Employers often do not require (or desire) employees to work through their notice period. This is particularly the case if an employee has provided resignation of their employment and are disruptive to the workplace.
Depending on the terms in the employment contract, employers may have the option of accepting the resignation and paying in lieu or notice or requiring the employee not to attend for work for the notice period, which is commonly referred to as “gardening leave”.
In Egginton v Focus (NSW) Pty Limited [2024] FWC 1872, the Fair Work Commission (FWC) was required to consider whether an employee agreed to finish up his notice period early or was dismissed at the initiative of the employer.
The employee was working for a transport company. The employment relationship between the employee and the employer, including its director had soured over time such that on 20 March 2024, the employee resigned from his employment. The employee provided the employer one month’s notice, even though his employment contract only required one week’s notice.
Initially, the employer confirmed that the employee would be required to work through his notice period. However, during the notice period, the employee’s relationship with the employer further deteriorated, with the employee lodging a bullying complaint and later a grievance raising psychosocial hazards in the workplace.
On 28 March 2024, the director of the employer spoke to the employee about ending his notice period early. The contents of this discussion was key to the jurisdictional objection lodged by the employer in the employee’s general protection claim alleging he was dismissed from his employment.
The employee claimed that he was dismissed from his employment by his employer on 28 March 2024. The employee gave evidence that in this phone call, the director advised him that things were not working out and he could finish up. The employee was not paid the balance of his notice period. The employee submitted that was if he had been outlined to him that he would not be paid the balance of the notice period, then he would have worked the notice period and would not have agreed to end his employment early.
The employer maintained that the employee was not dismissed from his employment, but rather he resigned from his employment. As to the phone call on 28 March 2024, the evidence put forward from the employer was that the employee was advised that he did not have to work out his notice period and he could leave early if he chose to do so. The employer’s submission was that the employee chose to end his notice period early.
The evidence from both the employee and the employer was that there was no discussion about whether the remainder of the notice period would be paid out to the employee.
The FWC noted that employers and employees can agree to end the employment early when an employee has provided notice of resignation, but that that clear understanding of the consequences for the notice period and what is agreed between the parties is necessary in order to avoid disputes.
The FWC held that whether there was agreement to end the employment earlier than the notice period was dependent on whether the employee had a “real or effective” choice to work out the notice period with pay.
The FWC stated that an employee has not been dismissed at the initiative of the employer if:
- the employee has the choice whether to work out the notice period with pay; and
- freely agrees to end the employment earlier by bring forward the last date of employment.
If the employee clearly understands that the balance of the notice period will not be paid if they elect to leave their employment early, it is likely that the FWC will be satisfied that the employee resigned from their employment.
In this matter, the FWC determined that it could not be satisfied that the employee’s employment ended as a result of his resignation. There was no evidence that the employee and the employer discussed:
- working the balance of the notice period with pay;
- paying in lieu of the balance of the notice period; or
- not paying in lieu of the balance of the notice period.
Accordingly, the FWC was satisfied that the employee’s employment was terminated at the initiative of the employer in its phone call to the employee on 28 March 2024, or alternatively, that the employee was forced to resign.
The FWC dismissed the jurisdictional objection.
Lessons for employers
It is important that employers understand the outcomes if they wish to end the notice period early for an employee who has resigned from their employment. An employer may have the option to pay in lieu of the notice period.
In the event that it is the employee who wishes to bring their last day of employment forward, this decision also demonstrates that there must be clear understanding from the employee that they can do so and agree that they will not be paid the remainder of the notice period, or work out the notice period and be paid.
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