") seeking an order pursuant to s 475 of the Industrial Relations Act 2016 (Qld) ("the current Act") for unpaid wages, namely, his long service leave.
  1. [2]
    The applicant was employed by Sciaccas Lawyers Pty Ltd ("the respondent") for almost 22 years, during which time he maintains he accrued 627.44 hours of long service leave valued at $63,505.00 and for which he did not receive payment. 
  2. [3]
    The respondent maintains that on or around 1 October 2014, the applicant received the sum of $69,505.00 which, it avers, represents the cashing out of the applicant's long service leave entitlement up to 30 September 2014.
  1. [4]
    In accordance with the limitations imposed by s 476(1) of the current Act, the applicant has reduced his claim to $50,000.

Background

  1. [5]
    The applicant commenced his employment with the respondent on 18 September 1995 as a solicitor and, by July 2000, had become a salaried partner.
  1. [6]
    On 21 July 2017, the applicant resigned his employment. Throughout, he did not take any period of long service leave: his service was a continuous and unbroken period of 21 years, 10 months and 3 days.
  1. [7]
    Approximately two years and nine months before resigning his employment, on or around 23 October 2014, Mr Concetto Sciacca, the sole owner of the respondent at the time, agreed to sell his shares in the respondent (formalised by way of share sale deed) to Shine Corporate Ltd ("Shine").
  1. [8]
    Schedule 3 of the share sale deed relevantly provided that the applicant's long service leave had been paid out and that its balance was nil as at 30 June 2014.
  1. [9]
    Approximately one month before the finalisation of the sale of the respondent, the applicant signed an Authority to Pay Funds document which acknowledged that the value of any accrued long service leave would be deducted from his bonus for that year. The document also stated the applicant's long service leave accrual would consequently be reduced to zero.
  1. [10]
    Shine became the owner of the respondent on or about 31 October 2014. The applicant continued to work for the respondent until his resignation took effect on 21 July 2017.
  1. [11]
    As part of his final pay, the applicant was paid the amount of $9,380.56, which represented the 92.68 hours of long service leave he had accrued between 1 October 2014 and his resignation.


Legislative Provisions

  1. [12]
    Subdivision 9 (Recovery of unpaid wages) of the current Act, under which this application is made, relevantly provides:

  475 Power to recover unpaid wages and superannuation contribution etc.

  1. (1)
    On application by a person under section 476, the commission may order payment of the following for the period of 6 years before the date of the application—
  1. (a)
    an employee’s unpaid wages;
  1. (b)
    an apprentice’s unpaid tool allowance under section 137;
  1. (c)
    remuneration lost by an apprentice or trainee because the employer has contravened section 371(2);
  1. (d)
    contributions to the approved superannuation fund payable for an eligible employee that are unpaid.
  1. (2)
    A presidential member may, either before or after the start of a hearing, remit the application to a magistrate if the presidential member considers the application could be more conveniently heard by a magistrate, having regard to, for example, costs or the difficulty or expense of producing witnesses.
  1. (3)
    If the application is remitted to a magistrate, the magistrate may hear and decide the application as if it had been brought before the commission, and the magistrate’s decision is taken to be a decision of the commission.

 ...

  477 Orders

  1. (1)
    On hearing the application, the commission or magistrate—
  1. (a)
    must order the employer to pay the employee—
  1. (i)
    the amount the commission or magistrate finds to be payable and unpaid to the employee for the 6 years before the date of the application; and
  1. (ii)
    an amount the commission or magistrate considers appropriate, based on the return that would have accrued in relation to the contributions had it been properly paid to the approved superannuation fund; and
  1. (b)
    may make an order for the payment despite an express or implied provision of an agreement to the contrary; and
  1. (c)
    may order the payment to be made on the terms the commission or magistrate considers appropriate.

...

  1. [13]
    Schedule 5 of the current Act provides:

 wages means—

 (a) an amount payable to an employee for—

  (i) work performed, or to be performed, by the employee; or

  (ii) a public holiday; or

  (iii) leave the employee is entitled to; or

  (iv) termination of employment; or

 (b) a salary; or

 (c) an amount payable from wages for the employee, with the employee’s written consent.

  1. [14]
    At the time the applicant's long service leave was said to have been cashed out, the Industrial Relations Act 1999 (Qld) ("the superseded Act") was in force. The provisions relating to long service leave in that Act relevantly provided:

43 Entitlement

  1. (1)
    This section applies to all employees, other than seasonal employees.
  1. (2)
    An employee is entitled to long service leave on full pay of—
  1. (a)
    for the first 10 years continuous service—8.6667 weeks; and
  1. (b)
    if the employee has completed at least a further 5 years continuous service—another period that bears to 8.6667 weeks the proportion that the employee's further period of continuous service bears to 10 years.

  ...

53 Payment instead of long service leave

  1. (a)
    An employee may be paid for all or part of an entitlement to long service leave instead of taking the leave or part of the leave if subsection (2) or (3) applies.
  1. (b)
    If the relevant industrial instrument provides for the employee to be paid for all or part of an entitlement to long service leave instead of taking the leave or part of the leave, payment may be made, in accordance with the industrial instrument, if the employee and employer agree by a signed agreement.
  1. (c)
    If no industrial instrument provides for the employee to be paid for all or part of an entitlement to long service leave instead of taking the leave or part of the leave, payment may be made only if the payment is ordered by the commission on application by the employee.
  1. (d)
    The commission may order the payment only if satisfied the payment should be made—
  1. (a)
    on compassionate grounds; or
  1. (b)
    on the ground of financial hardship.

Evidence

Common Law Employment Contract

  1. [15]
    The applicant entered into a common law employment contract with the respondent on 6 August 2013. It relevantly provided (my underlining):

7. Remuneration

7.1 In consideration for You carrying out the Duties, Sciaccas Lawyers will pay You the Base Remuneration set out in Item 5 of Schedule 1.

7.2 In addition to the Base Remuneration, You may be entitled to receive or have the benefit of the Additional Remuneration set out in Item 6 of Schedule 1 and further defined in Schedule 3.

...

7.5 The Total Remuneration or any component thereof may be varied by agreement or as required by law. If any award or statutory entitlement requires Sciaccas Lawyers to provide You with a benefit, the benefit is treated as forming part of the Total Remuneration to the extent permitted by law and other components shall be adjusted accordingly. Any taxation required to be paid by Sciaccas Lawyers in respect of the Total Remuneration shall be deducted and paid for the Total Remuneration.

7.6 The Total Remuneration includes all payments and benefits that Sciaccas Lawyers is legally obliged to provide. Your effective hourly rate of pay for hours worked is specifically off-set against, applied to and absorbs any existing or newly-introduced payments or benefits to which You are or may become legally entitled (including but not limited to annual leave loading, long service leave, overtime and/or penalty rates under any legislation, award or certified agreement) unless Sciaccas Lawyers specifies otherwise.

17. Long Service Leave

17.1 You are entitled to Long Service Leave on full pay, subject to, and in accordance with the Industrial Relations Act 1999 (Qld).

17.2 You are entitled to long service leave on full pay of:

  1. (1)
    for the first ten (10) years continuous service – 8.6667 weeks; and
  1. (2)
    if You complete at least a further five (5) years continuous service-another period that bears to 8.6667 weeks the proportion that Your further period of continuous service bears to 10 years.

...

17.6 By agreement in writing You can request to have part or all of your long service leave cashed out.

17.7 It is acknowledged by You that long service leave forms part of your total remuneration package.

  1. [16]
    Schedule 3 of the employment contract sets out that in addition to the applicant's total remuneration, the applicant was entitled to a bonus calculated as follows (my emphasis):
  1. (a)
    Definitions

Fees Billed     = Y

Base Remuneration x 4   = BR4

Long Service Leave taken during financial year  = LSL

Total Bonus to be Paid    = TB

  1. (b)
    Bonus Calculation

(Y – BR4) / 4 – LSL = TB

  1. [17]
    The formula above stipulates that in order to arrive at the total bonus figure to be paid, the amount of long service leave which was taken during the financial year must be subtracted.
  1. [18]
    The applicant told the Commission he had never taken long service before October 2014 and had no intention of taking it. He was quite happy for it to build up. He said that long service leave was never an issue in his employment until he was presented with an employment contract in late 2013.
  1. [19]
    His evidence was that he was never happy with the proposed contract and refrained from signing it for quite some time. He recalled that by the time he did sign it, he "knew the purpose of it was to prepare for the sale of the business", and that he "had to sign it otherwise – there was no – there was no room for negotiation".
  1. [20]
    Although he was dissatisfied with the employment contract, the applicant said his understanding was that in the event he was to take long service leave, the value of the leave would be reduced from the bonus that would be payable to him for that year.
  1. [21]
    The applicant provided the Commission with his bonus calculation statement for the 2014 financial year:

Fees billed to 30/08/2014$       1,804,913.50

Less Base$          874,000.00

Fee Basis for Bonus Calculation$          930,913.50

BONUS PAYABLE @ 25% OF FEE BASIS$          232,728.38

LESS DEDUCTIONS                   

TOTAL PAYABLE$          232,728.38

  1. [22]
    The applicant acknowledged his bonus was correctly calculated as $232,728.00. He was approached by Mr Sam Sciacca, who represented the respondent, about its payment in early September 2014.
  1. [23]
    At that time, he maintains he was told by Mr Sciacca that he would not receive any of his bonus for that year unless he signed a written document whereby he agreed that his accrued long service leave entitlement, as at 30 September 2014, would be paid to him as a cash advance and deducted from the 2014 bonus payment. 
  1. [24]
    In early September 2014, the applicant signed a written document with Mr Sciacca entitled 'Authority to Pay Funds'. It stated:

I, Vincent John Kartelo hereby request that my long service leave accrued as at 30 September 2014 (or as at the date my bonus payment is made), be paid to me in full as a cash advance and be deducted from my bonus payment in accordance with the terms of my employment agreement.

I acknowledge that this will result in a zero balance to my long service leave as at the date the bonus payment is made. 

  1. [25]
    During the proceedings, the applicant acknowledged he had signed the Authority to Pay Funds document, but contended he was unhappy with the document and the request being made of him.
  1. [26]
    He told the Commission he was struggling with debt at the time Mr Sciacca approached him and decided he could not risk a situation where he was not paid his bonus. In essence, he felt he had no choice, which was why he proceeded to sign the Authority to Pay Funds document in September 2014.
  1. [27]
    The applicant's evidence was that he was not given any explanation as to why these steps were being taken, but later, under cross-examination, he said he suspected it had something to do with Mr Sciacca clearing the long service liability of not just himself, but all other salaried partners who were working for the respondent at the time. 
  1. [28]
    He recalled there were similar discussions being held with other salaried partners who were being asked to sign a document in the same terms, but as far as he was aware, he did not think a request of a similar nature was made to any other solicitors or employees of the respondent – only salaried partners.
  1. [29]
    The applicant was clear that no application to the Commission was made at any time pursuant to s 53(3) of the superseded Act, seeking an order from the Commission to cash out his long service leave entitlements.
  1. [30]
    The applicant was subsequently given a document entitled 'LSL & Bonus payout calculation as at 1 October 2014', which relevantly stated:

 Bonus FY14   232,728.38 a

 LSL              Paid in full

 LSL Hrs   627.43

 Rate    101.21

 LSL payout   63,502.19 b

 Bonus payout   169,226.19 c

 Balance @ 01.10.2014  d = a – b – c

  1. [31]
    Around the same time, the respondent paid the applicant his 2014 bonus. The pay slip relevantly provided:

 Taxable Income   Units  Rate  Amount

 Long Service Leave   627.44 Hours  

 Bonus                           232,728.38

This amount was then subject to taxation and disbursed to the applicant.

  1. [32]
    Mr Ryan Heath gave evidence by way of affidavit for the respondent. He has been employed by the respondent as a lawyer and (later) a salaried partner for two periods: between 1997-2002 and, once more, from 2007 until the time of the proceedings.
  1. [33]
    Mr Heath deposed that he recalled Mr Daniel Wilkie, the office manager during the 2012-2013 period, calling him into his office at some point and advising that Mr Concetto Sciacca wanted to formalise employment agreements with senior staff members and partners to secure the business moving forward.
  1. [34]
    Mr Heath told the Commission he was presented with an employment agreement for his review and execution. He considered the agreement to be reasonable and reflective of his existing salary and bonus structure, save for one area dealing with long service leave.
  1. [35]
    He recalled the matter being controversial at the time because it was his understanding that his long service entitlements would accrue and that his bonus payment would be calculated separately and paid to him.
  1. [36]
    Mr Heath's evidence was that he recalled Mr Wilkie telling him it was always Mr Concetto Sciacca's view that in circumstances where he received bonuses calculated at a percentage of his turnover, long service leave was not payable.
  1. [37]
    In his own evidence, the applicant confirmed that he and Mr Concetto Sciacca "had a long running joke and discussion over many years about long service leave". He also recalled Mr Concetto Sciacca held the opinion that because salaried partners were receiving a bonus, "sharing in the profits, if you like", that he (and other salaried partners) were not entitled to long service leave.
  1. [38]
    The applicant told the Commission he would always say in reply to Mr Concetto Sciacca, "well, that's just ridiculous because I'm an employee". He said that nothing was ever sorted out until his contract appeared, which was the only contract he had been required to sign during his employment with the respondent up until that point.
  1. [39]
    In or around August or September 2014, Mr Health told the Commission that Mr Concetto Sciacca advised him that he wished to deal with the long service leave issue he had raised previously.
  1. [40]
    Mr Heath deposed that he was offered a choice of either "losing my entire long service entitlement and receive his full bonus as calculated in accordance with his employment agreement formulae", or "an amount equalling two-thirds of my long service leave entitlement could be deducted from my bonus calculation payment so as to retain my long service leave entitlement, accrued at that time".
  1. [41]
    Mr Heath further deposed that shortly after finalising his long service leave arrangements with the respondent, he became aware that Mr Concetto Sciacca was selling the business to Shine.
  1. [42]
    Mr Richard Dennis, the Chief Operating Officer of Shine, told the Commission that Shine agreed to purchase the shares in the respondent from Mr Concetto Sciacca.
  1. [43]
    In accordance with cls 10.3 and 10.4 of the share sale deed, Mr Dennis told the Commission that Mr Sciacca confirmed the accuracy of the respondent's liabilities due to its employees, including the applicant.
  1. [44]
    Schedule 3 of the share sale deed provided that the applicant's long service leave had been paid out and there was a nil balance at 30 June 2014.
  1. [45]
    Relying on the share sale deed (sch 3 in specific), Mr Dennis said that Shine did not seek an adjustment to the purchase price payable to the applicant, as would be expected if Shine were to accept the long service liability of the applicant in its accounts.
  1. [46]
    Mr Dennis also suggested in his evidence (after having regard to Mr Heath's evidence in respect of the payment (or otherwise) of his long service leave), that the applicant may well have received a similar offer from Mr Sciacca. That is, cash out his long service leave and accept a reduction in the calculation of his bonus entitlement; or, if he wished to maintain his long service leave, accept a reduction in his bonus calculation entitlement equivalent to two-thirds of the value of his long service leave entitlement.
  2. [47]
    The applicant told the Commission that he did recall discussing the possibility of buying back some of his long service leave, but said no specific terms or manner in which that might occur was put to him.
  1. [48]
    Later, under cross-examination, he was able to recall there being some discussion about two-thirds of his long service leave entitlement being deducted from his bonus entitlement and purchasing back some of his long service leave.
  1. [49]
    In any event, the applicant told the Commission he was unable to afford any other option at the time aside from being paid his full bonus entitlement. 

Jurisdiction of Commission under s 475

  1. [50]
    At all relevant times the respondent was a constitutional corporation and therefore a national system employer pursuant to the Fair Work Act 2009 (Cth). Similarly, at all relevant times the applicant was a national system employee.
  1. [51]
    Sections 7 and 8 of the current Act provide that an employer and employee includes national system employers and employees for the purposes of ch 2, pt 3, div 9, which pertains to long service leave. To avoid any doubt, s 13 of the current Act states:

The provisions of the Queensland Employment Standards about long service leave, jury service leave and emergency service leave may apply to employers and employees who are generally covered by the Commonwealth Fair Work Act.

Note

 See also—

  • the Commonwealth Fair Work Act, section 27(2)
  • the Queensland referral Act, section 3(1), definition excluded subject matter
  1. [52]
    I accept that insofar as this matter relates to provisions in respect of long service leave, the respondent was an employer within the meaning of s 7, and the applicant was an employee within the meaning of s 8, of the current Act.
  1. [53]
    I am satisfied that the Commission has jurisdiction in this matter to make an order for unpaid wages under s 477 of the current Act which binds national system employers and employees, in circumstances where the provisions of state laws in respect of long service leave are expressly excluded by the Fair Work Act 2009.
  1. [54]
    It is apposite that s 475 of the current Act be used as a mechanism or avenue through which an employee, belonging to the national system or otherwise, may recover a statutory entitlement like long service leave which is prescribed by state legislation. 
  1. [55]
    I note, however, that these powers are not unfettered. Referring to the predecessor provision to s 475 of the current Act, O'Connor DP (as he then was) stated:

Section 278 does not afford the applicant an opportunity to pursue the respondent for breach of contract. In Tweddell v Ehle Pty Ltd, Moynihan P considered the provisions of the then Industrial Relations Act 1990 providing for recovery of wages "due and payable to an employee, or payable on account of the employee and unpaid", with "wages" defined as "moneys payable to an employee in respect of work performed or to be performed". His Honour held:

"For wages to be due and payable they must have been earned by work done in accordance with the contract of employment. The claim in this case is really a claim for the loss of an opportunity to earn wages in the future, the loss being due, on the appellant's case, to the respondent's wrongful repudiation of the contract before performance became due; i.e. it is an action for breach of contract."[1]

  1. [56]
    Properly conceived, the respondent understood the Commission's jurisdiction to be confined to "the question of Long Service Leave as it applied to the parties".
  1. [57]
    The respondent then sought to frame the controversy between the parties as one chiefly concerning the payment of the applicant's additional remuneration:

the Commission does not have jurisdiction to delve into the Applicant's entitlement to bonuses, and the enforceability of the written agreement entered into between the Applicant and the Respondent in relation to the payment of the Bonus.

  1. [58]
    The respondent stated that whether the applicant received the full bonus ($232,728.38) or a lesser bonus ($169,226.19) should not interest the Commission, especially considering the respondent's status as a constitutional corporation and national system employer.
  1. [59]
    The applicant plainly seeks recovery of his entitlement to long service leave which, as stated earlier, being an entitlement prescribed under state legislation and expressly excluded by the Fair Work Act 2009, may be recovered by way of an application under s 475 of the current Act irrespective of whether the parties are classified as national system employers and employees.
  1. [60]
    The question of whether the applicant's statutory entitlement to long service leave was paid should not be confused or conflated with the entitlements set out under his common law employment contract, over which, I accept, the Commission has no jurisdiction to interfere.             

Legislative Provisions: Long Service Leave

  1. [61]
    The Acts sets out the entitlement of employees to long service leave. It also provides for payment instead of long service leave.
  1. [62]
    The relevant provisions of the superseded Act are set out at ch 2, pt 3 as follows:

43 Entitlement

 (1) This section applies to all employees, other than seasonal employees.

 (2) An employee is entitled to long service leave on full pay of—

  (a) for the first 10 years continuous service—8.6667 weeks; and

  (b) if the employee has completed at least a further 5 years continuous service—another period that bears to 8.6667 weeks the proportion that the employee's further period of continuous service bears to 10 years.

  ...

  (6) An employee who is entitled to long service leave elsewhere than under this Act, is entitled to leave that is at least as favourable as the entitlement under this section.

 ...

 53 Payment instead of long service leave

  (1) An employee may be paid for all or part of an entitlement to long service leave instead of taking the leave or part of the leave if subsection (2) or (3) applies.

  (2) If the relevant industrial instrument provides for the employee to be paid for all or part of an entitlement to long service leave instead of taking the leave or part of the leave, payment may be made, in accordance with the industrial instrument, if the employee and employer agree by a signed agreement.

  (3) If no industrial instrument provides for the employee to be paid for all or part of an entitlement to long service leave instead of taking the leave or part of the leave, payment may be made only if the payment is ordered by the commission on application by the employee.

  (4) The commission may order the payment only if satisfied the payment should be made—

   (a) on compassionate grounds; or

   (b) on the ground of financial hardship.

 Brief History of the Long Service Leave

  1. [63]
    Long service leave is an entitlement unique to Australia, with its origin in employment conditions extended to the public servants of Australian colonies in the middle to late 19th century. Historically, its purpose was to grant a 'furlough',[2] or extended leave, to allow the servant sufficient time after a long period of loyal service to return home to the United Kingdom or some other distant country.[3]
  1. [64]
    While most employees in the public sector enjoyed the benefits of long service leave by the end of the 1920s, it was not until 1951 that it was first introduced into the private sector by legislative enactment of the Parliament of New South Wales. The Minister for Labour and Industry remarked at the time:

The Government has taken this action with several aims in view: (1) It will be an influence tending to reduce labour turnover which today is costing employers a considerable waste of effort and money; (2) it will reward long and faithful service with a single employer; and finally (3) it will enable an employee half-way through his working life to recover spent energies and return to work renewed, refreshed and reinvigorated.[4]

  1. [65]
    The Queensland Parliament enacted similar legislation in 1952. The entitlement was refined and extended over subsequent decades by means of legislation and arbitral decisions.[5]
  1. [66]
    Long service leave is now one of the National Employment Standards ("NES"), which constitute the minimum entitlements of workers in Australia under the Fair Work Act 2009. An award, employment contract, enterprise agreement or other registered agreement cannot derogate from or exclude the NES.
  1. [67]
    On my reading of history, it can be observed that long service leave in Australia is not, and has never been, an additional entitlement that may be negotiated between an employee and employer to an employment agreement, as in New Zealand. It cannot be obviated or negotiated away between parties in a laissez-faire fashion.
  1. [68]
    Long service leave, on the contrary, is a statutory entitlement prescribed and regulated by state laws and awards. While it is nowadays commonly the case that awards and agreements will provide for long service leave, as a minimum, state legislation will confer the entitlement.

 Cashing Out Long Service Leave

  1. [69]
    It may also be instructive to examine the historical development of the capacity to cash out long service leave. The Industrial Relations Act 1990 (Qld) prohibited the act of doing so, except upon termination of an employee's employment. An employer was not to make, and an employee was not to accept, payment in lieu of long service leave.[6]
  1. [70]
    Some years later the Industrial Relations Act 1999 (Qld) was enacted, which strengthened the prohibition by adding penalties:

53.(1)  An employer must not make, and an employee must not accept, payment instead of long service leave except on termination of an employee's employment.

  Maximum penalty—40 penalty units.

 (2)  A person must not enter into an arrangement under which—

   (a) an employee or the employer terminates the employee's service with the employer; and

   (b) the employer pays the employee for all or any long service leave that the employee is entitled to; and

   (c) the employer re-employs the employee within a period, commencing on the termination date, equal to the period of long service leave that payment was payment was for.

  Maximum penalty—40 penalty units.

  1. [71]
    In June 2000, the Full Bench of the Commission conducted a review of the long service leave entitlement.[7] Naturally, the Full Bench contemplated the capacity to cash out long service leave:

On this issue the employee organisations and the employer organisations (and consultants representing employers) were divided beyond redemption. We unreservedly accept that the "cashing out" of long service leave is incompatible with the purpose for which it is granted. Widespread "cashing out" has the capacity to undermine any campaign by employee organisations for further enhancement of long service leave entitlements and, perhaps, capacity to undermine the current entitlements. That said, we have been acquainted with tales which demand compassion. We are not persuaded that an employee who takes half of 8 2/3 weeks in leave and the other half in cash to pay for an airline ticket will return to work less refreshed and invigorated than an employee who spends 8 2/3 weeks in the back garden. Doubtless, if "cashing out" is possible, some will use it to relieve pressing financial necessity. In our view, we should not seek unduly to control the decision making of adult persons. There have been no tales of horror from jurisdictions, e.g. Tasmania, where "cashing out" is permitted. We have come to the view that cashing out should be permitted in the case of adult workers. In light of the restrictions we propose should be imposed upon pro rata payment in lieu after 7 years we consider that "cashing out" should not be permitted until 10 years continuous service has been rendered.

  1. [72]
    The legislature gave effect to the conclusions of the Full Bench in their entirety, amending the Act the following year to remove the prohibition on payment instead of taking long service leave.[8] In its place was substituted the provision that exists today, which provides that, absent an industrial instrument, cashing out is permitted subject to two important qualifications: only if the payment is ordered by the Commission on application by the employee, and only if the Commission is satisfied the payment should be made on compassionate grounds or on the ground of financial hardship.
  1. [73]
    In Dallow v Queensland Police Service, Blades C dismissed an application for payment of long service leave, relevantly stating:

The cashing out of a long service leave entitlement is not to be had just for the asking. The attitude of the employer may have some relevance but is not conclusive. There is a legislative fetter upon the discretion of the Commission. Section 53 of the Act permits the Commission to make an order only if satisfied the payment should be made (a) on compassionate grounds; or (b) on the ground of financial hardship. The Act does not define what "financial hardship" might entail. The Concise Oxford Dictionary includes "severe suffering or privation" among the meanings of "hardship". The Macquarie Concise Dictionary defines "hardship" as "a condition that bears hard upon one; severe toil, trial, oppression or need". In my view, "financial hardship" means or includes "severe financial need". While recognising that there are degrees of financial hardship, the Act requires something more than merely being in debt and in my view means more than voluntarily and purposely generating debt so as to claim financial hardship. The Act does not permit long service leave to be just swapped for cash.[9]

Submissions

  1. [74]
    Although the respondent acknowledges the applicant's long service leave was not cashed out in accordance with the relevant provisions of the superseded Act, it submits:
  • the long service leave was cashed out, and the applicant received money on account thereof, which he acknowledged and agreed to;
  • the applicant now seeks to distance himself from the very clear written agreement he reached to accept less of a bonus than he believed he was entitled to and to cash out his long service leave;
  • the applicant agreed to receive money on account of long service leave and accepts that such a payment would be a 'double dip';
  • the applicant (an experienced lawyer) seeks to raise an argument of duress in agreeing in writing to the cashing out of his long service leave;
  • the applicant's claim is no different to an employee cashing out his long service leave in contravention of the Act or superseded Act one day and then the next day resigning and claiming the same again;
  • a contravention of the Act is dealt with by the Act itself and does not entitle the applicant to double dip;
  • it would be inequitable for the Commission to order the respondent to pay the long service leave again; and
  • the Commission does not have the jurisdiction to delve into the applicant's entitlement to bonuses and the enforceability of the written agreement entered into between the applicant and the respondent in relation to the payment of the bonus.
  1. [75]
    The applicant submits that, as part of the process, the respondent sought to eliminate a statutory entitlement accrued over some 19 years, with the stroke of a pen at zero cost to the business. The amount of $232,728.38 was paid to the applicant on 29 September 2014. Of that amount, $63,502.19 was attributed to the cashing out of the applicant's long service leave benefit accrued to 30 September 2014.
  1. [76]
    The applicant maintains that the respondent purported to cash out the long service leave, but instead it was a sham, an accounting trick. There was no payment to the applicant in lieu of taking long service leave.
  1. [77]
    The reality, according to the applicant, is that the respondent merely took a payment owed to the applicant in the form of the 2014 Bonus and described $63,502.19 thereof as payment for long service leave.
  1. [78]
    In the end, the applicant contends the effect of the respondent's conduct was such that he never received the benefit of his long service leave accrued to 30 September 2014, either as physical leave or a cash payment in lieu of taking the leave.
  1. [79]
    In those circumstances, it is submitted that the applicant is not seeking to claim the benefit of an entitlement twice for the same period of service.

Analysis and Conclusions

  1. [80]
    The starting point in considering the question of statutory construction is the ordinary and grammatical sense of the statutory words to be interpreted having regard to their context and legislative purpose.[10]
  1. [81]
    In my view, the purpose of the qualifications at s 53 of the superseded Act, which are expressed in clear and emphatic terms, is to ensure that the cashing out of long service leave, while no longer totally prohibited, remains meaningfully fettered. Only if the employee makes an application to the Commission, and only if the Commission is satisfied the payment should be made on compassionate or financial hardship grounds, may the payment be ordered; in other words, only those "tales which demand compassion" of which the Full Bench remarked will merit an order for payment.
  1. [82]
    This construction is supported by a legislative history which indicates that prior to the 2001 amendment, not only was cashing out long service leave prohibited, but to do so incurred a pecuniary penalty.
  1. [83]
    In summary, based on this construction of s 53 of the superseded Act, for the applicant's long service leave to be cashed out, he needed to make an application to the Commission averring compassionate or financial hardship grounds. No such application was ever made, and thus the applicant's long service leave cannot be said to have been cashed out, contrary to the respondent's assertions.

Did the applicant receive the benefit of the entitlement?

  1. [84]
    I accept that over the years Mr Concetto Sciacca may have expressed reservations to the applicant about paying accrued long service leave in circumstances where salaried partners were also receiving bonuses.
  1. [85]
    It is not overly controversial that, in the months leading up to the sale of the respondent to Shine, management was taking steps to get the house in order in respect of employment arrangements and existing accruals.
  1. [86]
    The respondent asserts that the applicant is 'double dipping'; in other words, he received an additional payment of $63,502.19 being the value of his long service leave, and yet, before the Commission, he seeks to recover that amount anew.
  1. [87]
    The basis of this assertion was the agreement reached between Mr Sam Sciacca and the applicant in September 2014. The agreement stated that the applicant's long service leave would be paid to the applicant "in full as a cash advance and be deducted from [the applicant's] bonus payment in accordance with the terms of [his] employment agreement".
  1. [88]
    In this regard, it is relevant to consider cl 7.5 of the applicant's employment agreement (my underlining):

7.5 The Total Remuneration or any component thereof may be varied by agreement or as required by law. If any award or statutory entitlement requires Sciaccas Lawyers to provide You with a benefit, the benefit is treated as forming part of the Total Remuneration to the extent permitted by law and other components shall be adjusted accordingly. Any taxation required to be paid by Sciaccas Lawyers in respect of the Total Remuneration shall be deducted and paid for the Total Remuneration.

  1. [89]
    One must note that, in the relevant year, the applicant was to be paid $232,728.38 as a bonus and the value of his long service leave was $63,502.19. To reiterate, the respondent submits that, in accordance with the agreement, its payment to the applicant can be segmented as follows:

 LSL payout  $63,502.19

 Bonus payout  $169,226.19

 TOTAL:  $232,728.38

  1. [90]
    While the agreement still resulted in the applicant being paid $232,728.38, the nub of this application is whether this amount represents a diminished bonus payment together with the applicant's long service leave entitlement, as the respondent contends; or rather, whether this amount merely represents the bonus that was otherwise due to the applicant, and, had the long service leave in fact been cashed out in the appropriate manner and then disbursed, it would have been additional to this amount.
  1. [91]
    The respondent submits that the Commission should not disregard the "very clear written agreement" that was made with the applicant to cash out his long service leave. The agreement, as mentioned earlier, was a signed document headed 'Authority to Pay Funds'. It stated:

I, Vincent John Kartelo hereby request that my long service leave accrued as at 30 September 2014 (or as at the date my bonus payment is made), be paid to me in full as a cash advance and be deducted from my bonus payment in accordance with the terms of my employment agreement.

I acknowledge that this will result in a zero balance to my long service leave as at the date the bonus payment is made. 

Is the Authority to Pay Funds enforceable?

  1. [92]
    A contract may be rendered illegal either by statute or as a matter of public policy at common law. It is well established that 'no court will lend its aid to a man who founds his cause of action upon an immoral or illegal act'.[11]
  1. [93]
    In Nelson v Nelson the High Court held that a contract could be rendered illegal by statute in three situations, namely where there exists:
  1. (a)
    an express statutory provision against the making of a contract, whether or not the prohibition was absolute or subject to some qualification such as the issuance of a licence;
  2. (b)
    an express statutory prohibition, not of the formation of a contract, but of the doing of a particular act – in which case an agreement that the act be done is treated as impliedly prohibited by the statute and illegal; or
  3. (c)
    contracts not directly contrary to the provisions of the statute by reason of any express or implied prohibition in the statute but which are 'associated with or in furtherance of illegal purposes'.[12]
  1. [94]
    Unlike its predecessors, the superseded Act does not contain an express statutory prohibition against the cashing out of long service leave, or a provision against the entering into an arrangement whereby an employee's long service leave is cashed out.
  1. [95]
    The applicant contends that the cashing out of his long service leave was impliedly prohibited by statute and thus the written agreement in respect of the payment of funds should not be enforced by the Commission.
  1. [96]
    In my view, the superseded Act, by necessary inference, prohibits the written agreement as it was formed and performed between the applicant and respondent.[13]
  2. [97]
    As set out earlier, even a cursory examination of the legislative history in relation to cashing out long service leave demonstrates that this practice was the exception, not the rule.
  1. [98]
    Until the amendment in 2001, both cashing out and sham arrangements under the cover of which cashing out might be effected were prohibited and discouraged on pain of pecuniary penalty.
  1. [99]
    The amendment, far from introducing a new legislative paradigm in which cashing out was deregulated and abetted, merely placed (among other changes) two narrow qualifications upon the prohibition by allowing employees who were not covered by an industrial instrument to make an application to the Commission, whereupon its merits would be assessed with reference to normative standards of financial hardship and compassion.
  1. [100]
    Putting the legislative history to one side, it is evident based on the ordinary and natural meaning of the words employed by s 53 of the superseded Act (viz. "only if") that the determination of whether long service leave may be cashed out was solely the prerogative of the Commission upon consideration of an employee's application.
  1. [101]
    Even if I were mistaken and the agreement is not impliedly prohibited under the superseded Act, the refusal to enforce a contract may arise from the policy of the law, commonly called public policy. Articulating the modern approach to this area of illegality, McHugh and Gummow JJ observed:

Regard is to be had primarily to the scope and purpose of the statute to consider whether the legislative purpose will be fulfilled without regarding the contract as void and unenforceable.[14]

  1. [102]
    Their Honours held that the policy of the law should accord with the principles set out by McHugh J in Nelson:

Accordingly, in my opinion, even if a case does not come within one of the four exceptions to the Holman dictum to which I have referred, courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies.[15]

  1. [103]
    Chapter 1 of the superseded Act sets out its principal object: to provide a framework for industrial relations that supports economic prosperity and social justice. This is said to be achieved by, inter alia:
  • providing for rights and responsibilities that ensure economic advancement and social justice for all employees and employers;
  • ensuring wages and employment conditions provide fair standards in relation to living standards prevailing in the community; and
  • promoting and facilitating the regulation of employment by awards and agreements.
  1. [104]
    The provision chiefly relevant to this matter, s 53 ('Payment instead of long service leave'), appears under div 5 ('Miscellaneous'), pt 3 ('Long service leave') of ch 2, which deals with 'Pre-modernisation employment conditions'.
  1. [105]
    It is timely to note that the superseded Act sets out 'pre-modernisation employment conditions' at ch 2, and 'modern employment conditions' at ch 2A. For present purposes, it is sufficient to have regard to ch 2; the relevant provisions concerning long service leave between the chapters are identical.[16]
  1. [106]
    While the superseded Act contains many chapters, each of which is directed towards distinct subject matter – for instance, dismissals (ch 3); industrial disputes (ch 7); industrial tribunals and registry (ch 8) and enforcement (ch 10) – ch 2 is concerned with prescribing and protecting the minimum entitlements and conditions of employment for employees to whom the Act applies.
  1. [107]
    These include inter alia the minimum wage, working time, sick leave, annual leave, public holidays, parental leave and long service leave.
  1. [108]
    I conclude that the applicant was not paid his long service leave. Rather, it was obviated in its entirety by representatives of the respondent just prior to a transfer of ownership of the business in late 2014, on the agreement that the applicant would be entitled in return to receive the bonus payment in full that was otherwise due to him. 
  1. [109]
    It is inconceivable, in my opinion, considering the proper construction of s 53, its insertion into a chapter the provisions of which exhaustively prescribe and protect entitlements and conditions of employment, and the principal objects of the Act with their references to fairness and social justice, that the legislature would have regarded the wholesale obviation of a statutory entitlement as anything other than contrary to the Act, contrary to public policy, and therefore unenforceable.
  1. [110]
    Section 69 of the superseded Act ensured that continuity of service was not broken by the transfer of the business in October 2014. As such, the applicant's service, along with his statutory leave entitlements, transferred to the new employer at that time.[17]
  1. [111]
    In circumstances where I have determined that the Agreement to Pay Funds is unenforceable, I find the applicant is entitled to long service leave calculated on his continuous service of 21 years, 10 months and 3 days.
  1. [112]
    I accept that on the cessation of his employment the applicant received a payment of $9,380.56 which represented the accrual for a period of less than three years.  Accordingly, I find that he is owed the balance of his long service leave entitlement, which is reduced to the limit of $50,000 imposed by s 476(1) of the current Act.
  1. [113]
    I order accordingly.

Footnotes

[1] Day v Hutcheon [2014] QIRC 084 (footnotes omitted).

[2] The word 'furlough' stems from the Dutch word verlof, meaning 'leave'.

[3] William Love, Long Service Leave in Queensland (Queensland Confederation of Industry Limited, 1992).

[4] New South Wales, Parliamentary Debates, Legislative Assembly, 1951, 2089.

[5] Hugh Selby, Long Service Leave (Law Book Co, 1983).

[6] s 11.30.

[7] Review of Long Service Leave Entitlement [2000] QIRComm 83; 124 QGIG 236 (27 June 2000).

[8] s 9 Industrial Relations and Another Act Amendment Act 2001 (Qld); Explanatory Notes, Industrial Relations and Another Act Amendment Bill 2001 (Qld) 4.

[9] [2004] QIRComm 165; 177 QGIG 255 (17 September 2004) (my underlining).

[10] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, 31 (French CJ).

[11] Holman v Johnson (1775) 1 Cowp 341, 343; 98 ER 1120, 1121.

[12] (1995) 184 CLR 538, 552 ('Nelson'); Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410, 432.

[13] Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215, 245 (Kirby J).

[14] Ibid at 227.

[15] (1995) 184 CLR 538, 613 (my underlining).

[16] See s 71HQ Industrial Relations Act 1999 (Qld).

[17] See Australian Liquor, Hospitality and Miscellaneous Workers' Union, Queensland Branch, Union of Employees v Wilsons Parking Australia 1992 Pty Ltd (2002) 171 QGIG 323, 325.

Close

Editorial Notes

  • Published Case Name:

    Kartelo v Sciacca's Lawyers Pty Ltd

  • Shortened Case Name:

    Kartelo v Sciacca's Lawyers Pty Ltd

  • MNC:

    [2019] QIRC 55

  • Court:

    QIRC

  • Judge(s):

    Member Knight IC

  • Date:

    01 Apr 2019

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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