Payment in lieu of notice and effect on dismissal date?

Author Paul Munro 27 Mar 2012
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When notice of termination is paid out by an employer, is there any impact on the date of termination — in particular, can an employee who is dismissed bring an unfair dismissal action because the effective date of termination falls outside the minimum period of employment?

This question was recently sent to WorkplaceInfo.

Q  We recently terminated an employee just prior to the employee completing six months of service with us.

The employee’s contract of employment stipulated that his work performance would be assessed during the first six months of his employment.

This is in line with the minimum period of employment applicable to our employees under unfair dismissal law.

A couple of days before completing six months, the employee’s immediate supervisor advised management the employee’s performance had not been satisfactory, citing chronic lateness for starting time and an overall lack of enthusiasm for the job, and recommended the employee not be employed beyond the minimum period of employment.

Because of the requirement under the National Employment Standards (NES) to give a week’s notice (less than 12 months service), the employee was paid one week’s pay in lieu of notice.

The employee has now claimed unfair dismissal.

Does this person qualify to claim unfair dismissal under the Fair Work Act 2009?

A  An employee who is terminated in lieu of notice within one week of completing the relevant minimum period of employment does not qualify for unfair dismissal.

The applicant in this particular unfair dismissal claim must have completed six months of continuous service with the employer to have the matter heard before Fair Work Australia (FWA). See: s384 of the Fair Work Act.
In this case, the applicant’s continuous service with the employer ceased prior to the completion of 6 months.

Payment in lieu of notice

Provided the payment in lieu of notice is not inconsistent with the applicable industrial instrument, or the NES, it cannot be deemed the employment continued beyond the time of termination specified by the employer. See: Prigge v Manheim Fowles Pty Ltd [2010] FWA 28

Source: Paul Munro, IR Consultant.
Paul Munro
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. more from Paul
KatharineB  27 March 2012,14:09   
I am interested to see such a clear cut, black and white answer. While undoubtedly correct by the letter of the law, terminating an employee so close to the minimum period based on the supervisors advice should raise some serious questions. In the first instance questions about the internal performance management processes, such as what feedback did the Supervisor give the employee in relation to these issues over the 6 months? How did the Supervisor try to address these issues? Did the employee have the opportunity to change their behaviour? Why was the employee unenthusiastic? Why were they chronically late? Secondly, the issues stated by the Supervisor chronic lateness and a lack of enthusiasm are the sort which manifest themselves over a period of time, more often than not providing plenty of opprotunity for the employer to deal with them well within the 6 month timeframe. This raises concerns over the Supervisors capabilities and understanding of performance management not to mention the recruitment process from a 'fit' perspective. Without further information, speculation as to why the Supervisor told management at the very last minute that this employee had performance issues, so much so that they should not continue employment is moot. In a similar situation, my company has employed legal advice which errs of the side of caution being that any terminations due to poor performance within the minimum employment period be conducted with at least 1 week before the completion of the 6 months employment and that at least one performance discussion has been held precisely to avoid unfair dissmissal claims such as these which while they may not be successful, no company wants them published in the media.
FrankB  29 March 2012,11:56   
I think Katherine B raises some very important points that rasies questions on the supervisor's owb skills. They really would have to to rush this termination through to avoid a successful unfair dismissal claim. Frank B
HughR  30 March 2012,09:17   
can i point out that the payment in lieu of notice however may be a breach of contract
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