A common misconception is that modern awards do not apply to employees who earn above the high-income threshold, which is currently $162,000. In fact, modern award application is only precluded where the employee is the subject of a guarantee of earnings.

The Federal Court explored this issue recently in APESMA v Peabody Energy Australia Coal Pty Ltd (2022).

In this case, the employer argued that it didn’t need to make redundancy payments under the Black Coal Mining Industry Award 2010 to employees earning above the high-income threshold. The employer argued the terms of the employees’ contracts of employment that dealt with remuneration constituted guarantees of annual earnings.

However, the Court ruled that a guarantee of earnings required something more than a mere contractual promise to pay an employee a specified salary. The employer had to notify employees who are covered by a modern award of the consequences of accepting a guarantee of annual earnings. The employer also had to give a written undertaking or guarantee to pay an amount of earnings for a specified period. In turn, the employees had to accept the undertaking.

In this case, therefore, the high-income employees could still enforce award entitlements.

The Court also had the opportunity to deal with the meaning of ‘retrenchment’. Under the award, the Queensland employees were entitled to be paid accrued personal/carer’s leave if their employment was terminated by retrenchment.

The Court found that “the ordinary meaning of ‘retrenchment’ in an industrial context is the termination of an employee’s contract of service, usually as a result of the employee’s job becoming redundant. An employee is ‘retrenched’ because his or her job has become redundant”.

As the Court already found the award applied to the Queensland employees, and they were also found to be retrenched, the employees were entitled to be paid for the personal/carer’s leave they had accrued upon their retrenchment.