A recent Federal Court of Australia decision has clarified award coverage and NES entitlements in the finance industry, with relevance to any employer paying commission-only remuneration or seeking to rely on a common law set-off.
In Ord Minnett Holdings Pty Limited v Theodorou [2025] FCA 721 the Court determined the application of the Banking, Finance and Insurance Award 2010 (Finance Award) to “middle managerial” roles, the NES entitlements of those remunerated under “commission only” arrangements and the application of common law set-off provisions.
Overturning a decision of the Federal Circuit and Family Court of Australia(FCFCOA), Justice Kennett found that an “Associate Adviser” of Ord Minnett Holdings Pty Limited (Ord Minnett) was not covered by the Finance Award and therefore not entitled to over $231,000 in compensation.
This decision has major implications for not only the financial services sectors but for any employer paying commission-only remuneration or seeking to rely on a common law set-off. The case follows a number of others in the finance industry where apparently well-remunerated and sophisticated employees have sought compensation by reference to Finance Award provisions.
Background and the Decision at First Instance
Mr Evangelos Theodorou was employed by Ord Minnett from March 2012 to December 2019, initially as a Private Client Adviser and later as an Associate Adviser providing financial advice to clients. The employment relationship was governed by a written employment agreement pursuant to which he was remunerated “by way of commission only”, rather than wages or salary.
In July 2021, Mr Theodorou commenced proceedings against Ord Minnett in the FCFCOA alleging breaches of the Fair Work Act 2009 (Cth) (FW Act) and the Finance Award. Specifically, he claimed that he was covered by the Finance Award as he had held a “middle managerial role” during the relevant period, entitling him to minimum wages, sick leave entitlements and annual leave loading that he had not been paid.
Mr Theodorou claimed that Ord Minnett had, contrary to section 44 of the FW Act, breached provisions of the National Employment Standards (NES) and the terms of a modern award that applied to him, specifically, the Finance Award. Each alleged contravention depended on Mr Theodorou being covered by the Finance Award. Ord Minnett denied that Mr Theodorou was covered by the Finance Award and each alleged contravention of the FW Act. In the alternative, Ord Minnett argued that it was entitled to offset or bring to account the amounts paid to Mr Theodorou by way of commission under the employment agreement against any amount it was required to pay to Mr Theodorou because of any application of the Finance Award.
At first instance before the FCFCOA, Mr Theodorou was found to be covered by the Finance Award because he was a person captured by clause B6 of the Finance Award which applied to a person who “typically performs a middle managerial role primarily to control the conduct of a part of the employer’s business and in which decisions are regularly made and responsibility accepted on matters relating to the administration and conduct of the part of the business”. In doing so, the FCFCOA concluded that clause B6 of the Finance Award applies to persons who are not “managers” within the ordinary meaning or meanings of that word and that Mr Theodorou’s duties, which extended beyond a stockbroker, came within clause B6 having regard to the indicative job list.
Ord Minett unsuccessfully argued that Mr Theodorou did not perform a “middle managerial role” and that he was, in any event, excluded from the operation of that provision because he was someone “who, because of the nature or seniority of their role, were not traditionally covered at all by awards.” Ord Minett also unsuccessfully argued that as Mr Theodorou was not covered by the Finance Award and paid on a commission only basis, he was a “pieceworker” and his base rate of pay for the purpose of the NES was therefore that defined by reg 1.09 of the Fair Work Regulations 2009 (Cth) (FW Regulations) which was satisfied by his commissions.
Ultimately, the primary judge concluded that, as Mr Theodorou’s duties fell within classification B6 of the Finance Award, Mr Theodorou was entitled to $245,483.96 for work from July 2015 to December 2019. While Ord Minnett was entitled to a credit for some payments, the primary judge rejected its claim to set off commissions already paid as those commissions were distinct from the salary obligation under the Award.
The Appeal
Ord Minnett raised several grounds of appeal including that the primary judge:
- erred in finding that Mr Theodorou’s position fell within the terms of clause B6 of the Finance Award;
- erred in failing to find that Mr Theodorou was a pieceworker within the meaning of s 21(1)(c) of the FW Act; and
- erred in finding Ord Minnett was not entitled to set off the commission it had paid Mr Theodorou against the amounts found to be owed to him
More specifically, Ord Minnett argued that the FCFOA had erred in not finding that Mr Theodorou’s position was a “middle managerial role” under the Finance Award and had therefore incorrectly calculated his entitlements including because the primary judge have failed to find that Mr Theodorou was a “pieceworker”. Ord Minnett also argued that, if the classification under the Finance Award was upheld, any unpaid salary and leave loading entitlements owing to Mr Theodorou under the Finance Award and the FW Act should be set off against the commissions he had already been paid.
The Decision
Award coverage
In upholding the appeal, Justice Kennett of the Federal Court found that Mr Theodorou’s role did not fall within the clause B6 classification of the Finance Award. Instead, the Federal Court found that, properly construed, clause 6B of the Finance Award refers to “managers in the ordinary sense: those who control (subject to senior management) a part of an entity’s business primarily by directing the work of others”. This was found to be supported by the wider context in which that expression appears.
While the Court also noted that the indicative job list in clause 6B must extend the coverage of the clause beyond the concept of a “middle manager role”, this did not assist Mr Theodorou as the list did not include a description of his role. Accordingly, Mr Theodorou was not covered by the Finance Award.
The concept of “not traditionally covered” by an award
The Federal Court also examined the operation of the exclusion in clause 6B of the Finance Award to persons who “because of the nature or seniority of their role, were not traditionally covered at all by awards”. That language is included in many modern awards and reflects section 143(7) of the FW Act which provides that “A modern award must not be expressed to cover classes of employees… who, because of the nature or seniority of their role, have traditionally not been covered by awards (whether made under laws of the Commonwealth or the States).”
The primary judge had held that the exclusion did not apply because Mr Theodorou had previously been covered by the now-superseded CommSec Award 2006, although that was the only award that had previously applied to Mr Theodorou’s position.
On appeal, the Federal Court said that “’Traditionally’ ordinarily connotes something done with a degree of frequency or regularity over a period of time. However, the time period and the frequency that are needed for the thing to be regarded as “traditionally” done are likely to be highly debatable and probably context-specific.” After analysing the history and context of award modernisation and section 143(7) of the FW Act, the Federal Court concluded that the Finance Award was “ineffective to the extent that it purported to cover employees in either of the classes referred to in s 143(7)” and that Mr Theodorou’s coverage by a single award made in 2006 was insufficient to establish that he was in a role that was not traditionally covered by an award.
Accordingly, Mr Theodorou was, for a second reason, not covered by the Finance Award.
Pieceworker and its implications
Having concluded that Mr Theodorou was not covered by the Finance Award, the Federal Court went on to find that Mr Theodorou was a “pieceworker” within the meaning of section 21(1)(c) of the FW Act and reg 1.12 of the FW Regulations as the nature of his commission only remuneration meant that he was paid “by reference to a quantifiable output or task” and he was therefore within the relevant prescribed class.
The Court also accepted that Mr Theodorou’s entitlements to be paid at his “base rate of pay”[1] for annual leave, personal/carer’s leave and public holidays[2] was to be calculated by reference to his commissions (and not to be paid in addition to any commissions). The base rate of pay operates as a minimum threshold, not a separate entitlement. As Mr Theodorou received commissions due to him each month regardless of whether he took leave, he was remunerated for those periods at the same level as the periods he was working and no additional amounts were payable to him.
Compensation off-set
Given the Federal Court’s findings above, the issue of set-off did not require determination. Nevertheless, the Federal Court disagreed with the views of the primary judge on this issue and would have allowed Mr Theodorou’s commissions to be set off against amounts payable under the Finance Award.
The primary judge had concluded that the award obligations and contractual obligations were not sufficiently correlated such as to allow the payment of commissions to be treated as discharging award obligations. However, the Federal Court referred to the summary of set-off principles in Wardman v Macquarie Bank Limited [2023] FCAFC 13; 322 IR 278 (at [31]), noted that “the recompense that he received in exchange for coming to work each day and performing the duties allocated to him was in the form of commissions based on the revenue that his efforts generated” and concluded that there was a “coincidence of purpose” between the commissions payable to Mr Theodorou pursuant to the employment agreement and the amounts that would have been due to him under the Award and the NES.
Kennett J went on to say that “it would be a strange result if an employee who entered into an employment contract providing for remuneration by commission only, and received those commissions over a period of years, could insist on those commissions being completely ignored in a reckoning of their rights against the employer.”
Key takeaways for Employers
This decision has major implications for not only the financial services sectors but for any employer paying commission-only remuneration or seeking to rely on a common law set-off.
Firstly, the decision provides key guidance to the banking, finance and insurance industry regarding the coverage of the Finance Award, particularly regarding employees in client adviser, stockbroking and wealth management roles. However, the unclear terms of the Finance Award remain an issue given the ongoing ambiguity regarding the coverage of persons captured by the Level 6 “indicative job list” who do not perform managerial functions.
Secondly, the Court has provided useful guidance on the operation of the words “not traditionally covered by an award” which regularly appear in modern awards. The fact that a position may have once been covered by an award on one single occasion is insufficient to establish that role is “not traditionally covered by an award”.
Thirdly, the decision has embraced a broad and common-sense approach to common law set-off clauses which is particularly comforting to employers who utilise commission only remuneration structures.
The decision also serves as a reminder to employers to ensure employment contracts clearly set out remuneration structures, expressly link commission payments to the work performed and ensure that any remuneration is intended to be set off against any award entitlements that may later be found to apply.
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This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.
[1] Fair Work Act 2009 (Cth), s 16. [2] Fair Work Act 2009 (Cth), ss 90, 99 and 116.