02 Jul HR LAW NEWSLETTER – JUNE 2024

Welcome to the June 2024 HR Law Newsletter.  This month, we discuss some changes set to take effect in the new financial year.  We also discuss a recent case, in which an employer was fined 17,000.00 plus damages for delaying payment of a terminated employee’s accrued annual leave.

HR LAW ANNOUNCEMENTS

Introducing our newest Partner

We are thrilled to introduce Sewar Mitanis as the newest Partner at HR Law.

Sewar brings over 18 years of extensive experience, specialising in Employment, Workplace/Industrial Relations and Enterprise Bargaining. Sewar has developed an in-depth knowledge and understanding of Federal and Queensland law, which allows her to provide considered, tailored and practical solutions to the wide range of her clients.

Following being admitted to the Bar of Lawyers in 2004 in her home country, Sewar migrated to Australia in 2006 and was then admitted as a Solicitor of the Supreme Court of Queensland in 2010. Sewar is also admitted as a Solicitor of the Supreme Court of Australia. Having worked exclusively in the Employment and Industrial Relations framework, Sewar has developed a strong passion for her areas of practice through working with public (Queensland State Government and Local Governments) and private sectors, as well as the Queensland Industrial Relations Commission and the Industrial Court of Queensland.

To get in contact with Sewar, you can contact her on s.mitanis@hrlaw.com.au or 0447 725 411.

NATIONAL MINIMUM WAGE

The Fair Work Commission’s expert panel decided to increase the National Minimum Wage and all modern award minimum wage rates by 3.75 per cent, effective from 1 July 2024.

This decision will increase the National Minimum Wage from $882.80 to $915.90 a week and from $23.23 to $24.10 an hour.

In determining this level of increase, the Panel stated that the primary consideration was the cost-of-living pressures that modern award reliant employees, particularly those who are low paid and live in low-income households, have continued to experience over the past year.

To access the Annual Wage review, click here.

INCOME AND COMPENSATION CAPS & FILING FEES RISING

Along with the increase to the national minimum wage, the Fair Work Commission has announced the following increases effective 1 July 2024.

• High-Income Threshold: The high-income threshold will increase from $167,500.00 to $175,000.00 for FY2024/2025.  Employees who earn above this threshold may be excluded from making an unfair dismissal claim unless they are covered by an award or agreement.

• Maximum Compensation Unfair Dismissal Claims: The maximum compensation for unfair dismissal claims will increase from $83,750.00 to $87,500.00 for dismissals occurring on or after 1 July 2024.  This amount is set at half of the high-income threshold.

• Filing Fees: The filing fees for various applications under the Fair Work Act 2009 (Cth) (“FW Act”) will also increase. Specifically, the filing fee for unfair dismissal, general protections, and anti-bullying/sexual harassment applications made under sections 365, 372, 394, 773, 789FC, and 527J of the FW Act will increase from $83.30 to $87.20.  There is no fee to make an application to deal with a sexual harassment dispute under section 527F of the FW Act.

SUPERANNUATION CONTRIBUTION INCREASE

On 1 July 2024, the Superannuation Guarantee Rate (“SGR”) will increase from 11% to 11.5%, with it set to increase again on 1 July 2025 to 12%. 

Employers need to consider the effect this will have on employees whose remuneration is inclusive or exclusive of superannuation and any amendments which may be required to the terms of their employment.  For example, if an employee’s remuneration is inclusive of superannuation and you intend for the superannuation increase to be ‘absorbed’ within the employee’s salary, you must ensure the employee is not underpaid as a result (i.e. taking into account for example, the employee’s minimum hourly rate, allowances, penalty and overtime rates etc in accordance with the relevant modern award or enterprise agreement).

DELEGATES RATES IN ENTERPRISE AGREEMENTS

From 1 July 2024, enterprise agreements must include a delegate rights term. This term provides for the exercise of the rights of workplace delegates.

Where employees are asked to vote on an enterprise agreement on or after 1 July 2024, all enterprise agreements must include a delegates’ rights term. If the agreement does not include a delegate rights’ term, the delegates’ rights term set out in the relevant modern award will be included.  

THIS MONTH’S CASE BRIEF

When terminating an employee’s employment, it is essential the employee is paid out, among other entitlements:

• outstanding wages;
• outstanding accrued leave entitlements including annual leave and long service leave (if applicable);
• redundancy entitlements (if applicable); and
• notice (if paid in lieu).

Employers must ensure they comply with the timeframes for final termination payment as set out in the FW Act, as well as the applicable modern award or enterprise agreement. 

What does the FW Act say about payment of accrued unused annual leave?

There are no specific provisions within the FW Act which prescribe specific timeframes or deadlines regarding when final termination payments must be paid. The only general provision which refers to payments and salary is under section 323(1) of the FW Act, which requires employers to complete payment to employees at least monthly. However, some modern awards do stipulate provisions around when final termination payment must be made. For example, clause 17.5 of the Clerks – Private Sector Award 2020 (“Award”) states:

17.5       Payment on termination of employment

• The employer must pay an employee no later than 7 days after the day on which the employee’s employment terminates:

• the employee’s wages under this award for any complete or incomplete pay period up to the end of the day of termination; and

• all other amounts that are due to the employee under this award and the NES.

• The requirement to pay wages and other amounts under clause 17.5(a) is subject to further order of the Commission and the employer making deductions authorised by this award or the Act.

However, Note 1 of this clause states that under section 117(2) of the FW Act, an employer must not terminate an employee’s employment unless the employer has given the employee the required minimum period of notice or “has paid” to the employee payment instead of giving notice.  Accordingly, where an employee is paid notice in lieu, final termination must be made on the final date of employment.

CASE BRIEF

In the recent case of Dorsch v HEAD Oceania Pty Ltd (Penalty) [2024] FCA 484, the Federal Court fined an employer $17,000.00 plus damages for delaying payment of a terminated employee’s accrued annual leave. Specifically, the employer failed to pay the employee’s outstanding accrued annual leave balance until three (3) months after the termination in contravention of section 90(2) of the FW Act.

The Facts

On the date of termination on 9 December 2021, the employee of Head Ocean Pty Ltd (“Company”) had accrued annual leave in the amount of $8,022.82 (“the Entitlement”). The Company failed to pay the Entitlement to the employee until three (3) months after his termination date.

The Court noted that the Company’s conduct was not a deliberate attempt to avoid paying the employee’s entitlements. Rather, the delayed payment was due to the Company’s initial mistaken belief about their legal obligations. In any event, the Court found that the Company did not take adequate steps to verify and understand its obligations, although it did eventually rectify the underpayment and admit to the contravention.

The Outcome

In the original liability case of Dorsch v HEAD Oceania Pty Ltd [2024] FCA 162, the Court found at [292] that the Company’s obligation to pay accrued annual leave crystallised upon the termination of the employment relationship.  The Court found that the delay in payment was in breach of section 90(2) of the FW Act, which states: 

“(2)    If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.”

Section 90(2) of the FW Act forms part of the National Employment Standards (NES). Notably, section 44 of the FW Act states that an employer must not contravene a provision of the NES.  This is a civil remedy provision, meaning that if an employer breaches the NES, penalties may be imposed on the employer and/or those personally involved in the breach.  

Penalties and damages applied

The Company was fined $17,000.00 for the breach, which is approximately 25 per cent of the current maximum penalty for a company. In determining this penalty, the Court stated at [32]:

“…  a clear message does need to be sent to HEAD Oceania and the community that ignorance (including mistaken belief) is no excuse. Further, an employer not only has an obligation to know and understand the law but also, if in doubt as to whether the entitlement is payable, to take adequate steps to interrogate the circumstances and seek advice. It is not sufficient that one can have a mistaken belief and then take no steps to verify the circumstances. This is not a case where (incorrect) legal advice had been obtained and relied upon or where attempts had been made to verify the record.”

Furthermore, the Court ordered the Company to pay the employee $10,000, to compensate him for the detrimental impact suffered by the breach, including financial strain.  Specifically, the Court determined that the delay had a “material effect” on the employee, noting that the unpaid amount was not insignificant as it comprised approximately 10% of the annual salary the employee received from the Company.

What does this case mean for employers?

It does not appear that the Dorsch decision is authority to mandate that accrued annual leave is payable for every person on their final day of employment.  Rather, here, it was found that the length between the termination of the employee’s employment and payment of the Entitlement was considered wholly unacceptable.

Employers should consider the following:

• Where the employee is paid notice in lieu: Noting the requirements under section 117(2) of the FW Act in relation to notice in lieu, final termination payment should be made on the employee’s final date of employment.

• Where the employee works out their notice period: Employers should follow any requirements in the applicable modern award or enterprise agreement.  In the absence of any requirements, we recommend final termination payments be paid within seven days of the employee’s final date of employment.

Employers should otherwise periodically review their legal obligations under the FW Act and other applicable legislation, noting this case demonstrates the Court’s low threshold for breaches the FW Act including in circumstances of mistaken belief.

To read the Dorsch v HEAD Oceania Pty Ltd (Penalty) [2024] FCA 484, click here.

To read the Dorsch v HEAD Oceania Pty Ltd [2024] FCA 162, click here.

WHAT YOU MAY HAVE MISSED

In this year’s Federal Budget, the Fair Work Ombudsman has won $28 million over the next four years to continue to pursue underpayments by large corporate employers.  Specifically, the Ombudsman’s workforce has been boosted from 16 to 970, to improve the Ombudsman’s ability to pursue underpayments and respond to self-reported non-compliance with the FW Act by large corporate employers.

To read more, access HR Law’s recent article, click here. 

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The content of this newsletter is intended to provide a general guide to the subject matter.  Specialist advice should be sought about your specific circumstances.