- Victorian Education Department Found to Have Unlawfully Deducted $20 Million for Laptop Use
- December 7, 2015 | Author: Adam Salter
- Law Firm: Jones Day - Sydney, New South Wales Office
- In Australian Education Union v State of Victoria (Department of Education and Early Childhood Development)  FCA 1196 (6 November 2015), the Federal Court found that the Department of Education and Early Childhood Development ("DEECD") had breached the Fair Work Act 2009 (Cth) ("Act") in deducting more than $20 million from the salaries of more than 40,000 teachers and principals for laptops used primarily for work.
Factual Background. Between 1 July 2009 and 29 November 2013, the DEECD made fortnightly deductions of between $4 and $17 from the salaries of teachers and principals who participated in a scheme whereby the DEECD provided the employees with a laptop. More than 40,000 employees participated in the scheme, and more than $20 million was deducted from the salaries of participating employees.
Legal Background. Section 323(1) of the Act requires an employer to pay its employee amounts payable for the performance of work in full and in money, except where the deduction is permitted under section 324(1). Section 324(1) allows an employer to make deductions in specified circumstances, including where the deduction is authorised by the employee in accordance with an enterprise agreement or the deduction is authorised under state law. Section 325(1) prevents an employer from requiring an employee to spend amounts payable to the employee in any way that is "unreasonable in the circumstances". Additionally, section 326(1) invalidates any term of an enterprise agreement or employment contract that enables an employer to make a deduction which is for the benefit of the employer and is "unreasonable in the circumstances".
The Australian Education Union ("AEU") challenged the legality of the deductions and sought orders that the amounts deducted be repaid to the participating employees. The parties had agreed that the part of the claim relating to a sample group of 11 teachers, as well as a set of common questions, would be determined at an initial trial, while all other issues raised would be deferred to a later trial.
Decision. Firstly, Bromberg J held that the deductions were not permitted under section 324(1) of the Act. His Honour rejected the DEECD's contention that the deductions were authorised by the teachers in accordance with their enterprise agreement which provided for "salary packaging arrangements". His Honour held that the subject of a salary packaging arrangement is remuneration earned and its fundamental feature is the substitution of one form of remuneration for another. On that basis, his Honour concluded that the because the laptops were not provided to the teachers as remuneration, it was not a "salary packaging arrangement" and therefore not authorised in accordance with the enterprise agreement. Furthermore, his Honour rejected the contention that the deductions were authorised under a state law, being a Ministerial Order made on 19 December 2012 determining that section 324(1) did not apply retrospectively to a scheme which commenced operation in July 2009.
Second, Bromberg J determined that even if the deductions were authorised under section 324(1), they were inoperative under section 326(1) on the basis that they were "unreasonable in the circumstances". His Honour considered the deductions to be unreasonable because there was a lack of genuine choice regarding participation in the scheme, the rate of contribution to the cost was excessive, the deductions were not primarily for the benefit of the employees and the value of the benefit did not provide any counter justification.
Although deciding that the deductions were unlawful, Justice Bromberg's decision on orders to be made in relation to the 11 teachers as well as the disposition of the claims not yet decided will be determined in a further trial for which a directions hearing was listed for late November 2015.
Lesson for Employers. This case serves as a reminder that when making deductions from an employee's remuneration, employers must carefully consider not only whether such deductions are authorised under the Act, but also whether the deductions are reasonable in the circumstances and whether they impermissibly benefit the employer. Deductions are unlikely to be deemed reasonable if they are mandatory, excessive or detrimental to the employee. In the case of employees who are not covered by an enterprise agreement or award, the deduction must be authorised in writing by the employee and be principally for the employee's benefit.