Questions & Answers - Termination of employment, unfair dismissal and redundancy

Question:

Has probation and qualifying period been removed from FWA 2009?

Answer:

Yes, it has been replaced by the minimum employment period, which is 12 months for employees of small business employers (i.e. employers with less than 15 employees) or 6 months for employees of non-small business employers. This applies to unfair dismissal laws.

Question:

For your information I own a retail business in Queensland and we presently pay our team members under the Retail Award in Queensland.

From January will we be covered by a new Retail Modern Award instead of the current State Retail Award? Will all state awards be covered by the new Modern Awards? And will there be any changes in the rates of pay or will each state or region have their own rates still?

With the new unfair dismissal laws I assume everyone is covered by them and if so what happens with the State IRC systems in particular QLD? If we have a dismissal issue going forward will the new Fair Work Australia be dealing with it?

Answer:

Although it is difficult to be specific without knowing more about the nature of your business, it is likely that from 1 January 2010 your business will be covered by the new General Retail Modern Award, which will replace all state awards. Rates of pay will need to be changed accordingly so that they are in line with the rates of pay in the award.

You can find the General Retail Modern Award at http://www.airc.gov.au/awardmod/awards/general_retail_t.pdf - if this link does not work, go to www.airc.gov.au and use the tabs at the top left to navigate through 'award modernisation' to 'modern awards', 'retail industry', 'modern award'.

Employees who are given notice of termination of employment, or whose employment is actually terminated (whichever is the earlier) after 1 July 2009 are covered by the new unfair dismissal laws. All unfair dismissal applications will be dealt with by Fair Work Australia. The state IRC systems will still have their own minor jurisdictions - you can visit their websites or give them a call for further information.

Question:

How does the Fair Work Act and provisions deal with mandated leave without pay where an employer is unable to keep an employee gainfully employed for a period but wants to avoid the finality of redundancy?

Answer:

You can't force someone to take leave without pay except by agreement. Similarly you can't stand down employees on grounds of lack of work unless that lack of work is due to something for which the employer cannot reasonably be held responsible (and this does not extend to circumstances where an employer experiences a downturn in custom or trade). An employee who is unlawfully stood down could apply for an order from Fair Work Australia that he or she be paid for those days.

Question:

We have a role within our organisation that has become redundant as we restructured the role and since then the work load has diminished by a further 30% as has the revenue. We have utilised all redeployment options in other departments and are unable to redeploy this person into a role that is in line with what she is doing. The only role that we may have available is a reception role which has a budgeted salary at half of what this employee is earning. Can we offer our employee a 'genuine redundancy' or do we have to offer the reception role to our employee?

Answer:

The question is whether it would be reasonable for you to offer the employee this role. If you think that the employee is not suitable for it because it is significantly below their skills and competencies then it would not be reasonable to offer redeployment to the role, and you can proceed to retrenchment. You would need to document that reasoning, however.

Question:

Is there still a 3 month probationary period for new employees (with only 1 day's notice of termination) or is this replaced with the 6 month qualifying period. If so what is the notice required during the qualifying period?

Answer:

A 6 months qualifying period applies (or 12 months for national system employers of less than 15 full-time equivalent staff). Notice during the first year of employment is not less than one week.

Question:

What are the legal requirements for a company retrenching employment? The company may be classified as a small business - employing 15 or less staff.

Answer:

In order to avoid unfair dismissal exposure you need to show that it was not reasonable to offer the redundant employee employment elsewhere in your organisation. For example, if you close a night shift with the effect that workers working that shift are redundant, would it be reasonable to offer the redundant workers employment in the warehouse.

Question:

Outside of VIC, what is the rule regarding continuity of service if someone is rehired after either resigning or being terminated by the employer?

Answer:

In the absence of a transfer of employment situation, there is no continuity of service if an employee resigns or is terminated from their employment. The Fair Work Act provides that where a transfer of employment occurs, an employee’s service with one employer is treated as service with another employer. It also provides that any period that occurs between the employee’s employment with the first employer and the second employer does not break the employee’s continuity of service.

A transfer of employment occurs when:

• an employee’s employment with the first employer ceases and the employee accepts new employment with an associated entity of the first employer within three months; or
• an employee is a transferring employee in relation to a transfer of business and the first employer and the second employer are not associated entities.

Question:

Redundancy and notice period: If a company is under Voluntary Administration (VA), positions are made redundant, and the employer prefers to pay the notice period in lieu of notice - is the notice period payable at the time of termination or held over until the VA process is completed as in the case of other entitlements such as LSL, AL, severance pay?

Answer:

Employers are entitled to hold over termination payments until the VA process is completed.

Question:

Our employees are covered by a Federal EBA (with the AMWU). Does the new 6 month qualifying period now override the EBA clause of a 3 month probationary period?

Answer:

For a number of years there has been a 6 month qualifying period for employees to access unfair dismissal laws. Since 1 July 2009 this has been called the “minimum employment period”. The MEP is 12 months for small business employers of less than 15 employees. The 3 month probationary clause in the EBA still applies but after the expiration of the first 3 months of service of EBA employees, you shall have another 3 months before unfair dismissal laws apply to those employees.

Question:

My board has asked me to restructure our business and downsize. Consequently, I am obliged to terminate my 2 remaining full time staff. They have been given 30 days notice but have known this was imminent for 6 months. Obviously they are taking time off (paid) to have interviews, but I have now been told they are entitled to 1 paid day off a week to look for jobs. Is this correct, please?

Answer:

Yes that is correct.

Question:

Are small employers (i.e. less than 15) with staff not covered by a Modern Award required to pay severance pay under the NES?

Answer:

No.

Question:

I am looking for some guidance around how Fair Work will evaluate if it would be reasonable to redeploy the employee. In a company of 4000 people Australia wide, how actively to we have to pursue redeployment and what do we need to do to show we have pursued it?

Answer:

I think it would be sufficient to list vacancies on a website or some other forum and give redundant employees access to that information. Obviously you would need to give employees who are interested in pursuing a vacancy time to apply for the position internally.

Question:

Under the FWA, high income employees (i.e. over $108,300K) are not entitled to UFD. What if they are covered by a Modern Award? Are they still exempt from making an UFD claim?

Answer:

If a high income employee is covered by a modern award they will be entitled to make a claim for unfair dismissal.

Question:

Can an employer or employee engage a lawyer to defend an UFD claim?

Answer:

Yes, an employer or an employee is entitled to engage a lawyer to defend an unfair dismissal claim. However in order to represent the employer or employee in a hearing before the FWA the lawyer first needs to seek permission from FWA to represent the person. This will usually be granted, in particular if the other side is represented.

Question:

Many small employers (i.e. less than 15 employees) are covered by an award with a less onerous redundancy clause than that under the FW Act. Am I correct in assuming:

1. Award covered employees will be covered by the severance pay provisions in the award (which are less expensive than the award requirements for large employers which equal the entitlements under the FW Act).
2. The award-free employees of small business employers will not be entitled to severance pay (no award or Act entitlement).

Answer:

Yes, for award covered employees of small business employers severance pay is capped at 8 weeks. There is no NES redundancy pay obligation for small business employers.

Question:

If I serve one week notice to my employer during probation period, am I entitled to my pay for all working days there including the notice period?

Answer:

Yes.

Question:

We are currently in the process of restructuring a department due to a downturn in business which will result in redundancies. All employees are being re-interviewed for their current jobs and one person has withdrawn their interview application stating that he is not interested in the job position available (it is the exact job he is currently doing in terms of hours, roster, location and work type). Is this considered a resignation or would we still have to pay redundancy?

Answer:

It is difficult to answer this query without further details. If you have declared his/her role redundant than it will be a redundancy. Otherwise, it will be a resignation.

Question:

Have casuals now been given the right to claim for unfair dismissal after 6 months of regular and systematic employment and the understanding this is likely to continue in the future? If they are employed by the hour, what is to stop a company just saying we have no work available until they effectively disappear.

Answer:

Yes, unless you employ less than 15 employees in which case the unfair dismissal right only arises after 12 months. If there is no work available then you will be able to rely on the genuine redundancy exemption.

Question:

Regarding unfair dismissal, I am working in the casual labour hire business, we presently have some employees who have been employed casually on our clients worksite for longer than 6 months (in the main full time hours/38 hrs per week), if they are terminated due to work shortage, can they lodge an unfair dismissal claim against our company? (i.e. providing we are unable to provide them with an alternative casual assignment).

Answer:

No so long as you meet EBA or award obligations to consult regarding redundancies.

Question:

Can an employee, whilst on maternity leave, be made redundant and can the maternity leave include the 4 week notice period, or does the 4 week notice period commence when maternity leave finishes?

Answer:

Yes, so long as the fact that the employee is on maternity leave has nothing to do with the redundancy. You can give notice during the maternity leave.

Question:

What could businesses use as a protocol for the genuine redundancy test for unfair dismissals, i.e. what evidence do we need to show that we have tried to find alternative employment?

Answer:

The best approach is to simply have a discussion with the employee about the redundancy and try and reach consensus as to the fact that there are no suitable opportunities for redeployment. Once you have that file note it will be hard for the employee to contend otherwise. Of course, if the employee throws up redeployment opportunities you will need to be in a position to explain why they are not suitable for the employee. That might mean that you have to adjourn the meeting and come back to the employee after investigating it. In other words, put the onus on the employee.

Question:

I understand that a person will not be able to bring an unfair dismissal claim if the sum of the person's annual rate of earnings is greater than the high income threshold. Does "annual rate of earnings" mean that the person must have served in the role and received those earnings over a 12 month period before they are protected? For example, what happens where an employee is appointed to a position in a large business on a base salary of $110,000 pa and the employee completes their minimum employment period (6 months), but has their employment terminated, say 8 months after commencement. Given that the employee has not completed 12 months, is their "annual rate of earnings" still taken to be $110,000 thereby ousting them from the unfair dismissal jurisdiction? Or is some pro-rate calculation performed?

Answer:

This issue is not expressly dealt with in the relevant legislation and regulations and no cases have yet dealt with the issue. This means that if the employee in your example filed an unfair dismissal claim, you would need to argue that Fair Work Australia (FWA) did not have the jurisdiction to deal with the matter and have FWA come to a decision in that regard.

In our view, it is highly likely that FWA would conclude that it did not have the jurisdiction to deal with the claim on the basis that a person's annual rate of earnings should be determined by reference to what they would have earned if his or her employment was not terminated before the conclusion of a year's service. This approach is consistent with how the regulations prescribe an employee's earnings should be calculated where the employee is paid on the basis of piece rates and is employed for less than a year.

Question:

The business I'm helping has more than 60 employees on a variety of awards in agriculture sector. With unfair dismissal can an employee make a claim in this business and if so, does the employee have to have worked for more than 6 months?

Answer:

Yes, an employee can bring a claim for unfair dismissal against an employer engaging that number of employees.

The employee must have completed a period of employment with the employer of at least six months ending at the earlier of:

1. the time when the employee is given notice of the dismissal;
2. immediately before the dismissal.

This 6 month period applies to your business because they have 15 or more employees and are therefore not a "small business employer". For a "small business employer" the qualifying period is one year of employment.

Question:

We currently looking at a number of redundancies within our company and have three employees who are pregnant. One is due to take paid maternity leave in February and the other two are not due until April 2010. Consider the company offers 14 weeks paid maternity leave after 12 months continuous service, which they are entitled to, are they entitled to the redundancy and the 14 weeks maternity leave? Are they considered to be disadvantaged in finding full time employment and not qualifying for maternity leave entitlements as they will not be employed for over 12 months before having their child?

Answer:

It depends on the detail of your paid maternity leave policy, but generally speaking, if you make the employees' positions redundant before they are due to commence maternity leave (and you are not selecting them for redundancy for this reason, which would be unlawful), they will not be entitled to the paid maternity leave.

Question:

I understand that the new NES comes into effect on 1 January 2010. In regards to redundancy, I would like to confirm that redundancy payments are calculated from 1 January 2010 – e.g. if I have 6 years of service, the legislated redundancy pay will not be 6 years, rather it is based on years of service from 1 January 2010. I can’t seem to find this in the legislation. Please could you advise on this and also where it is found in the legislation?

Answer:

This is dealt with in item 5 of Schedule 4 in the Fair Work (Transitional Provisions and Consequential Amendments) Act. For the purpose of the redundancy pay NES, you do count service prior to 1 January 2010 unless the terms and conditions of employment that applied to the employee's employment immediately prior to 1 January 2010 did not provide for an entitlement to redundancy pay.

Whether they are disadvantaged in finding other employment because they will be absent from the workforce for 12 months is not a matter for which your company can be held liable.

Question:

Small Business and Unfair Dismissal: Does the code effect small business under 15 persons and require employees to be given written warnings and further training before being dismissed?

Answer:

The Small Business Fair Dismissal Code requires that employers warn employees, ideally in writing, before they are dismissed. The Code applies to employers engaging less than 15 employees.

The link to the dismissal code is:
http://www.fairworkassist.com.au/res_sbfdcc.php

Question:

I note the NES under Fair Work applies to all employees, including high income executives and professionals. Can employers still demand a longer notice of termination period from resigning senior execs as we currently do (sometimes up to 3 months)?

Answer:

Provided that the executives are not covered by Modern Awards or other industrial instruments which say otherwise (although, that would be unlikely), you can require a longer period of notice in their contracts of employment.

Question:

I note the NES under Fair Work applies to all employees, including high income executives and professionals. Can employers still demand a longer notice of termination period from resigning senior execs as we currently do (sometimes up to 3 months)?

Answer:

Provided that the executives are not covered by Modern Awards or other industrial instruments which say otherwise (although, that would be unlikely), you can require a longer period of notice in their contracts of employment.

Question:

Wanted to check whether the Fair Work Act makes any provisions around employment probationary periods. We currently employ the majority of staff on a 6 month probation period and are unsure whether this needs to change. During the 6 month probation, either party can terminate the employment contract with just one week's notice. Can you please advise if this will still be OK or if we need to make changes?

Answer:

It will still be OK for you to employ staff on a six month probationary period, during which either party can terminate the employment contract on one week's notice. This is for the following reasons:

1. Your current practice complies with the minimum notice periods prescribed by the National Employment Standards (NES), which state that the minimum notice period required for an employee who has completed not more than one year of service is one week.
2. It will still be the case that any employee dismissed within the six month probationary period cannot bring an unfair dismissal claim, even though the exemption relating to employees on probation no longer applies under the Fair Work Act 2009.

As set out in section 382 of the FW Act, a person is protected from unfair dismissal only if they have completed the 'minimum employment period'. The 'minimum employment period' is defined in section 383 of the FW Act to be a period of 1 year if the employer is a small business employer (i.e. the business employs fewer than 15 employees at the time), or a period of 6 months in any other case. Consequently, employees who are subject to probationary periods of longer than 6/12 months may still have bring unfair dismissal claims, notwithstanding the longer period of probation in their contracts.

As your current practice does not derogate from either of the above provisions, you will not need to make any changes.

Question:

What notice period does a Clerical employee have to give an employer under (1) Workchoices, (2) Fair Work -NES. All info only mentions employer notice to an employee.

Answer:

If your employee is a clerical employee it is likely that he or she is covered by an award (for example, the Clerical and Administrative Employees (Victoria) Award)) which may provide for the minimum period of notice an employee must give to an employer. For instance, the Clerks' Award in Victoria requires that employees give employers the same period of notice as required of the employer.

Under Work Choices, there is no specific period of notice that an employee is required to give an employer. On this basis, we suggest that employees be required to a give a "reasonable" period of notice, which, could be the same as that required of an employer.

Likewise, the NES (which will come into effect from 1 January 2010) do not provide for minimum notice periods for employees to give to employers. However, the NES states that modern awards and enterprise agreements may provide for this, so you will need to check if any are applicable. If not, you should require that employees provide you with a reasonable notice period. You could include this in their individual contracts of employment.

Question:

I am trying to determine when casuals who have been employed on a regular and systematic basis can make a claim for unfair dismissal? My understanding under WC it was 12 months but I can't find any clear details under the FWA.

Answer:

The answer depends on the size of your business. If you have 15 or fewer employees, a casual employee has been employed on a regular and systematic basis for 12 months and who has a reasonable expectation of continuing employment on a regular and systematic basis can make an unfair dismissal claim. If you have more than 15 employees they can make the claim after 6 months.

Question:

We have an employee we are going to make redundant. We are a constitutional corporation not covered by any award or agreement but have a letter of employment in place. The employee is based in Victoria. The current company the employee is in has less than 15 FTE but the employee came from another business that we bought. Do we need to pay redundancy payments? We are aware of what the notice period requirements are.

Answer:

Under section 119 of the Fair Work Act (FW Act) there is a new requirement to pay an amount of redundancy pay if an employee is terminated on the basis of redundancy. However, this provision does not commence until 1 January 2010.

Consequently, if the employee is to be made redundant before 1 January 2010, you are only required to make a redundancy payment if the employee has an existing entitlement to receive redundancy pay under their current Letter of Employment. If the Letter of Employment does not contain a provision for redundancy pay, subject to our comments below, you do not have to make such a payment.

If the redundancy is to occur after 1 January 2010, the amount of the redundancy payment will depend on the terms of the current Letter of Employment. This is because the employee's right to receive redundancy pay only arises on 1 January 2010 if the employee was entitled (in this case under the Letter of Employment) to receive a redundancy payment before this date. However, if no right currently exists under the Letter of Employment, the employee's 'Redundancy pay period' for the purposes of calculating the amount of the redundancy pay only begins to accrue from 1 January 2010.

You should also check whether an instrument containing an entitlement to redundancy pay transferred with the employee from her old employer. If there is a transferring instrument that applies to the employee, which contains an entitlement to redundancy pay, the employee may be entitled to receive that benefit depending on when the transfer took place.

Further, if the employee is covered by a company policy that relates to the payment of redundancy pay the employee may assert that this policy forms a term of the Letter of Employment and so a redundancy payment would need to be paid in line with the policy (particularly if redundancy payments had been made in accordance with this policy previously).

Finally, you should consider whether there are any redeployment opportunities available for the employee before terminating their employment. This is because, under section 389 of the FW Act (exemption from unfair dismissal), the dismissal of an employee will not be a genuine redundancy if it would have been reasonable in all the circumstances for the employee to be redeployed within the company or an associated entity of the company.

Question:

Can you explain what, if any, effect the new legislation has on the commonly used 3 month probationary period?

Answer:

The new Fair Work Act does not really have any impact on a 3 month probationary period. Under the Act, employees need to serve what is now referred to as a 6 month "minimum employment period" before they can bring an unfair dismissal claim. Having said this, a lot of employers still refer to 3 month probationary periods in their contracts of employment.

Question:

Question re termination payments: When an employee is dismissed, when does the final termination payment need to be made to the employee? This is assuming all company property has been returned.

Answer:

Generally speaking, termination payments need to be made immediately upon termination of employment. For example, it is not permissible to withhold payments in lieu of accrued but unused annual leave or outstanding wages for any reason. If you were paying additional sums that you are not required to pay at law you may be able to pay those at a later date (provided that there is nothing to the contrary in an employee's contract of employment or company policy, for instance).

Question:

1. Does unpaid maternity leave count towards years of service when considering redundancy payment?
2. What happens with 457 visa holders in terms of NES and 12 months unpaid parental leave? Does this take precedence or do the minimum salary requirements per annum?
3. Average Working Hours - If we reference averaging of hours based on 26 weeks in employee handbook, is the fact that employees sign off on the handbook sufficient to meet obligation in NES which states "employee may agree in writing to average hours over 6 months or less"?

Answer:

1. Generally speaking, unpaid maternity leave does count towards years of service when considering redundancy payments. This position could be changed in a company policy, industrial instrument or contract of employment.
2. 12 months parental leave does not disrupt the continuous service requirements of a 457 visa holder.
3. In our view, it would be preferable to have an employee sign a document that specifically states that they agree to average their hours over 6 months or less.

Question:

We have an employee who is underperforming in his role and has erratic attendance patterns due to health issues. The employee is about to complete his first 5 months in the organisation, and is still within his 6 month probationary period. My understanding is that should we choose to end his employment within this first 6 month period, we need only provide him with one week's notice (or payment in lieu of notice) and that he would be unable to access a claim to Unfair Dismissal as he has not met the MEP. Can you please confirm whether this is correct?

Answer:

Your understanding is correct. You are required to provide the employee with one week's notice (or payment in lieu) under section 661(2) of the Workplace Relations Act 1996, which still applies in respect of the notice to be provided on termination until 1 January 2010.

Also, the employee would be unable to bring an unfair dismissal claim as he has not met the minimum employment period of 6 months (or 12 months if you are a small business employer under the Fair Work Act 2009 (FW Act).

The above is, however, subject to any additional requirements regarding termination (such as a longer period of notice) which may exist under the applicable award.

You should also be aware of the new General Protections provisions in Part 3-1 of the FW Act. Under these provisions an employee can bring a claim against their employer if the employer takes adverse action against the employee (i.e. if the employer alters the position of the employee to their prejudice, or terminates their employment) because of a disability. Accordingly, if a reason for the termination is the employee's attendance patterns, and this is due to him or her having a physical or mental disability, a claim may be made under the General Protections provisions.

We suggest you seek legal advice about the manner in which any termination is conducted.

Question:

How come "At least 10 years" under redundancy payment drops down to 12 weeks when "9 years" is 16 weeks?

Answer:

This seems odd, but it is because employees become entitled to be paid on a pro rata basis for long service leave in most States after 10 years' service. The payment in lieu of long service leave provides another form of compensation in the event of redundancy.

Question:

Sect 389 of the FWA requires the employer to comply with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy. Modern Award commence 1/1/10 so what is the requirement to consult prior to 1/1/10?

Answer:

Any requirement to consult before that date may be contained in one of the following (although not necessarily):

• the employee's contract of employment;
• any company policies; or
• an award or certified agreement that may apply.

Failing this, there is no current legal requirement to consult with employees in the event of redundancy.