Extra commission instead of leave: did it cover long service leave?
Jason Jowett v Coastal R.E. Pty Ltd atf Coastal Unit Trust [2024] WAIRC 00149
- Decided by
- Industrial Magistrates Court of Western Australia
- Date
- 5 April 2024
- Outcome
- $17,133.79 annual leave and a $7,000 penalty; long service leave lost on appeal
- Result
- Mixed result
A real estate agent paid only by commission signed a contract saying his higher commission paid for all his leave in advance. When he resigned after almost 10 years, he won $17,133.79 in unpaid annual leave and a $7,000 penalty, because annual leave cannot be signed away. His $54,567.22 long service leave win was overturned on appeal: a majority of the WA Full Bench held the old law let him trade that leave for higher commission.
Key points
- Paid annual leave under the Fair Work Act cannot be signed away in a contract; the extra commission counted against it only for the years when the award allowed leave to be paid in advance.
- Before 20 June 2022, s 5 of the Long Service Leave Act 1958 (WA) let an employee agree in writing to give up long service leave for an adequate benefit.
- A majority of the Full Bench held that this could be done in advance, before any leave had accrued, and all three members found commission 77% above the award minimum adequate.
- Since 20 June 2022, long service leave can only be cashed out once it has accrued, and for at least the ordinary pay the leave is worth.
What happened
Mr Jowett sold homes in suburbs such as Carine, Scarborough and Marmion for Coastal R.E. Pty Ltd, a real estate agency. He worked there from 13 November 2012 until he resigned on 20 October 2022: 9 years, 11 months and 8 days. He was paid only by commission. He received 60% of 93% of the agency's gross commission, rising to 65% once that gross commission passed $270,000, plus superannuation. From 1 July 2021 that rose to 70% (75% above $900,000), including superannuation. The award minimum for commission-only agents was 31.5%.
His contract tied the generous rate to leave. Clause 8 said: "An additional percentage amount has been included in the commission remuneration, so that you are paid in advance of all leave entitlements", so any leave would be unpaid, and nothing more would be paid for leave when the job ended. Mr Jowett took leave three times without leave pay. When he resigned, the agency paid him $1,671.72 for long service leave, covering only the period after the WA law changed in June 2022.
The claims
Mr Jowett sued in the Industrial Magistrates Court, which enforces both the Fair Work Act 2009 (Cth) and WA long service leave law. He claimed unpaid annual leave under the federal Act and pro rata long service leave under the Long Service Leave Act 1958 (WA). Although he was a national system employee covered by the federal Act, his long service leave came from this WA law.
A separate claim about his payslips failed. On his accountant's advice, he had his wife invoice the agency for amounts that wiped out some of his commission. The magistrate rejected his "belated and arguably disingenuous" attempt to call those payments deductions, and left them out when working out his pay for long service leave.
Annual leave: a right you cannot sign away
The Fair Work Act gives employees four weeks of paid annual leave a year, and s 90(2) requires untaken leave to be paid out when employment ends. Industrial Magistrate Scaddan held that it "was never open to the parties to contract out of the requirement of paid annual leave". From 2 April 2018 the real estate award also required commission-only employees to be paid at least the base rate when they took leave. She assessed his untaken leave at $37,400.77.
In a second decision, she let the agency count the extra commission against leave for the years up to 2 April 2018, when the award still allowed leave to be paid in advance. That cut the amount to $17,133.79. She also ordered a $7,000 penalty, paid to Mr Jowett, placing the breach in the low range. Among other things, she accepted that the agency genuinely believed the commission covered his leave.
Long service leave: the legal test
Before 20 June 2022, s 5 of the Long Service Leave Act said an employer and employee "may agree that the employee may forgo his entitlement to long service leave under this Act" if the employee was given an adequate benefit in lieu and the agreement was in writing.
The magistrate read s 5 as allowing leave to be traded only once it had accrued. It was not meant to allow payment in advance for leave the employee might never become entitled to. In any event, she found the evidence could not show the extra commission was adequate, because one undivided percentage covered every kind of leave. She ordered the agency to pay $54,567.22, being 8.61 weeks at his average weekly pay of $6,531.82, less the $1,671.72 already paid.
The appeal
The agency appealed to the Full Bench of the Western Australian Industrial Relations Commission. Commissioners Tsang and Kucera held that s 5 allowed an employee to give up a contingent entitlement, meaning leave not yet accrued, if the benefit was adequate and the agreement was in writing. Clause 8 met that test. All three members thought the benefit adequate: his original rate was 77% more than the award minimum.
Senior Commissioner Cosentino agreed with the magistrate that s 5 covered only an accrued entitlement. The Senior Commissioner would still have allowed the appeal on a different ground, called set-off: the contract showed the commission above the award minimum was paid for leave, including long service leave, so those payments had already satisfied what was owed. The $54,567.22 order and the magistrate's caution on long service leave were both set aside.
What this means for you
The law has moved. Since 20 June 2022, s 5 allows long service leave to be cashed out only once it has accrued, for at least the ordinary pay the leave is worth, in an agreement signed by both sides. A new contract can no longer trade it away in advance. But an agreement signed before that date may still be judged under the old section, as this one was.
If you are paid by commission, read your leave clause. If you are in the federal system, a contract cannot remove your paid annual leave under the National Employment Standards (the minimum conditions in the Fair Work Act), even though some commission payments may be counted against it, and you may be owed leave when you go. For long service leave, it is worth getting advice early, because the answer may depend on when your contract was signed and how far your commission exceeds the award minimum. Employers should not treat a loaded rate as a safe substitute for paying leave: this agency changed its contracts from December 2022.
The takeaway
A contract cannot take away paid annual leave, although extra commission may count against it in limited cases; under WA law before 20 June 2022, a clear written clause and a generous rate could cover long service leave, even before it accrued.
Note: The Full Bench appeal ([2025] WAIRC 00681) dealt only with long service leave; the annual leave orders and the $7,000 penalty were made under the Fair Work Act. The majority (Commissioners Tsang and Kucera) allowed the appeal on the meaning of the old s 5; Senior Commissioner Cosentino reached the same result through set-off. No further appeal to the Industrial Appeal Court was found. Section 5 was replaced with effect from 20 June 2022 by the Industrial Relations Legislation Amendment Act 2021 (WA). The decision on set-off and penalty was given on 14 August 2024, and the Full Bench decided the appeal on 8 August 2025.
Industrial Magistrates Court of Western Australia · 5 April 2024
Jason Jowett v Coastal R.E. Pty Ltd atf Coastal Unit Trust [2024] WAIRC 00149, Industrial Magistrate Scaddan; on appeal, Senior Commissioner Cosentino, Commissioner Tsang and Commissioner Kucera. Read the full decision
This is a plain-English summary of the published decision, for general information. It is not legal advice, and every case turns on its own facts.
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