Termination of employment

Transcription

1 A pocket guide for employers by Paul Munro

2 Contents Page Introduction 1 Notice of termination 1 Unfair dismissal 6 Constructive dismissal 10 Unlawful dismissal 11 Workers compensation 12 Disability discrimination 12 Serious misconduct 13 Payments on termination 16 Post-termination payments 17 Further help 18

3 1 Introduction This pocket guide provides employers with a handy summary of your legal obligations regarding termination of employment, one of the minimum employment conditions set by the National Employment Standards (NES) and modern awards. It covers issues such as notice of termination, payments usually due on termination, unfair dismissal laws, unlawful dismissal laws, dismissal due to the employee s serious misconduct, and abandonment of employment. This guide is a companion to another WorkplaceInfo pocket guide Redundancy, Fair Work and the NES. Notice of termination Minimum period of notice employer Exempted employees Minimum period of notice employee Deductions of monies on termination Meaning of week(s) notice Form of notice Job search entitlement Absence during notice period Payment in lieu of notice Giving notice when absent on leave Withdrawal of notice Continuing notice Summary dismissal after notice given Notice prior to commencing employment Abandonment of employment Minimum period of notice employer Section 117 of the Fair Work Act 2009 requires an employer to provide a minimum period of notice of termination to an employee, in writing. The length of notice is based on the employee s years of continuous service with the employer and is set out in the following scale:

4 2 Length of service Less than one year s continuous service At least one year but less than 3 years continuous service At least 3 years but less than 5 years continuous service Five years continuous service or more Notice period 1 week s notice 2 weeks notice 3 weeks notice 4 weeks notice An employee with at least 2 years continuous service with the employer and who is aged over 45 years is entitled to an additional one week s notice. When calculating an employee s period of service with the employer, all absences from work are included, except any period of unauthorised absence, eg unprotected industrial action. Exempted employees The Fair Work Act excludes the following categories of employees from the minimum notice period requirements: an employee engaged under a contract of employment for a specified task, or a specified period of time, eg an apprenticeship, or a specified season an employee whose employment was terminated because of serious misconduct a casual employee an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement a daily hire employee working in the building and construction industry a daily hire employee working in the meat industry in connection with the slaughter of livestock a weekly hire employee working in connection with the meat industry and whose termination is determined solely by seasonal factors. Even though an employee may be in one of the above exempt categories, the employer should also check any applicable industrial instrument (where relevant) to find out whether it specifies a different period of notice. The notice of termination provision contained in an industrial instrument is still enforceable. Minimum period of notice employee The minimum periods of notice of termination under the Fair Work Act only apply to notice given by the employer. The period of notice of termination required to be given by an employee is determined by the applicable industrial instrument or the individual s contract of employment. Most modern awards

5 3 require the employee to provide the same period of notice as that required of the employer under the Fair Work Act, except there is usually no requirement on the employee to give additional notice based on the employee s age. Deductions of monies on termination If the employee fails to provide proper notice of termination to the employer, the latter may be allowed to deduct the equivalent period of notice from all monies due on termination of employment, although this is subject to the relevant provisions of the applicable industrial instrument. An employer may be required to comply with a garnishee order. This is a court order requiring the employer to withhold part of the wages owed to a particular employee and pay the amount instead to the creditor of the employee to satisfy a debt which is due. Laws relating to garnishees exist both in federal and state jurisdictions. When making payment to the court, all amounts due to the employee must be paid to the court, including any payments due on termination of employment, such as pro rata annual leave, long service leave, payment in lieu of notice, etc. Meaning of week(s) notice Unless otherwise prescribed by the applicable industrial instrument or contract of employment, reference to a week s notice means seven calendar days. The day the notice is given by either party does not count as part of the notice period unless given prior to the employee s ordinary starting time for that day. For example, an employee who gives one week s notice to terminate their employment on a Monday afternoon will be required to work until the completion of their ordinary hours on the following Monday. Form of notice It is important that notice to terminate the employment is communicated in the proper manner. Acceptable forms of notice may be given to an employee by the employer by: delivering it personally leaving it at the employee s last known address, or sending it by pre-paid post to the employee s last known address. In the case of an employee s resignation, the employer should request an employee s resignation in writing so as to avoid any misunderstanding, although this may be difficult to obtain in some circumstances. There is nothing to prevent the employer from accepting the verbal resignation of the employee, including over the telephone, however, the employer should seek confirmation preferably in writing from the employee or, in the latter case, some way of verifying the caller on the telephone by asking particular identification details known only to the employee. Where verbal notice is given by the employee at the workplace it may be prudent for the employer to have a witness to the resignation. The employer s request for an employee s resignation in writing is to avoid any heat of the moment decisions that the employee may later regret.

6 4 Job search entitlement A common provision in modern awards is where notice has been given by the employer to an employee, he or she must be allowed up to one day s time off with pay for the purpose of seeking other employment, at a time convenient to the employer. Absence during notice period An employee on a period of notice is required to work out the notice, except where prevented from attending due to illness or injury or where on an absence authorised by the employer. When the notice is given by the employer, an employee who is absent from work without reasonable cause during the notice period may have wages docked for the period of the absence, however, the length of the notice is not extended by the period of any unauthorised absence, meaning the date of termination remains unchanged. An absence on paid annual leave, paid personal/carer s leave, a public holiday, long service leave, job search entitlement, jury service, compassionate leave, etc would count as part of the period of notice. Payment in lieu of notice The Fair Work Act requires the employer to provide the relevant period of notice of termination to the employee, or the payment of the equivalent amount in lieu of notice. The amount in lieu is calculated at the employee s full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum period of notice. Full rate of pay is defined in the Fair Work Act to include the following: incentive-based payments and bonuses loadings monetary allowances overtime or penalty rates and any other separately identifiable amounts. Under the Fair Work Act, an employer is not required to make payments equivalent to the superannuation guarantee however, the employer is required to make SG contributions calculated on any payment in lieu of notice (see SGR 2009/2). Giving notice when absent on leave The right of an employer to terminate an employee absent on paid leave is dependent on the type of leave. Industrial tribunals have usually determined that notice of termination by the employer will not be effective if it seeks to terminate the employee s employment prior to or at the same time as a previously granted period of (say) annual leave. Under these circumstances, the period of notice would commence from the end of the period of annual leave, or the employer would pay the appropriate payment in lieu of notice. It is presumed a

7 5 similar situation exists where an employee is absent on long service leave although that particular issue does not appear to have been tested before the courts. This differs from an employee s absence on personal/carer s leave, where tribunals have usually determined that an employer is entitled to give notice to an employee because the period of such leave is necessarily uncertain. However, the employer should not terminate an employee because of an absence on personal/carer s leave as the employee could claim unlawful dismissal on the ground the termination was based on the employee s temporary absence from work due to illness or injury. Withdrawal of notice Notice, once given by the employer, cannot be withdrawn, except with the agreement of the employee. The reason for this is that an employee may have already obtained employment with another employer, with the result that if an employer could unilaterally withdraw notice, the employee could be bound by two concurrent contracts of employment. The same logic applies to the withdrawal of notice by the employee. The requirement for the employee to give the appropriate period of notice is to allow the employer sufficient time to fill the position. If the employee could withdraw notice at any time it could result in the replacement employee being left without a job, having already terminated their employment with the previous employer to accept the vacated position. An exception to this is where the mental state of the employee at the time of the resignation meant the giving of notice was not considered a voluntary act. Continuing notice Notice given by the employer or employee must relate to a specific period it cannot be continuous in effect. For example, where a full-time or part-time employee continues in employment after a period of notice has expired, the employment may only be terminated by the giving of another period of notice, or the payment of the requisite sum in lieu of notice. Summary dismissal after notice given The fact that notice of termination of employment has been given by either party does not prevent the employer from summarily dismissing an employee if the latter is guilty of misconduct during the period covered by the notice. Payment is usually until the time of dismissal only and the employee may forfeit monies that would have been due on termination if the dismissal had not been caused by the employee s serious misconduct. Notice prior to commencing employment Where an employer engages an employee under a contract of employment but decides to terminate the contract before the employee commences work, the employee is entitled to the required period of notice under the applicable industrial instrument or the individual s contract of employment. It should be noted that any employee terminated prior to the commencement of their employment with the employer is able to claim unlawful dismissal if the grounds for terminating the contract were discriminatory.

8 6 Abandonment of employment This is a situation where an employee has left their employment without providing any indication to the employer of his or her intention to do so. This is considered an implied resignation by the employee, although the employer must take reasonable steps to ensure the employee has resigned. The applicable modern award may stipulate the period of absence without contact with the employee from which abandonment may be presumed. For example, the Manufacturing and Associated Industries and Occupations Award 2010 provides that the absence of an employee from work for a continuous period exceeding three working days without consent and without notification to the employer is prima facie evidence that the employee has abandoned their employment. The employee then has 14 days from their last attendance at work to satisfy the employer of the reason for their absence, otherwise the employee is deemed to have abandoned their employment. The date of termination is the date of last attendance at work or the last day s absence where consent was given to the absence by the employer. Unfair dismissal Inclusions and exemptions Casual employees Small business employer High income employee Small Business Fair Dismissal Code Harsh, unjust or unreasonable Genuine redundancy Qualifying period transfer of business Remedies Lodging a claim Appeals Costs Inclusions and exemptions Unfair dismissal is the term used to describe the dismissal of an employee that is carried out by an employer without sufficient or acceptable reason and/or without the employer following proper procedure. Fair Work Australia can order reinstatement or compensation in this situation. The Fair Work Act provides for an employee to claim before Fair Work Australia (FWA) that their dismissal by the employer was harsh, unjust or unreasonable. While the majority of employees will be able to access this statutory right, some categories of employees are excluded from unfair dismissal laws, including:

9 7 an employee not covered by a modern award or enterprise agreement whose annual rate of earnings exceeds the high income threshold (currently $108,300 pa, indexed each July) an employee who has not completed six months continuous service with the employer (or 12 months in the case of an employer with fewer than 15 employees) an employee whose contract of employment is for a specified term, eg an apprenticeship, specified task or specified season an employee subject to a training agreement and whose employment is limited to the duration of that agreement an employee dismissed in a case of genuine redundancy an employee of an employer with fewer than 15 full-time equivalent employees who has complied with the Small Business Fair Dismissal Code (see below) a contractor. Casual employees The Fair Work Act provides that casual employees employed on a regular and systematic basis with a reasonable expectation of continuing employment by the employer may claim for unfair dismissal. A casual employee employed on this basis is subject to the same qualifying period (6 months where the employer employs 15 or more employees; 12 months where the employer employs fewer than 15 employees) as full-time and part-time employees. Small business employer An employee employed by a small business employer must have completed a 12 month period of employment in order to make a claim for unfair dismissal. A small business employer is defined by the Fair Work Act as, at a particular time, employing fewer than 15 employees. For the purposes of calculating the number of employees employed by the employer at a particular time, all employees employed by the employer at the time of dismissal are to be counted, including any casual employees who are employed on a regular and systematic basis, as well as the employee or any other employee being dismissed. Associated entities are taken to be one entity. High income employee Under the Fair Work Act, an employee who is not covered by a modern award or enterprise agreement and whose earnings exceed the high income threshold, is unable to claim for unfair dismissal. The threshold is currently $108,300 pa (as at 1 January 2010 but indexed in July each year). The Fair Work Act defines earnings to include the following: the employee s wages and amounts applied or dealt with in any way on the employee s behalf or as the employee directs and the agreed money value of non-monetary benefits, eg company motor vehicle.

10 8 However, earnings do not include the following: payments the amount of which cannot be determined in advance, eg commissions, incentive-based payments and bonuses, and overtime (unless overtime is guaranteed) reimbursement for expenses incurred by the employee during the course of their employment (tax exempt allowances) and employer contributions to a superannuation fund. It should be noted that an employee who is covered by a modern award or enterprise agreement and whose annual earnings exceed the high income threshold is still able to make a claim of unfair dismissal to FWA. Small Business Fair Dismissal Code An employer who employs fewer than 15 employees is subject to the Small Business Fair Dismissal Code. Employees of a small business employer cannot make a claim for unfair dismissal unless the employee has completed at least 12 months continuous employment with the employer. Fair Work Australia provides the Code as a checklist for small business employers to assist in determining whether an employee s dismissal was fair and whether the employee is able to make a valid claim. The Code is available at Harsh, unjust or unreasonable The Fair Work Act identifies the criteria that FWA must consider when determining whether a dismissal was harsh, unjust or unreasonable, including: whether there was a valid reason for the dismissal related to the person s capacity or conduct (including its effect on the safety and welfare of other employees), and whether the person was notified of that reason, and whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person, and any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal, and if the dismissal related to unsatisfactory performance whether the person had been warned about that unsatisfactory performance before the dismissal, and the degree to which the size of the employee s enterprise would be likely to impact on the procedures followed in effecting the dismissal, and the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal, and any other matters that FWA considers relevant.

11 9 It is important for an employer to follow this procedure prescribed by the Fair Work Act in order to provide a satisfactory defence against an employee s possible claim of unfair dismissal. Genuine redundancy Genuine redundancy occurs if the person s employer no longer requires the person s job to be performed by anyone because of changes in the operational requirements of the employer s enterprise, and the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy 1. A person s dismissal is not a genuine redundancy if it would have been reasonable in all circumstances for the person to be redeployed within the employer s enterprise, or the enterprise of an associated entity of the employer. Qualifying period transfer of business When a business is transferred from one employer to another, the second employer should inform each transferring employee that service with the previous employer is not recognised for the purposes of the qualifying period under unfair dismissal laws. This means the transferred employee must complete the applicable qualifying period with the new employer before being able to claim unfair dismissal. Remedies Fair Work Australia (FWA) has the power to order reinstatement or compensation in lieu of compensation. Reinstatement remains the primary remedy and FWA will only be able to order compensation if it is satisfied that reinstatement is inappropriate and that compensation is appropriate. Compensation for an employee is capped at the employee s total remuneration for the period of 26 weeks immediately before the dismissal. FWA must take into account the following criteria when determining the amount of compensation where an employee s dismissal is deemed to be unfair: the effect of the order on the viability of the employer s enterprise, and the length of the person s service with the employer, and the remuneration the person would have received, or would have likely received, had the employee not been dismissed, and the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal, and the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation, and the amount of any income reasonably likely to be earned by the person during the period between the making of the order for compensation and the actual amount received, and any other relevant matter. 1 For a more detailed discussion on redundancy, see WorkplaceInfo s companion publication: Redundancy, Fair Work and the NES, also by Paul Munro 2010.

12 10 If FWA is satisfied that an employee s misconduct contributed to the employer s decision to dismiss him or her, then the amount which would otherwise have been ordered must be reduced. Compensation cannot include any amount for shock, distress, humiliation or other such hurt caused by the dismissal. Lodging a claim An employee must lodge a claim within 14 days of the dismissal taking effect, although FWA has the discretion to extend the time frame where exceptional circumstances exist. Once the employee s unfair dismissal application has been lodged with FWA, the employer should receive written notification of the application, information about the process FWA will follow, and an employer response form. The employer and the employee should also receive details of the time and date for the conciliation of the application. If the unfair dismissal application is not withdrawn or is not settled at the conciliation stage, the employer and the employee will receive written notification from FWA of any conference or hearing to be held in relation to the application. Appeals FWA must not grant permission to appeal from a decision unless it considers it is in the public interest to do so. An appeal on a question of fact will only be able to be made on the ground that the decision involved a significant error of fact. Costs A person involved in an unfair dismissal case before FWA must meet their own costs. FWA may order a person to bear some or all of the costs of another person if the unfair dismissal application or response to it was frivolous, vexatious or made without reasonable cause, or had no reasonable prospect of success. Constructive dismissal This is a termination of employment by an employee as a consequence of actions or words by the employer which result in the employee effectively having no reasonable choice but to resign, retire or comply with substantial changes to his or her existing job. Constructive dismissal is deemed to be a dismissal by the employer, even though notice of termination was actually given by the employee. A direction from the employer for an employee to resign or else could be viewed as a situation where the employer is avoiding giving proper notice to the employee. For example, a single incident of verbal abuse has given rise to successful claims of constructive dismissal. In one case, an employee who was falsely accused of theft was found to have been constructively dismissed. Also, an assistant manager s comment to an employee: You can t do the bloody job anyway, not believing this to be true, was deemed a constructive dismissal, while the statement of a director to his secretary: She is an intolerable bitch on a Monday morning, amounted to a constructive dismissal. Because of the concept of constructive dismissal, despite an employee resigning from their position with the employer, there are circumstances whereby an employee may succeed in an unfair or unlawful dismissal claim before Fair Work Australia, the Federal Magistrates Court, or the Federal Court of Australia.

13 11 Unlawful dismissal General protections dismissal Dismissal due to illness or injury Procedure Unfair dismissal application General protections dismissal Unlawful dismissal is now referred to under the Fair Work system as a general protections dismissal. The Fair Work Act prohibits an employer from taking adverse action against an employee or a prospective employee because that person has a workplace right, has exercised a workplace right, or proposes to exercise a workplace right. A workplace right includes a person who has an entitlement under an industrial instrument or workplace law, is able to initiate a proceeding under a workplace law or is able to make a complaint or inquiry in relation to their employment. An employer must not take adverse action because of the person s race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer s responsibilities, pregnancy, religion, political opinion, national extraction, or social origin. Adverse action is taken by an employer against an employee if the employer dismisses the employee, or injures the employee in his or her employment or alters the position of the employee to the employee s prejudice, eg demotes the employee, or discriminates between the employee and other employees of the employer. An employer who refuses to employ or discriminates against a prospective employee in the terms and conditions on which it offers to employ the prospective employee is also considered to be taking adverse action. An employer must not take adverse action against an employee because he or she has engaged in lawful industrial activity, such as belonging to or participating in union activities. Dismissal due to illness or injury The Fair Work Act prohibits the dismissal of an employee where the reason is due to the employee s temporary absence from work because of personal illness or injury. An employee is protected from dismissal when temporarily absent due to illness or injury unless the employee s absence on unpaid personal/carer s leave extends for more than 3 months, or total absences of 3 months within a 12 month period. Any absence on paid personal/carer s leave is not to be included in the 3 month period, however, a period of absence on workers compensation is included as part of the 3 months. Alternatively, an employee who is dismissed because of illness or incapacity may make a claim under relevant disability discrimination law.

14 12 Procedure Dismissal applications An employee may make application to FWA claiming dismissal under the general protections provisions of the FWAct within 60 days of the dismissal taking effect. FWA must convene a private conference dealing with the application, through conciliation or by making a recommendation. If the dismissal remains unresolved FWA must issue a certificate. The employee can then make application to a court within 14 days of the issuing by FWA of the certificate. FWA is obliged to advise the parties if the application does not have a reasonable prospect of success. Dispute applications If a person has not been dismissed, but alleges there has been a breach of the general protections provisions of the FWAct, the person may make application to FWA to deal with the dispute, but only if both parties agree. In addition, there is no certificate required to be issued by FWA before the person can apply to a court for a remedy. FWA may deal with the dispute by conciliation or recommendation. Unfair dismissal application An employee cannot make a general protections dismissal application at the same time as an unfair dismissal application. Workers compensation Although an employee absent on workers compensation is protected from dismissal under the Fair Work Act for the first 3 months of their period of absence, many state and territory workers compensation laws also prohibit the termination of an employee s employment by the employer within a specified period of time where the sole or primary reason for the dismissal is because of the employee s absence on workers compensation. The specified period can range from 6 months (under NSW law), to 12 months (under Victorian law), or indefinitely (under South Australia law where the employer employs 10 or more employees). Refer to the relevant state or territory workers compensation law to determine whether the employer can terminate an employee who is absent on workers compensation. Disability discrimination The Disability Discrimination Act 1992 (Cth) makes discrimination against disabled employees unlawful. People with a disability are protected against discrimination in dismissal or any other detriment, such as demotion or retrenchment. However, the inability of an employee to perform an essential activity or inherent requirement of a position may be a defence for an employer in relation to any claim under this Act. The employer should make attempts to reasonably accommodate a disabled person unless it results in unjustifiable hardship for the employer. Further details of this Act can be obtained at

15 13 Serious misconduct Definition Acts of serious misconduct Investigating misconduct Police charges Serious misconduct v misconduct Serious and wilful misconduct Out of hours conduct Definition It is important for the employer to identify the types of employee behaviours that are considered to be serious misconduct, as opposed to simply misconduct. This distinction can alter the employee s entitlement to conditions on termination of employment, such as excluding the minimum periods of notice provisions of the Fair Work Act, payment of pro rata long service leave and annual leave loading on termination, as well as justifying the circumvention of reasonable process, eg warnings, with respect to unfair dismissal laws. Both the Fair Work Act and its Regulations define serious misconduct to include the following: wilful, or deliberate, behaviour by an employee that is inconsistent with the continuation of the contract of employment conduct that causes imminent, and serious, risk to the health, or safety, of a person, or the reputation, viability or profitability of the employer s business. Conduct that the Regulation considers serious misconduct includes theft, or fraud, or assault, or the employee being intoxicated at work (under the influence of alcohol or a drug not prescribed by a qualified person), or the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee s contract of employment. Acts of serious misconduct The following are examples of employee behaviour that may constitute serious misconduct: Fraud/dishonesty The type of workplace, the nature of the employee s duties and the gravity of the offence will usually be relevant factors when considering whether an act of dishonesty justifies instant dismissal. For example, a bakery employee stealing a few bread rolls may justify a final warning, whereas serious fraud by a bank employee or misappropriation of monies by an accountant may justify instant dismissal as such action strikes at the heart of the nature of the employment relationship, ie a breach of trust. Intoxication/drug use The taking of drugs or alcohol at the workplace, or immediately prior to attending work or during a break from work may justify instant dismissal. Where the employee is required to drive or operate dangerous

16 14 machinery, instant dismissal may be justified on occupational health and safety grounds, whereas, a clerical employee may receive a final warning. An employee is taken to be intoxicated if the employee s faculties are so impaired that it renders the employee incapable of performing normal duties. Assault In the absence of extenuating circumstances, industrial tribunals have usually viewed any dismissal of an employee based on fighting in the workplace as justified. As to the circumstances of the fight, relevant considerations may include whether the dismissed employee was provoked and whether the act constituted self-defence. The extenuating circumstances may concern other considerations such as the employee s length of service, work record, and whether the employee was in a supervisory position. Refusal to carry out lawful instruction This can be a difficult area for an employer to prove in the context of serious misconduct. The employer must investigate whether there are valid reasons for an employee s refusal to carry out an instruction, such as legal industrial action, safety concerns, a personality clash or a lack of training in the work to be performed. Risk to health/safety Only in extreme cases where an employee was wilfully or grossly negligent would summary dismissal be justified. The employer should be confident the unsafe act did not occur as a result of a lack of safety in the system of work. Offensive material Breaching an employer s code of conduct involving pornographic s can be serious misconduct justifying instant dismissal. It is important that all employees are aware of the company policy in this regard, particularly where the policy espouses zero tolerance. An effective policy should set out clear statements, including what is acceptable, using some examples, that such conduct will not be tolerated, and the consequences of a breach of the policy, including possible termination of employment and the potential personal consequences of the inappropriate behaviour. Investigating misconduct Although serious misconduct may justify instant dismissal, the onus of proving the employee s behaviour lies with the employer in an unfair dismissal action. Industrial tribunals have usually determined that a reasonable period of time may be involved when investigating an employee s conduct, although this would depend on the nature of the conduct. For example, an investigation of an employee s alleged fraudulent act may take longer to investigate than an alleged assault by an employee. Undue delay by an employer in investigating any serious act by an employee may be viewed by a tribunal as condoning the employee s actions. Police charges The failure of a successful police prosecution in criminal proceedings in relation to an employee s serious misconduct does not necessarily mean the dismissal was unfair. This is because police require a higher test of proof (beyond reasonable doubt) under criminal law to gain a prosecution, whereas,

17 15 unfair dismissal is a civil proceeding, the onus of proof being based on the balance of probabilities, a lesser test of proof. Gathering proof should be done subject to a proper investigation of all the relevant facts surrounding the employee s dismissal. Serious misconduct v misconduct While there is no overriding definition of what constitutes misconduct, industrial courts and tribunals have attempted to provide some guidance as to the types of employee behaviour or actions that may be considered misconduct or serious misconduct. Usually, serious misconduct describes the one act by an employee as sufficient to justify instant dismissal, whereas, the cumulative effect of an employee s actions may eventually justify an employer s decision to terminate the employee s employment for misconduct. Examples of misconduct which can eventually result in an employee s dismissal include chronic absenteeism, malingering, inefficiency, neglect of duty, etc. Serious and wilful misconduct Employment legislation may deny an entitlement to an employee if the dismissal was for reasons of serious and wilful misconduct. This is common in long service leave legislation and may require an employee s actions or behaviour to be both serious and wilful before the loss of an entitlement to pro rata leave on termination occurs. While the seriousness of an employee s actions or behaviour may be proven, it may be difficult for an employer to prove that the employee s action or behaviour was wilful or deliberate. Out of hours conduct Industrial tribunals have summarised the principles which could be applied in considering the extent to which an employer can discipline an employee in relation to out of hours conduct. There must be a clear and relevant connection between an employee s out of hours conduct and his or her employment. The conduct must be of such gravity or importance as to indicate a rejection or repudiation of the employment contract by the employee. The factors to be taken into account in this circumstance include: the conduct, when viewed objectively, is likely to cause serious damage to the relationship between the employer and employee, eg behaviour which tarnishes the relationship of trust and confidence on which the employment relationship is based (a breach of trust and confidence), or the conduct damages the employer s interests, eg behaviour which significantly undermines management, creates fear in the workplace, or gives rise to negative publicity (a breach of the employer s interest), or the conduct is incompatible with the employer s duty as an employee, eg a police officer engaging in criminal activity, or a teacher engaging in sexual activity with a student (a breach of duties). In the absence of these considerations, an employer has no right to control or regulate an employee s out of hours conduct.

18 16 Payments on termination When a termination of employment occurs, the employer may be liable to provide different types of payments on the date of termination, depending on the circumstances of the termination. The following payments may be payable to an employee on termination of employment: Annual leave Long service leave Redundancy pay Rostered days off (RDOs) Cashing out personal/carer s leave Superannuation Annual leave An entitlement to payment of accrued annual leave credits on termination is regulated by either the National Employment Standards (NES) under the Fair Work Act or the applicable modern award whichever is the more beneficial to the employee will apply. Under the National Employment Standards (NES), an employee is entitled to be paid out their accrued annual leave credits on termination of employment, based on their base rate of pay, which excludes incentive-based payments and bonuses, loadings, penalties, monetary allowances, and any other separately identifiable amounts. An employee employed under a modern award is entitled to receive pro rata annual leave pay of annual leave credits accrued at the date of termination, paid at their rate of ordinary pay. Their ordinary pay is usually calculated on the actual rate of pay, which may include allowances, loadings and penalties paid for all purposes of the award, first aid allowance, and any other wages payable under the employee s contract of employment, including any over award payment. Long service leave An employee s entitlement to payment of long service leave on termination of employment is usually determined by the relevant state or territory long service leave legislation. The entitlement is usually determined by a number of different factors, including: the employee s length of continuous service with the employer which party terminated the employment the circumstances under which an employee may be entitled when resigning their employment and at what remuneration the employee is to be paid on termination. Generally, an employee with less than 10 years continuous service does not have an automatic right to pro rata long service leave on termination, although some jurisdictions do differ on this point. A casual employee is usually entitled to long service leave, based on their continuous service with the employer.

19 17 Redundancy pay Under the NES, an employee is entitled to redundancy pay when the employer no longer requires the employee s job to be performed by anyone, or the employer becomes bankrupt. The scale of payments is based on the employee s years of continuous service with the employer, although the employee must have served at least one year s service with the employer before an entitlement to redundancy pay occurs. The NES redundancy pay provisions apply to an employer who employs 15 employees or more at the time the redundancy occurs 2. Rostered days off (RDOs) Under a modern award, an employee may be allowed to bank up to five RDOs. In this circumstance, the employee would be entitled to be paid these accrued RDOs on termination of employment. Cashing out personal/carer s leave Although this provision is uncommon, an individual or collective agreement or contract of employment may allow for the cashing out of amounts of an employee s accrued personal/carer s leave credits. Refer to the applicable agreement or contract to determine whether an employee can cash out accrued personal/carer s leave. Superannuation From 1 January 2010, employer superannuation guarantee (SG) contributions no longer form part of the definition of ordinary pay for the purposes of calculating payment in lieu of notice under the Fair Work Act, although payments in lieu of notice of termination are included in calculating an employer s SG superannuation contributions into the employee s superannuation fund. (SGR 2009/2) Post-termination payments A modern award or a contract of employment may provide for post-employment entitlements when the payment is delayed because of the nature of the work or is related to circumstances unrelated to the continued employment of the employee. The following circumstances may attract post-termination payments: Accident pay A modern award may provide for accident pay, which will usually continue to be enforceable until 31 December This is make-up pay which represents the difference between the level of workers compensation and the employee s award rate or actual rate of pay (including over award payment). Accident pay is payable while the employee is on workers compensation, up to a maximum period, eg 26 weeks, but continues to be paid to the employee even where the employee s employment has been terminated. Reference should be made to the applicable modern award to determine an employee s entitlement to accident pay beyond their employment with the employer. 2 See Redundancy, Fair Work and the NES, also by Paul Munro 2010.

20 18 Commission payment A modern award or an individual s contract of employment may provide for the payment of any commission on orders obtained during an employee s employment to continue to be paid to the employee, even though the employee is no longer employed with the employer. Refer to the applicable modern award or contract of employment to determine an employee s entitlement in this circumstance. Further help Fair Work Australia Fair Work Ombudsman Modern awards: the content of each modern award can be viewed at

21 19 Paul Munro Workplace relations commentator and writer Paul has over 30 years experience providing advice to employers on workplace issues, with over 25 years as a workplace relations advisor with New South Wales Business Chamber. Paul has also been in a workplace advisory role with employer organisations in the timber industry and club industry. Paul ensures that employers have the necessary information to make considered business decisions relating to their workplace and helps to simplify some of the more complex statutory and award-based obligations placed on employers. Paul currently writes regular feature articles for the web-based subscription publication WorkplaceInfo and has published over 300 articles. 2010, Australian Business Pty Ltd Conditions of use and disclaimer This guide provides a summary only of the subject matter covered, without the assumption of a duty of care by the publisher, NSW Business Chamber in association with Australian Business Pty Ltd. The summary is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Information and services provided to you in this guide are personal to you and you agree not to re-sell or make available this information and services to any other person (other than your own employees) or another business without our written permission. Links Parts of the guide may have links through to webpages not controlled, associated or affiliated with us. We are in no way responsible for any content appearing on such a webpage. The fact that a link to such a webpage may be included in the guide does not mean that we in any way endorse, promote or are associated or affiliated with that site or any of that site s content. Intellectual property All text, graphics, software in the guide (including where included in advertisements) (Content) is our copyright material unless indicated otherwise. We and our suppliers may have trade marks (both registered and unregistered) subsisting in the Content. The Content is protected by relevant intellectual property laws. We authorise you to use and distribute the Content strictly for your own personal and internal business use only. You are not otherwise authorised to modify, copy, republish, frame, adapt or distribute this Content without our written permission. Disclaimer The publisher will not be liable under any circumstances for any loss of profits or any damages of any kind recognised by law (even if it has been advised of the possibility of such loss of profits or damages) which are the consequence of you: (a) Acting, or failing to act, on any information contained on or referred to in this guide, the Content, the Materials and/or any of the External Web Sites; or (b) Using or acquiring, or your inability to use or acquire, any service or product contained or referred to in this guide, the Content and/or any External Web Sites. General These terms are be governed by and construed in accordance with the laws of the State of New South Wales, Australia.

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