When is an employee no longer an employee?

We have recently had an influx of employment disputes across a variety of job industries. Despite no two cases ever being the same, it appears that there are recurring themes that are plaguing employers.

Concerningly, it appears that employers are unaware as to when an employee ceases being an employee. Especially after a notice of termination of the employment has been given (by either the employer or employee).

Further, employers appear unsure of which obligations and rights[1] (both contractual and statutory) are enforceable during the notice period (the period between the day notice of termination is given and the day on which the employment contract concludes). This includes whether action can be taken against an employee for serious misconduct during the notice period.

As an employer, it is imperative that you understand what obligations and rights you have when it comes to the termination of an employee, and what obligations and rights your employee has during the notice period.[2]

When is an employee no longer an employee?

If a valid notice of termination is given, the employment concludes on the date at which the notice period expires or is due to expire, unless the contract is ended by some other independent cause.[3]

This position was recently confirmed by Deputy President Anderson in the Fair Work Commission matter Christopher Patterson v Re-engage Youth Services Incorporated T/A Re-Engage Youth Services[4], where the Deputy President stated “there was still a relationship to terminate” after Mr Patterson had provided his notice of termination.

What contractual or statutory rights exist during the notice period?

As discussed above, the end of an employment contract is the date on which the notice of termination expires. This means that the employment contract, and the terms, rights and obligations contained in same, remain in effect until the expiry of the notice of termination.

So, what happens if the employee neglects or fails to comply with their employment obligations during the notice period?

Serious Misconduct[5]

The notice period can often be an awkward time for both the employer and the employee. Unfortunately, it is not uncommon for an employee (particularly if they were not expecting to receive a notice of termination) to act improperly during the notice period.

An issue which may arise is that an employee may engage in serious misconduct after a notice of termination is given to them. For example, a disgruntled (soon-to-be-former) employee may attempt to sabotage the employer’s business or verbally or physically assault another employee. In these circumstances, an employer can terminate the employee without notice, notwithstanding the fact that the employee is already in the notice period.

So why would you terminate an employee who has already received or given notice of termination?

For one, you are not required to provide a period of notice for employees who are terminated for serious misconduct.[6] As such, you will not need to pay the employee for that period (you are still required to pay the employee their accrued rights and entitlements, such as annual leave).

Terminating an employee for serious misconduct also removes the employee from the workplace immediately, which minimises the risk of any further damage being caused by the employee to the business and reputation of the employer.  

It needs to be noted though, if an employer does decide to take action against an employee for serious misconduct, the employee should be afforded procedural fairness with respect to the allegations.

Procedural Fairness

As a general rule, procedural fairness should always be afforded to an employee prior to terminating the employee for serious misconduct, even if they had previously given or received a notice of termination.

In order to provide an employee procedural fairness, an employer would:

  1. Notify the employee of the serious misconduct they are accused of, in clear and explicit terms, prior to termination[7]; and

  2. Provide the employee an opportunity to respond to the alleged serious misconduct, prior to the termination[8].

Even in circumstances where the alleged serious misconduct appears plain and obvious, the Fair Work Commission may consider the dismissal to be unfair where employees were not afforded procedural fairness [9]. As such, we strongly recommend employers provide procedural fairness to all employees accused of serious misconduct, instead of running the gauntlet with the Fair Work Commission.

Important Considerations

When considering whether to take further action against an employee during the notice period, it is important consider the practical effect of the decision.

Whilst you may have a “slam dunk” right of termination for serious misconduct, the reality is that it is not always practical to dismiss an employee on that basis, especially after they have already been given a notice of termination.

For example, if the notice period is short (1-2 weeks) it may not be economically viable to terminate the employee to save one week’s pay compared to the potential legal costs associated with defending unfair dismissal proceedings (which are sometimes commenced by aggrieved employees, irrespective of the strength of their case).

However, in circumstances where the employment contract provides for a longer notice period, it may be financially viable to dismiss the employee for serious misconduct during the notice period.

The decision to take action against the employee for the serious misconduct is ultimately the employer’s, who should consider a variety of factors, including:

  1. The financial impact of the decision;

  2. The risk to the employer if the employee is not dismissed;

  3. The impact of the employee returning to the workplace;

  4. The likelihood of the employee commencing proceedings for unfair dismissal; and

  5. Any other relevant consideration.

Takeaway Points

As an employer, you should have a full and proper understanding of any and all employment obligations and rights, both you and your employees may have. You should understand that both the employee’s and the employer’s obligations and rights remain in effect until the conclusion of the employment.

If an employee engages in serious misconduct during the notice period, you can terminate the employee, notwithstanding the original notice of termination. However, you should always afford the employee procedural fairness with respect to the alleged serious misconduct (regardless of how damning the case may be).

The decision to terminate the employee in the notice period for serious misconduct should not be automatic. The employer should consider the likely impact of the decision and consider the repercussions, prior to making same.

If you fail to comply with your contractual and statutory obligations and Fair Work Commission proceedings are commenced, ignorance will not be considered a defence.  

If you are unsure, you should always seek legal advice regarding your contractual and statutory rights and obligations to prevent litigation in the future.

If you require assistance regarding decisions to be made in your workplace, contact Active Law for concise and pragmatic legal advice.

[1] The obligations and rights of employers and employees are governed by a combination of the Fair Work Act 2009 (Cth), the employment contract, and an Award or Agreement (if applicable).

[2] For the purpose of this article, employee means part-time or full-time employee and not a casual employee, unless otherwise stated.

[3] McCarry G.J. (1986), “Termination of Employment Contracts by Notice”.

[4] [2018] FWC 20 at [83].

[5] For the purpose of this article, assume for any reference to serious misconduct that the conduct satisfies the requirements under the Fair Work Act 2009 (Cth) and relevant case authorities

[6] Fair Work Act 2009 (Cth), s123 (1)(b).

[7] Fair Work Act 2009 (Cth), s387 (b).

[8] Fair Work Act 2009 (Cth), s387 (c).

[9] Sabeto v Waterloo Car Centre Pty Ltd (2003) 123 IR 222 and Slavin v Horizon Holdings Pty Ltd [2012] FWA 5588.

Disclaimer: Reliance on content.
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.