In the absence of an employer contract 

An often felt emotion for small business owners, particularly in real estate,  is a strong attachment to the operations of their business and the staff that they employ. 

This strong relationship can be conducive to success because both parties are motivated to succeed due to the close attachment to the business. 

When things are tough and the relationship sours though, that same emotion can cloud the judgement of small business employers and can result in decisions being made on an emotional basis rather than being made objectively with disastrous results. 

So what mistakes can be made? 

The first one is not having a contract of employment with your employee.  It seems obvious doesn’t it.  Of course you should have a contract of employment.  However, it is amazing how often this is not the case.  You know the drill.  You’ve found someone to help you in your business, you go for a coffee, get to know and like them and you start the employment relationship with a handshake.  No need to formalise the arrangement right? 

The problem arises when one party has an expectation of what was agreed to that the other party doesn’t.  When that expectation isn’t fulfilled, disappointment and anger can arise.  Now, we are off to the races as the relationship sours, disputes occur and that strong bond and attachment that I mention earlier starts to disappear. 

Always ensure that you reduce what you and your employee agree to writing.  Subject to any legislation, industrial awards or legally binding statutory enforceable agreements the parties to a contract are free to agree to any terms that they wish to impose upon themselves – subject to those terms not being unlawful.  To avoid doubt at a later stage, a written contract should be entered into. 

Another problem is that the Real Estate Award requires you to enter into a written arrangement with your staff.  By not having a contract of employment you are breaching the award. 

The second mistake that small business employers can make is not knowing what is contained in their contracts with employees or awards and legislation that cover them.  This can be very costly because it is usual for the lack of compliance to only come to light when an employee leaves or there is a dispute or breakdown in the relationship and the non-compliance has gone on for some time.  Don’t guess what your obligations are, know them! 

If your sales representatives are on a retainer/commission contract, the retainer must be paid regardless of their performance.  This does not mean that poor performing employees cannot be performance managed.  It does mean, however, that they cannot be ‘punished’ for poor performance by not being paid their entitlements. 

The final mistake discussed today resulting from an emotional decision is when small business employers suspect employees have misconducted themselves, particularly serious misconduct such as theft.  Usually these suspicions arise during periods where the business is not performing well.  Quite often, quick emotional decisions are made to dismiss the employee without due process resulting in unfair dismissal claims.  A recent example of this is illustrated in a decision from the Fair Work Commission. 

In this case, a small business employer was ordered to pay an employee it had dismissed $30,000 in compensation.    The employer, whose sales and income was declining, after being told the employee had been printing sales reports, came to conclusion without any corroborating evidence, that the employee had been stealing money from the business.  Instead of taking the time to consider and properly investigate the suspicions, whilst providing the employee with procedural fairness, the employer summarily dismissed her.  It was clear from the summary of facts contained in the Commission’s decision that the employer had made a decision based on his emotions. 

The Commission found that there was no basis for the employer’s assertions that the employee had been stealing and the accusations had been fabricated. 

REEFWA can help employers avoid the pitfalls associated with termination and drafting of contracts of employment. For expert advice regarding these matters or for representation at unfair dismissal proceedings please contact the Employee Relations Advice Centre on (08) 9365 7660 or advice@cciwa.com 

Elton v Acupuncture Australia Pty Ltd [2015] FWC 864 (Feb 4) 

Meeting the Minimum Income Threshold Amount – What Employers Need to Know Before 2 April 2019

By Erin Verzandvoort,
Employee Relations Adviser

Following a broad review of modern awards by the Fair Work Commission (FWC), employers in the real estate industry should start preparing for an important upcoming deadline, ending 2 April 2019. Currently, the Real Estate Industry Award 2010 (the award) prevents employers from allowing employees to remain on commission only arrangements if they do not meet the minimum income threshold amount (MITA) after an annual review period.

Employees who were engaged as commission only employees prior to 2 April 2018, need to have their gross income reviewed to establish if they achieved the MITA in the previous twelve-month period commencing 2 April 2018. For employees engaged after 2 April 2018, the review must not occur later than 12 months from the anniversary of their commencement on a commission only arrangement. The MITA is equal to 125% of the minimum wage for the employee’s applicable classification under the award. This amount is calculated as an annual gross amount, excluding statutory superannuation. Acceptable evidence of the employee having met the MITA may include; individual payment summaries, pay slips and/or commission statement records or other sales records.

It is important for employers to consider their options if it appears an employee will not meet the MITA by 2 April 2019. While the award simply states the commission only arrangement must cease, it does not provide any practical pathways for employers to choose in this event. The following options are available for consideration.

Termination

One option available to employers is to terminate the employee’s employment. This may be an appropriate solution where the contract of employment contains a provision to terminate employment if the MITA is not met. Even so, employers who terminate an employee may be at risk of an unfair dismissal  claim as well as possible claims for breaching the contract of employment. To carry out a fair and lawful termination, in accordance with the Fair Work Act 2009, employers should ensure there is a valid reason to terminate employment and a procedurally fair process is followed. Leading up to 2 April 2019, employers should monitor and manage the performance of commission only employees. Where appropriate and where it can be demonstrated that key KPIs have not been met, warning letters may need to be issued.

Change of contract

Changing the employment arrangement is an alternative option to termination of employment. If an employee fails to meet the MITA, they can no longer be employed on a commission only arrangement. However, they may still be eligible to be employed on other arrangements, such as a retainer/commission arrangement. This approach allows employers to retain employees who can no longer remain on a commission only arrangement by changing their employment conditions. An employer should not change the contract of employment without the express agreement from the employee and ideally any variation should be recorded in writing. Failure to do so could result in the employer breaching the employment contract and attract pecuniary penalties in the FWC or Federal Court.

Employers who continue to employ employees on a commission only arrangement who do not meet the MITA may be considered in breach of the award and could be liable penalties of up to $63,000 for the body corporate and $12,600 for individuals per breach. For serious breaches, under the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, employers who deliberately and systematically breach an obligation, could be liable for penalties up to $630,000 for the body corporate and up to $126,000 for individuals for serious contraventions. 

Accordingly, it is important for employers who engaged employees on commission only arrangement prior to 2 April 2018 to consider the likelihood of their commission only employees not meeting the MITA by 2 April 2019 and what options are the most appropriate for the business.

If you are considering any of the options discussed we recommend you contact the CCIWA Employee Relations Advice Centre on (08) 9365 7660 or email advice@cciwa.com

Hot Topic | Unfair Dismissal

RECENT UNFAIR DISMISSAL DECISION HIGHLIGHTS THE PERILS OF ATTEMPTING TO USE REDUNDANCY AS A WAY TO DISMISS DIFFICULT EMPLOYEES

A common strategy used by employers in the real estate industry, particularly those who have less than fifteen employees because this means they are not required to pay redundancy pay, is to manufacture a redundancy situation and dismiss difficult or under-performing employees for that reason, rather than properly addressing issues of misconduct or under-performance.

A recent Fair Work Commission decision highlights the dangers of using such a strategy.

Background

The employee was employed by the employer in a position that in Western Australia, would be the equivalent of a Licensee in late 2015.

In March of this year, the employer had a discussion with the employee, where the employee was advised that his position was no longer required to be done by anyone because the employer had decided to take over the duties of licensee itself.  However, rather than end the employment relationship, the employer offered the employee a position as a property sales associate or alternatively, the employee could choose to be engaged on a contract for service (contractor) relationship.

Whilst this was not part of the unfair dismissal application decision, please note that neither of the above alternatives are appropriate here in Western Australia and should not be considered by REEFWA members.  A property sales associate position would be too junior for an employee who is currently engaged as a licensee and the property sales person position would be more appropriate.

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