If you pay staff members “all in” rates or employ “permanent casuals” or “independent contractors”, this briefing note is important for you.

Employers often complain of “double dipping” where persons they engage and pay to perform services subsequently claim, and are found to be entitled to, payments for benefits under an Award or the National Employment Standards.  Examples of this include:

  • employees paid “all in” hourly rates claiming overtime, weekend penalties and other allowances;
  • So called “permanent casuals” claiming payment for annual leave despite having received a casual loading;
  • individuals engaged as independent contractors claiming to be employees.

Several recent judgements have again drawn attention to the so-called ability to “set off” payments that have been made to the individual against Award or NES entitlements. Whilst the courts have pointed out that the issue is not a true set off within the legal meaning of those words, they have accepted that it is a useful and common description of the practice in employment law.

The judgments have to date generally approached the matter as one of the allocation of monies paid, holding that a payment that is designated to be in settlement of one indebtedness cannot subsequently be applied in settlement of a different indebtedness.

So, for example:

  • a payment made for all work performed might be “set off” against a claim for payment of wages, overtime and weekend penalties, but not against annual leave or allowances;
  • a payment made for 40 hours of work per week might be set off against a claim for wages for 38 ordinary hours and 2 hours overtime, but not for work in excess of 40 hours or other award entitlements.

In each case the courts will consider what the payment is expressly stated to cover. For that reason, “set off” clauses need to be drafted with great care.

Employers who use “all in” hourly rates (or “permanent casuals” or “independent contractors”) should review the payment clauses of their contracts accordingly.

The law on this issue is currently under scrutiny in several high-profile cases.  Questions have been raised as to whether “set off” can be applied where there is a mis-description of the true employment relationship.  In addition, in one matter currently before the Federal Court, claims based on unjust enrichment have been raised to avoid a double payment to the employee.