Greatest hits 2015: redundancy obligations at no. 2

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Greatest hits 2015: redundancy obligations at no. 2

Our second most popular story for 2015 considered redundancy obligations when fixed-term contracts end early.

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Our second most popular story for 2015 considered redundancy obligations when fixed-term contracts end early.

Also in second place were:

Paul Munro’s A–Z definition


Alcohol and drug testing was the second most popular A–Z definition in 2015. 

Topic pages


Hours of work was the second most visited page on our website in 2015.

Feature articles


Second place in our greatest hits countdown went to a story about employee’s redudancy obligations – Do we pay redundancy if contract completed early? 

Here it is again in case you missed it.

Q  Our company has an employee who is employed on a two-year, fixed-term contract, which is due to finish at the end of the current financial year (June 2015). However, it appears the work related to the contract will be completed three months ahead of schedule.

We have looked at the employee’s employment contract and it clearly specifies the contract is for two years, starting from 1 July 2013. Our understanding is that redundancy pay does not apply to an employee who is employed on a contract of a specified period of time. As his employment is finishing before the period of time specified in the contract, is the employee entitled to redundancy pay?
 
A  The employee would be entitled to redundancy pay under the National Employment Standards (NES) if the position becomes redundant before the end date specified in the contract of employment, the employee has completed at least 12 months continuous service with the employer and the employer has 15 employees or more.

While the Fair Work Act (s121 and s123) provides that the scale of redundancy pay under the NES does not apply to an employee’s termination of employment if the employee is employed for a specified task, or a specified period of time, or a specified season, the termination must take place at the completion of the specified task, time or season.
 
This means redundancy pay would not be payable if the contract finished at the completion of the contracted period of time (in this case two years).
 
Under the scale of redundancy pay, an employee who has completed more than one year but less than two years continuous service is entitled to four weeks of redundancy pay at the employee’s base rate of pay.

What is a contract of a specified period of time?

A contract of a specified period of time is where the start and end times are unambiguously identified by a term of the contract. This is either by the contract stating definite dates, or by stating the dates or criteria by which one or other end of the period of time is fixed, and by stating the duration of the contract of employment. It is the common law position that a contract that ends with the effluxion of time does not terminate at the initiative of the employer.

Unfair dismissal

It should also be noted that a worker employed under a contract for a specified period of time, whose employment is terminated other than at the expiration of that contract, may make an application under the unfair dismissal provisions of the FWAct, provided the employee has served the relevant minimum period of employment.

Common law

If the employer terminates the employee’s fixed-term contract early (ie before the agreed end date), the employee may be able to claim denial of contractual benefits or breach of contract. The employee would need to pursue this action through the common law courts.

Modern awards – small business employer

A modern award may contain a “transitional provision” clause which provides redundancy pay to employees employed by a small business employer, even though the NES excludes such an entitlement. For example, an employee of a “small business employer” covered by the Timber Industry Award 2010 (cl 15.7) is entitled to redundancy pay under the prescribed scale if their position becomes redundant.

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