Workplace Relations, Employment & Safety Update

Redundancy & Employee Entitlements

Following on from our recent breakfast seminar on Restructures, Redundancies and Transfer of Business we caution employers to ensure they not only get the redundancy process right, but they pay employees their correct entitlements.

The Fair Work Ombudsman (FWO) has released information about a Queensland Company facing prosecution for the underpayment of employee entitlements on redundancy.

The genuineness of the redundancies was not in question, but as the Company underpaid the employees their notice of termination and redundancy entitlements in the amount of $18, 019.00 FWO became involved in the matter.  The FWO, Nicholas Wilson commented that the decision to prosecute the Company was made because of the significant amount of underpayment involved and the failure of the employer to rectify the problem.

As a result underpayment, and its conduct, the Company is exposed to a maximum fine of up to $33,000.00 for each contravention, and the part-owner/ manager is exposed to a maximum fine of $6,660.00 for each contravention.

Lessons for Businesses

This case highlights the importance of ensuring that termination entitlements are accurately calculated and paid, particularly where redundancy payments may be payable in addition to entitlements to notice of termination. It also raises the importance of complying with any request or enquiry from FWO and rectifying any underpayments to prevent the employer being exposed to a potential prosecution and fine.

Stand down and Suspension of Employees

An employer does not have a Common Law right to stand down or suspend employees even where the circumstances may demand it, including during industrial action or as part of an investigation of a disciplinary matter.

Stand Down

The right to stand down an employee arises under statute, an industrial instrument, or can be expressly stipulated in the contract of employment.
 
The Fair Work Act 2009 (Act) provides employers with the right to stand down an employee where they cannot be usefully engaged due to:

1. industrial action (organised or engaged in by an employee or their bargaining representative);
2. a breakdown of machinery or equipment not the fault of the employer; or
3. a stoppage of work for any cause not the fault of the employer.

It is important to understand that in cases of industrial action, the right to stand down only applies to those employees not entitled to engage in the industrial action. In cases of stand down the employer is not obligated to pay the employee. There is also no requirement under the Act to give employees notice of a stand down, as is the case if the employer sought to lock out employees in accordance with the provisions of the Act. 

In a recent decision of Fair Work Australia it was confirmed that it is legitimate for the employer to stand employees who could not be usefully engaged for safety reasons when industrial action was engaged in by maintenance workers who would otherwise have performed maintenance work on machinery used by the production employees who were stood down. 

Where the right to stand down employees is contained in an industrial instrument or the contract of employment the provisions of the Act are not to be relied upon.

Suspension of Employees

The right to suspend an employee is generally exercised by the employer to allow it to investigate misconduct allegations, and to ensure that it continues to provide a safe place of work during such investigation.

However, there is no statutory right to suspend an employee. It is also generally considered that there is no Common Law right to suspend an employee, although suspension without loss of pay may not result in the employee being in any worse position than if they had been required to work, but it could be considered to be a technical breach of the contract of employment.

Accordingly, we recommend that if an employer wishes to exercise a right to suspend an employee during a period of an investigation, it firstly ensures that such right is contained within an enterprise agreement, transitional instrument or the contract of employment.  Further, the right to suspend without pay should be contained within the industrial instrument and/or contract of employment. 

If a suspended employee is subsequently cleared of any wrong doing we believe it is prudent to pay the employee for any lost earnings.    Employers should also note that a period of suspension will not break the employee’s period of service.

Lessons for Businesses

Employer should ensure that before they seek to stand down employees or suspend an employee that the right exists under the Act, the relevant industrial instrument or the contract of employment.

Failure to comply with the Act, the industrial instrument or the contract of employment can expose the employer to not only penalties and actions under the Act, but also damages claims at Common Law for breach of contract.

For further assistance or information contact the Workplace Relations, Employment and Safety team at Mills Oakley Brisbane on 07 3228 0400.