El control interno

 As noted above, to avoid uncertainty for both parties it may be desirable, when recruiting an employee for a specified term or the duration of a specified task, to agree at the time of engagement on the arrangements that would apply if the engagement were to be terminated early for a reason related to the operational requirements of the agency. An example of this would be because the work is no longer required to be performed as a result of a change in government policy. It should be made clear how these arrangements will interact with any entitlement an employee has to redundancy pay under the NES.

 It would also be sensible to agree at the time of the engagement that the employee will not be entitled to any compensation for early termination if their employment is terminated for any reason not related to the operational requirements of the agency.

 A possible approach to compensation arrangements that might apply if the engagement of an employee is to be terminated early is set out at Appendix B.

 Such an arrangement could be included in the contract of employment, or in an industrial instrument. It should be noted that this may not always avoid further liability if the agreed amount is not found by the courts to be a reasonable payment for the damages suffered.

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Appendix A: Fair Work Act provisions – further

information

Unfair dismissal

The Fair Work Act 2009 (FW Act) (Part 3-2) sets out when a person may be entitled to a remedy for unfair dismissal. Unfair dismissal is where a person is dismissed from his/her employment and the dismissal is found to be harsh, unjust or unreasonable and is not a case of genuine redundancy.

 ‘Genuine redundancy’ is defined in the FW Act as being where 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.

 However, the FW Act also provides that a person’s dismissal will not be a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise; or the enterprise of an associated entity of the employer. Further information on genuine redundancy is set out in Part 2.3 dealing with termination on the ground that an employee is excess to requirements.

Certain categories of employees are not covered by the unfair dismissal protections of the FW Act, including employees who have not completed their minimum employment period (section 382 of the FW Act). For APS purposes the minimum employment period is 6 months.

Paragraph 386(2)(a) of the FW Act makes it clear that a person is not dismissed if the person was ‘employed under a contract of employment for a specified period of time, for a specified task, or for the duration of a specified season, and the employment has terminated at the end of the period, on completion of the task, or at the end of the season’. In APS terms, this means that where a person is engaged for a specified term or for the duration of a specified task and employment ceases at the end of the period or on the completion of the task, then the person’s employment is not regarded as having been terminated at the initiative of the employer for the purposes of the FW Act.

However, a non-ongoing APS employee engaged for a specified term or specified task who has their employment terminated by the employer prior to the expiry of the term or prior to completion of the task may have rights to lodge an unfair dismissal claim subject to other tests in the legislation being satisfied. This is because non-ongoing APS employees engaged under section 22(2)(b) of the Public Service Act 1999

(PS Act) can have their employment terminated at any time by notice (see section 29(1) of the PS Act). These types of contracts for a specified term or specified task which allow parties to give notice of termination before the end of the term are not considered to be ‘true contracts’ for a specified period or a specified task.

Casual employees may have access to the unfair dismissal provisions of the FW Act where they have been employed on a regular and systematic basis, have completed the minimum employment period and had a reasonable expectation of continuing employment during that period.

Fair Work Australia, which deals with unfair dismissal claims made under the FW Act, is able to uphold the termination decision, or alternatively to order reinstatement or, where this is considered inappropriate, order the employer to pay compensation to the employee.

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General Protections

Part 3-1 of the FW Act contains the General Protections provisions. These provisions provide protections in relation to workplace rights (which can broadly be described as employment entitlements and the freedom to exercise and enforce those entitlements) and engaging in industrial activities (which encompass the freedom to be or not be a member or officer of an industrial association and to participate in lawful activities,

including those of an industrial association).

Employers are prohibited from taking ‘adverse action’ against an employee because the employee has, or exercises a workplace right or engages in industrial activity. ‘Adverse action’ includes dismissal of an employee and injuring the employee in his or her employment.

The General Protections provisions apply to all APS employees (and prospective APS employees) regardless of the length of time they have been working for the employer or whether they are an ongoing employee or not.

An example of the application of General Protections provisions is that an employer is prohibited from dismissing an employee who is absent from work on parental leave, for the reason that the employee is on parental leave. The protection applies because the employee has exercised their workplace right to access their parental leave entitlement.

The General Protections provisions also contain a range of miscellaneous protections that are relevant in the termination of employment context.

 Section 351 prohibits an employer from taking adverse action (which includes dismissal) against an employee for a discriminatory reason (e.g. race, sex or disability).

 Section 352 prohibits an employer from dismissing an employee because they are temporarily absent from work due to illness or injury of a kind prescribed by the Fair Work Regulations (FW Regulations).

Notice of termination

Section 117 of the FW Act provides that an employer must provide the minimum notice period or payment in lieu of notice for termination of employment before terminating the employment of an employee. Minimum notice periods are as follows:

Period of continuous service Notice period*

Not more than 1 year 1 week

More than 1 year, but not more than 3 years 2 weeks

More than 3 years, but not more than 5 years 3 weeks

More than 5 years 4 weeks

* Note that under the FW Act, the relevant notice period increases by 1 week if the employee is over 45 years old and has completed at least 2 years’ continuous service with the employer.

Where payment in lieu of notice is made, the employee is entitled to receive payment of at least the amount the employer would have been liable to pay to the employee at the 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.

There are certain exceptions to the requirement in section 117 of the FW Act to give notice of termination or payment in lieu of notice of termination. Under section 123 of the FW Act, an employer is not required to give notice or payment in lieu of notice to employees engaged for a specified period of time, for a specified

35 task or for the duration of a specified season; casual employees; or to employees whose employment is terminated for ‘serious misconduct’, which is defined in Regulation 1.07 of the FW Regulations – see

http://www.comlaw.gov.au/Series/F2009L02356.

 Agencies will need to determine on a case by case basis whether the conduct of an employee falls within this definition of ‘serious misconduct’ in the FW Regulations and therefore whether the employee is entitled to notice of termination, or payment in lieu.

 However, this does not mean that APS employees can have their employment terminated ‘on the spot’ for serious misconduct. Agencies will need to follow their established procedures for determining whether an employee has breached the APS Code of Conduct, and termination of employment with or without notice on the ground of misconduct can only occur at the end of a properly conducted misconduct process. It should be noted that because of section 29 of the PS Act which allows an employer to terminate employment at any time, the courts are unlikely to regard APS specified term and task employment as specified term or specified task employment for the purposes of the FW Act. Agencies terminating the employment of a non-ongoing APS employee prior to the completion of the specified term or the duration of the task will therefore generally be required to give the employee notice of termination or compensation instead of notice at least equal to the amount set out in section 117 of the FW Act.

It is important to note that the FW Act only sets a minimum notice period. APS industrial instruments and contracts of employment may provide entitlements to longer periods of notice than that available under the FW Act. If this is the case, then those longer periods will apply in APS termination decisions.

Further advice on identifying the amounts to be included where payment in lieu of notice of termination is to be made is set out in Appendix C.

Redundancy pay

Further information on minimum redundancy pay entitlements under the FW Act is contained in Part 2.3

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Appendix B: Compensation for early termination of non-

ongoing APS employees engaged for a specified term

It is suggested that engagement documentation and/or any industrial instruments applying to an employee:

 specify that where a non-ongoing APS employee who has been engaged for a specified term is terminated before the expiry of the specified term because:

- the duties in relation to which they were engaged have been completed ahead of time; or

- a decision has been made that those duties are no longer required to be performed;

the employee will, in addition to any entitlements arising under section 117 of the FW Act, be entitled to compensation in respect of the period of service foregone; and

 specify that the above amount for compensation for early termination will not be in addition to any entitlement the employee has to redundancy pay under section 119 of the FW Act (National Employment Standards (NES) payment)*; and

 state that the employee shall not be entitled to other damages or compensation in respect of, or arising out of, the termination (other than any entitlement the employee would have to redundancy pay under section 119 of the FW Act)*.

* Note that if a specified term employee is also entitled to an NES redundancy payment on early termination of the specified term, and the employee’s contract of employment or the industrial instrument applying to the employee includes early termination provisions which are equivalent or more beneficial to the employee than the NES redundancy amount, it is suggested that it be made clear in the contract/industrial instrument that the employee is not entitled to the benefit of both the NES redundancy entitlement and the compensation amount provided for in the employment contract/industrial instrument (i.e. that the compensation amount is to be reduced by any NES redundancy amount payable to the employee).

The following formula may be appropriate in relation to a non-Senior Executive Service (SES) employee engaged for a specified term.

An agency will, however, need to have regard to the particular circumstances of the engagement, e.g. whether remuneration packaging applies or the person relocated from interstate or overseas to take up the engagement, the length of service as a non-ongoing APS employee prior to termination, and other steps taken to mitigate the employee's loss such as assisting in finding alternative employment.

Period of service forgone Compensation

Not more than 6 months Nil

More than 6 months, but not more than 12 months 4 weeks salary

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Appendix C: Amounts to be included in payment in lieu

of notice

Under section 117(2) of the Fair Work Act 2009, where payment in lieu of notice of termination is made, the employee is entitled to be paid at least the amount the employer would have been liable to pay to the

employee at the full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum notice period.

In practice, the amounts that should be included where payment in lieu of notice of termination is made are as follows:

 Payments should only include amounts that would have been included in an employee's weekly,

fortnightly or monthly pay packet had the employee worked until the end of the minimum notice period. However, where a particular entitlement is paid on a longer term basis (e.g. quarterly or annually), a proportionate amount should also be included in the payment in lieu of notice even if payment of that amount would not have fallen due during the notice period.

 Essentially, such an entitlement means wages or salary, anticipated overtime and/or shift allowances, and other allowances such as 'higher duties allowance' (where an employee is temporarily assigned duties at a higher classification level and this assignment would have continued), clothing and site allowances as well as amounts that are normally paid directly to third parties on behalf of the employee will be payable.

 This would include the employee's superannuation contributions that are usually paid to a superannuation fund on behalf of the employee (which form part of the employee's salary), plus any other sums that are included in the employee's remuneration that are paid to third parties (for example under salary sacrifice arrangements).

However, payment in lieu of notice of termination should not include employer superannuation contributions payable by agencies.

In addition, as leave does not accrue after a person ceases employment, other entitlements such as annual leave or long service leave should only be calculated up until the actual date that the termination of employment takes effect (as specified in the notice of termination).

Salary increase between date of termination and end of required period

of notice

In circumstances where an employee is terminated and receives payment in lieu of notice of termination, and a relevant industrial instrument or other workplace arrangement that applied to the employee before their termination provides for an increase in salary in the period between the actual date the employee's

employment is terminated and the end of the required period of notice, then, unless the relevant industrial instrument provides otherwise:

 the salary increase is only relevant in calculating the person's salary for the balance of the notice period (i.e. the period between the date of effect of the salary increase and the end of the notice period)—the same principle applies to any other increases (such as to allowances or loadings) that would have become payable had the employee continued to work until the end of the notice period; but

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 the pay rise is not relevant in terms of calculating the person's entitlements to pay in lieu of unused leave credits—entitlements should be calculated using the salary rate that applies at the actual date that the termination of employment takes effect.

For example, an employee who has an entitlement to four weeks notice is paid in lieu of notice and has their employment terminated on 15 June. A pay rise then comes into effect on 1 July. In that situation, the person would be entitled to have their notice paid at the higher rate from 1 July until the notice period would have expired, on say 12 July. However, this pay rise would have no effect on the employee's other entitlements as calculated at the actual date of termination (15 June).

If, however, the employee works through the notice period (or part thereof) and remained in employment on 1 July, then he/she would be eligible to have all their accrued entitlements calculated on the basis of the higher rate of pay and would continue to accrue entitlements until their employment was actually terminated. There is no entitlement to payment in lieu of notice where the employee works through the notice period.

Other payments

On termination an employee will be entitled to be paid for unused annual leave and (where eligible) long service leave credits, calculated in accordance with the relevant legislation/industrial instrument, up until the date of effect of termination of the employee's employment (i.e. the date specified in the notice in writing of termination of employment under section 29 of the Public Service Act 1999).

Payment in respect of unused long service leave credits

The amount payable in respect of long service leave on termination of employment is governed by sections 16, 17 and 21 of the Long Service Leave (Commonwealth Employees) Act 1976 (LSL Act).

The LSL Act provides that the amount payable upon the termination of employment of an eligible employee must be calculated by reference to the salary that applied to the person on the day immediately before the person ceased to be an employee. No provision is made in the LSL Act for taking into account an increase in salary that occurs after the actual date of termination but before the end of the required period of notice.

Payment in lieu of other amounts

Payment in lieu of other entitlements can be made to employees in certain circumstancesfor example:

 an accelerated separation payment made to an excess employee on termination of employment, which, in addition to normal redundancy pay entitlements, involves an additional payment for the balance of the consultation and/or consideration periods (in addition to the notice period) being paid as a lump sum; or

 the balance of the retention period is paid out as a lump sum payment.

In these circumstances, the Australian Public Service Commission’s policy is that the calculation of these lump sum payments should be worked out on the same basis as payment in lieu of notice of termination of employment. In particular, the calculation of the payment should not include amounts for pro rata annual

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