Ace Insurance has been ordered to pay $10,000 and substantial compensation to five former agents after the Federal Court ruled they were employees rather than independent contractors.

The compensation is to cover holiday and long-service leave entitlements.

The dispute began when the five agents claimed annual and long-service leave from the insurer.

Ace argued they were paid by commission only and were not entitled to payment in lieu for annual or long-service leave.

The agents claimed the 30 days per year of payments they sought matched entitlements under the standard agency agreement between Ace and one of the agents, who was entitled to 28 weeks’ leave for the seven-and-a-half years he worked for Ace.

The court found the agent’s weekly salary was $11,172.26 a week, so he was entitled to $325,671.38 of accrued holiday pay.

Another agent was entitled to $56,092.91 of leave payment. A third was due only $14,759.21, because the judge could not determine the exact salary earned, owing to differences between the agent’s submission to the court and Ace’s commission records.

Long-service leave payments for the agents ranged from $7500 to $12,500.

In his judgement, Mr Justice Perram said Ace sought legal advice in 1986 on its tax obligations to agents and in 1987 a decision by the Department of Industrial Relations had made the agents independent contractors.

“From 1987 onwards, Ace had been advised that its agents were not employees and its reliance on that advice was not unreasonable,” the judge said.

“Both it and its agents had laboured under the same misapprehension as to their status. 

“I am not sure how the mutuality of the error reduces the seriousness of the matter when one has already concluded that the error occurred as a result of reasonable reliance on legal advice. 

“I reject Ace’s contention that the agents’ claims were opportunistic; they do not seem to me to have that quality.”

The court has still to determine costs for the case.

Editor’s note: In court this morning (Monday) an error in the calculation of entitlement for one agent was identified and the figure was recalculated. This reduced the amount of accrued holiday pay awarded to the agent from $325,671.38 to $69,766.44. insuranceNEWS.com.au was informed of the change late this afternoon.