Commission Arrangements In Employment Contracts
Tony Cavanagh is a Director at Mullane & Lindsay in Newcastle and is one of LawCover’s panel solicitors.
Ms S was an employed real estate agent for around five years. She was remunerated partly by salary and partly on commission. Her commission was a percentage of the sales commission received by the agency. A dispute arose as to whether the agency was entitled to make specific deductions from the gross commission it received, before calculating the employee’s percentage.
Ms S said she was not told about these deductions before starting the employment; that when she later complained about them she was told “this is how its done here” and there was no change in conduct by the agency. The Court accepted this evidence, however it also held, on the evidence, that Ms S knew there would be at least some deductions made from gross commissions prior to accepting the original offer of employment; and that she certainly knew of the deductions when she renewed her Contract each year for the 5 subsequent years.
The case raised two important points. Firstly, although the written contract of employment was ambiguous on whether or not deductions from commission could be made, the Court was satisfied on the evidence that Ms S’s conduct after accepting employment, showed an awareness that deductions would be made. The Court therefore decided the employment contract included a term permitting deductions to be made. In particular that was so when the contract was renewed from year to year.
Secondly, the Court found that the conduct of Ms S, by continuing in employment and accepting remuneration on the basis of ‘gross commission less deductions’, prevented or “estopped” her from asserting, after the employment relationship was terminated, that the agency was not permitted to make those deductions.
The case is a neat illustration that any contract, including an Employment Contract, can comprise not only what the parties agree in writing, but also what they impliedly agree by their conduct. Where a person A claims a contract is not being performed by B, it can be important to challenge it promptly, otherwise a Court might eventually find that subsequent conduct that was consistent with what B said was the agreement, is evidence that B is correct; or that by continuing to work in a way consistent with B’s interpretation of the contract prevented A from later arguing a contrary position.
Because this decision is of the District Court, and from Queensland, it does not have any precedent value in New South Wales, but it nonetheless neatly encapsulates some issues that often arise in NSW contract disputes: Saul –v- Snowview Pty Limited [2011] QDC 206.
Tony Cavanagh is a Director at Mullane & Lindsay, and practises extensively in Commercial and other Litigation; and Employment Law. If you require any assistance in these areas please contact Tony Cavanagh or contact our Newcastle office.