The effect of a dismissal during notice of resignation

It is not uncommon for an employee to give notice of resignation under an employment contract, or even pursuant to a moral obligation, only to have the employer then terminate the employee’s employment during that notice period. Is this a dismissal for the purposes of the unfair dismissal laws?

The answer is yes, as you will see from the following extract from a recent case of the Fair Work Commission.

“Although each case depends on its unique facts, relevant guidance can be drawn from the approach of the full bench of the Australian Industrial Relations Commission (the predecessor to the Fair Work Commission) in ABB Engineering Construction Pty Ltd v Doumit. In that matter an employee resigned giving a month’s notice he intended to work out, only to have the employer unilaterally decide to pay him a month in lieu. The bench said (references omitted): 55

“In the circumstances, whether the termination of any connection between Mr Doumit and the company on 15 May 1996 was a termination at the initiative of the employer depends on whether there was any relationship to terminate after the company received the resignation.

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The effect of giving of notice is summarised by Gray J in the Federal Court in Birrell v Australian National Airlines Commission:

“The giving of notice of termination of a contract, in accordance with the terms of that contract, is a unilateral right. Its exercise does not depend in any way on the acceptance or rejection of the notice by the other party to the contract. The giving of such a notice operates to determine the contract by effluxion of the period of notice.”

McCarry “Termination of Employment Contracts by Notice” sums up his view of the situation as:

“A valid notice of termination, once received, will operate to end the contract of employment when the period of notice expires or is due to expire, unless in the meantime the contract is ended by some other independent cause. The employer/employee relationship will end with the contract, if it has not ended earlier, but aspects of the contract can still be enforced thereafter.”

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The employer took no issue with the notice and acted, or at least intended to act, in accord with the contract by giving pay in lieu of notice. It proffered the payment in lieu because it considered that the contract had been terminated. That was a reaction. It was not an initiative to terminate the employment so as to bring the termination under Part VIA Division 3 of the Act as a termination at the initiative of the employer. In the employer’s perspective, its actions did not substitute a fresh termination for that which was initiated by Mr Doumit. However, the employer’s action did operate to substitute an earlier termination of the employment relationship than that initiated by Mr Doumit. The employer’s action operated to reduce some of the benefits that would have accrued if Mr Doumit had worked out the notice period.

We consider that having regard to all relevant circumstances and particularly the length of the notice period, and the scale of payment to Mr Doumit, the company’s action to bring forward the date of effect may and should be conceived as consequential to the resignation. In our view the circumstances of the case do not establish matters of fact or degree that would justify our finding that the employer took advantage of the resignation to in effect substitute a termination of the employment of its own initiative. We do not preclude the possibility of there being such a case, particularly in circumstances where a long period of notice is given in the form of a resignation. But this is not such a case.”

I also note the approach of the Commission in Brunner v Amalgamated Marketing Pty Ltd T/A Radio Stations 4AK and 4WK 56 in which the Senior Deputy President concluded that unilateral action by the employer to terminate on notice inside the notice period of an employee’s resignation was a dismissal.

In this matter two factors weigh more strongly in support of a conclusion that the employer took advantage of the resignation to in effect substitute a termination of employment at its own initiative than the facts in ABB Engineering Construction Pty Ltd v Doumit. They are firstly, that the employer did not act in accord with the contract of employment (mistakenly giving two weeks’ notice in lieu rather than three as required and arguably, unless the employer can establish an implied right, requiring notice to be paid in lieu) and secondly, the employer formed a view that it could not be sure that Mr Patterson would reliably and professionally work out the period of notice.

I take account of the fact that in the matter before me the length of notice given is not long (three weeks), and shorter than that in ABB Engineering Construction Pty Ltd v Doumit. Nor is the scale of payment great.

However, the employer cannot escape the fact that, after some hesitation on its own part, it chose to performance manage Mr Patterson even after he tendered his resignation. 57 Although there is no evidence that the employer had decided to terminate Mr Patterson’s employment on performance or conduct grounds, it is clear from the evidence of Ms Curyer (including her letter accepting the resignation) that she considered multiple breaches of policy to have occurred.58 The employer unilaterally decided to prevent a period of notice from being worked out and its reason for doing so was its view that Mr Patterson could no longer be trusted to act reliably and professionally whilst working out his notice period.59 This is both the direct evidence of Ms Curyer, and the clear inference from the fact that even after receiving the resignation the employer proceeded with a performance management meeting.

The employer’s decision to pay out the period of notice and to (erroneously) calculate that period as two rather than three weeks was made on advice from an external consultant in the hours following the 11.30am meeting on 10 July. 60 Whilst they were decisions made only after Mr Patterson’s resignation had been received, they were decisions which did more than simply pay out the notified notice period.

Taking these factors into account, and especially the combined effect of the unilateral decision to pursue performance management after the employee’s resignation and to shorten the notice period given by the employee and to deny the employee the right to work out the notice based on views arising from the performance management meeting, I consider that the employer brought Mr Patterson’s employment to an end in a manner that was materially different to the terms on which he had resigned. In those circumstances I characterise the employer’s conduct as substituting a termination of employment at its own initiative rather than simply being conduct consequential to the resignation.

I am also satisfied that there was still a relationship to terminate when the employer made these unilateral decisions. An employee working out a period of notice after having given lawful notice remains working under his or her ongoing employment contract, the termination of which has been notified but not fully taken effect. Inside this period of notice, rights and obligations under the employment contract continue to apply. Mr Patterson’s continuing employment contract was unilaterally terminated on different terms by Re-Engage at its initiative and for its own reasons.

While the employment relationship was initially brought to an end by Mr Patterson notifying that fact at 8.20am on 10 July to take effect on 31 July 2017, the employer’s unilateral decision later that day brought it to an end a week earlier, on 24 July, with the employer not requiring work to be performed between 10 July and 24 July.”

Patterson v Re-Engage Youth Services Incorporated (2018) FWC 20 delivered 3 January 2018 per Anderson DP