Over the course of the last six years, four separate sets of proceedings have been grinding their way through the Federal Court. Given the apparent commonality of issues, the matters were heard in parallel across 19 days in June and July 2023. Fast forward a little over two years and a little over 200 pages of judgement, and we’ve now got this Court’s answer to the billion-dollar question as to the operation of contractual annualisation arrangements (particularly as they operate under the General Retail Industry Award).
With the judgement approaching it’s one-month birthday, surprisingly less has been written about what the decision means for employers than you would think. One can only speculate why that is. Perhaps it’s because the answer arguably runs contrary to decades of conventional thinking (and possibly contrary to aspects of a Full Federal Court decision handed down in April 2025). Perhaps it’s because the dust is still settling, or perhaps it’s because in a political and legislative environment of continuing pressure and focus on employers to provide work-from-home and other flexible work arrangements, the decision signals a possible need to tear up long-used contractual annualisation arrangements and to move back to rigid and closely monitored working and hourly-wage arrangements, with accompanying timesheets.
Within the circles of those I’ve spoken to, there seems to be an anecdotal consensus that the judgement will almost certainly (need to) be appealed, but with the recent announcement of a class action law firm exploring similar claims against a third major retail group, the potential impact of the decision is undeniable.
So, what are the potential impacts of the judgement?
Firstly, the Court’s indicated:
Salary amounts paid by an employer in satisfaction of award entitlements can only be applied against award entitlements within the same pay period.
Salary amounts paid by an employer in excess of award entitlements in one pay period cannot be carried forward to be applied against award entitlements in a future pay period.
An underpayment of award entitlements in one pay period cannot be paid off using an overpayment in a future pay period.
Secondly, (and less surprisingly) annualised salary arrangements or similar do not remove an employer’s separate obligations to keep the employee records that are required to be made and retained by the Fair Work Act and Regulations.
Thirdly, keeping records that enable relevant information to be determined is insufficient to meet the requirement to keep a record of the relevant information itself. So, for example, a requirement to keep a record of overtime worked is not going to be met by keeping a record of both the employee’s rostered hours and actual hours.
While many employers may understandably wait for the appeal process or legislative change before tearing up their annualised salary arrangements, there’s a number of things to keep your eyes open for in the meantime.
Risk-assess your arrangements. If the amount you’re paying within a given pay-period could be less than what the award requires, then it needs your attention.
If the records you’re actually keeping don’t clearly tick the boxes on the records you’re actually required to keep, then it also needs your attention.
Employees (and importantly, former employees) are entitled to copies of their employee records on request. Not providing the actual employee records, and not providing them within the short timeframe required, is a free-kick to a disgruntled former employee.
While this judgement is a product of class-actions and litigation commenced by the Fair Work Ombudsman, it’s entirely predictable that requests for employee records and allegations of pay-period underpayments will be leveraged alongside other claims asserted by disgruntled and former employees.
