A highly paid junior lawyer negotiated with his employer to receive a significant share of the profits of the business as part of his remuneration.
He sued his employer for making false and misleading representations by not paying him what was allegedly owed as per his contractual arrangements, not paying his annual leave entitlements, not properly keeping records and not reimbursing him for expenses.
What is it about?
This case serves as a reminder that although unfair dismissal claims and general protections application are more common claims of false and misleading representations are also a risk.
The issue in this case was whether the employer and its director made false and misleading representations to their former employee, Mr Carbone, including not paying the agreed remuneration and annual leave entitlements.
The facts
Mr Carbone commenced employment with the employer James McConvill & Associates Pty Ltd as a paralegal from 2014-2015. James McConvill was the director of the employer.
From March 2015 to July 2015, Mr Carbone was employed on a full-time basis as a legal practitioner on a “Post Admission Agreement” (the Agreement). The Agreement included that Mr Carbone would be:
“remunerated 50% of the fees, less disbursements, received by the partnership from files of which [Mr Carbone] had carriage”.
Mr Carbone later entered into another contract from July 2015 to August 2016 which set out Mr Carbone would earn a salary of $35,000 per annum, and he would be entitled to a commission of 50% of the fees received by the employer, if he was the “primary professional fee earner”. From August 2016, Mr Carbone entered into the same contract, except it stated he would be earning a commission of 40%, rather than 50% of the fees.
During Mr Carbone’s employment, he made numerous complaints relating to invoicing, the employer’s legal and regulatory compliance, ethical issues, misconduct, failure to properly supervise lawyers and paralegals within the business, and outstanding or unpaid employee entitlements.
In October 2018, Mr Carbone filed a claim in the Federal Court of Australia alleging:
- unlawful termination on the basis adverse action was taken against him where his employer coerced him not to exercise a workplace right;
- his employer made false and misleading representations under the Australian Consumer Law including that:
- he would be remunerated a 40/60 fee share arrangement;
- that he would be paid all entitlements under the Fair Work Act 2009 (Cth);
- that he would be reimbursed for expenses paid by Mr Carbone on his employer’s behalf;
- that his employer would keep proper records; and
- Mr Carbone would earn $500,000 per annum.
Mr Carbone sought damages totalling $418,103.00 for misleading and deceptive conduct (s 236 of the Australian Consumer Law).
Mr Carbone also sought $630,773.80 in relation to the claim under the FW Act, on the basis he would continue employment for a further two years.
The employer and director rejected this and argued that Mr Carbone could have expected to remain employed for a further six weeks. Further they asserted that Mr Carbone should receive a sum of $36,390, bring six weeks’ salary.
The decision
The employer lost the case because it did not comply with orders of the Court during litigation, and as a result Justice Collier made orders striking out the defence filed by the employer and its director in addition to ordering in favour of the employee.
The Court decided Mr Carbone would have remained employed for a further 6 months in that he was the most successful fee earner of the firm, and that would have been beneficial for the employer.
Judge McNab ordered the employer pay Mr Carbone:
- $157,693.38 pursuant to s 545 of the FW Act; and
- $5,061.45 for annual leave entitlements;
- $18,200.00 in pecuniary penalties.
It also ordered the director pay $3,490.00 in the pecuniary penalties to the employee.
Implications for you
This decision is an important reminder for employers to be wary of the terms and conditions agreed to with employees. Regular reviews of employment agreements should be conducted to ensure they are updated. The case also serves as a reminder of the importance of engaging in the litigation process and complying with court orders. When sued, get advice and representation.
Employers and organisations must remain vigilant of their obligations under the FW Act such as keeping accurate records including of leave entitlements. As always if unsure seek advice.
Carbone v James McConvill & Associates [2021] FCCA 661 (9 April 2021)
