Can notice of termination run concurrently with leave?

In Short v CBI Constructors Pty Ltd (2017) FCCA 2442 delivered 2 November 2017,  Smith J said that the currently legal cases on the point in Australia do not support “a universal proposition that notice of termination cannot be given concurrently with any period of leave.” His Honour cited a case in which I was involved many years ago McSharer v Hospital Employees Industrial Union of Workers, WA (1974) 54 WAIG 1545, where Burt J (as he then was) found that the effect of the annual leave provisions in the relevant Award was that the contract of service continued throughout the period of five weeks leave. His Honour held that the right to terminate the employment on one week’s notice should be read subject to that and, for that reason, the employer could not give notice which, in its terms, would terminate the employment within the period of annual leave. His Honour did not decide whether notice could have been given which expired at the end of the leave period, and his decision was entirely based upon a construction of the Award.

Smith J went on to say

“In Liquor Hospitality & Miscellaneous Union v Cuddles Management Pty Ltd (2009) 183 IR 89; [2009] FMCA 463 (Cuddles). Lucev FM (as his Honour then was) found that the respondent had dismissed an employee at a time on which she was on maternity leave. The employee was entitled to 4 weeks’ notice under her contract of employment. The issue was whether that notice could run concurrently with the period of maternity leave. His Honour concluded that it could not. Lucev FM relevantly stated:

An employer cannot give notice of termination of employment to an employee on approved leave, or, at least, the notice cannot run concurrently with the approved leave because to do so is to deprive the employee of their right to paid leave. … In the The Chief Secretary v The Hospital Employees Industrial Union of Workers of WA (Coastal Branch) the Court of Arbitration in Western Australia held that a government department cannot give notice of dismissal so as to have any portion of the month prescribed for the notice of dismissal running concurrently with the annual holidays of the employee concerned. In McSharer v Hospital Employees Industrial Union of Workers, WA Burt J held that the right to terminate employment on one weeks notice was subject to an entitlement to leave and therefore an employer cannot give notice which in its terms would terminate employment within a period of annual leave. In AMWSU v Multicon Engineering (WA) Pty Ltd each of the Justices of the Industrial Appeal Court held that notice of termination was not able to run concurrently with a period of annual leave because to do so would be to deny the employee the benefit of the annual leave to the extent of the notice of termination. …

In this case the provisions of the WR Act[1] reinforce the proposition that an employee on approved leave, and specifically maternity leave, cannot have that leave interfered with by a period of notice. In this case, even though the prerequisite period of service for entitlement to maternity leave had not been met by Ms Poppas, Cuddles Management granted her maternity leave. Section 265 of the WR Act relevantly provides that maternity leave is “a single, unbroken period of unpaid leave (ordinary maternity leave)”. Section 279(1) of the WR Act entitles an employee to terminate employment during maternity leave “subject to any notice required to be given by the employee”. There is no co-related right given to an employer to terminate an employee’s service during maternity leave. Section 280 of the WR Act guarantees an employee who has taken maternity leave the right to return to the position held immediately before the start of the maternity related leave period. In the Court’s view those provisions make it clear that an employer is not entitled to terminate an employee’s service whilst the employee is on maternity leave. Furthermore, and in any event, to do so would entitle an employer to give notice during a period during which the employee is not being paid. If notice were to run during this period the employee’s entitlement to paid notice period, or pay in lieu of notice, would be vitiated. Having regard to the provisions of ss.265, 279 and 280 of the WR Act the Court’s view is that that cannot have been the intention of the Parliament. Furthermore, it is contrary to the law as established in the Chief Secretary, McScharer and Multicom Engineering.”

The decision in Cuddles turned upon a construction of the relevant provisions of the Workplace Relations Act 2006 (Cth) (WR Act). In particular, Lucev FM found that the right of a person on maternity leave to return to the position held immediately before the start of that leave, made it clear that employment could not be terminated during the term of the leave. His Honour found that it could not have been the intention of the Parliament for notice to be given during a period which the employee was not being paid, because the right to a paid notice period or pay in lieu of notice, would be vitiated. Counsel for the applicant could not identify any provisions in the WR Act which would give rise to a similar construction of s.117 of the Act, but relied upon the terms of the Agreement………………………..

I note that, in the final sentence of [117] of Cuddles, Lucev FM appears to give an alternative bases for his decision, namely that the ability to terminate during maternity leave would be “contrary to the law as established in the Chief Secretary, McSharer and Multicon Engineering.” However, those cases concerned annual leave and, while they undoubtedly supported the approach taken in Cuddles, they did not dictate the outcome.

Section 117 of the Act prohibits an employer from terminating an employee’s employment, unless written notice is given of at least the minimum notice period (in this case 2 weeks), or the employer has paid 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 is nothing in the plain text of s.117 of the Act that prevents the notice period from including a period in which an applicant is not in fact working. Similarly, there is nothing in the apparent purpose of that provision which would require such a construction.

The applicant relied upon the following statement in the Explanatory Memorandum circulated with the Fair Work Bill 2008 to establish the intention of the provision:

[466]         The intention of paragraph 117(2)(b) is to impose on an employer that makes the payment in lieu of notice, an obligation to pay either to (or for the benefit of or on behalf of) the employee, everything which the employee would have been entitled to receive had the employee worked out the required period of notice. …

That paragraph adds nothing to the resolution of the issue before the Court but, rather, states the obvious meaning of sub-s.117(2)(b) of the Act. Nor, with respect, does the assertion that the purpose of the requirement for notice, is to enable an employee to adjust to the change in circumstances and seek alternative employment. Where payment is not made in lieu of notice the employee must, if he or she wishes to be paid, continue to work. It is not clear how a person who is not working during the notice period would be disadvantaged by that fact. The applicant’s argument that the purpose of the R&R leave was for recuperation, is relevant to this issue and I will return to it in due course.

On that construction of s.117 of the Act, the requirements of that provision are not subject to any consideration concerning the period of R&R leave. However, the Agreement also contains a provision for notice and the issue must be determined by reference to it. Clause 19 relevantly provides:

19.1         Notice by the Company

The Company will provide notice of termination of employment (or payment in lieu of such notice) to all Employees except for casual Employees as follows:

Period of Continuous Service Period of Notice
1 year and up to the completion of 3 years 2 weeks

 

(Emphasis in original)

There are some differences between this provision and s.117 of the Act. Clause 19 is not expressed as a prohibition and the reference to payment in lieu of notice is sparse. Nevertheless, I accept the applicant’s submission that it is, in effect, the same as s.117 of the Act. That said, there is nothing in cl.19 which requires it to be construed so that any notice given cannot include the period of any R&R leave to which an employee is entitled under cl.31 of the Agreement.

Clause 31 is, as the applicant noted, found in pt.5 of the Agreement which relates to distant work provisions. That is to be contrasted with pt.6 which deals with leave provisions including public holidays, Gorgon Special Leave, annual leave, personal leave, compassionate leave, parental leave, jury service and long service leave. It is not clear what point the applicant derived from the location of cl.31 in the Agreement; however, it emphasises the fact that the context of the Agreement is that the work is to be undertaken on Barrow Island, an island 50 kilometres north-west of the Pilbara coast of Western Australia. The other clauses in pt.5 of the Agreement include provisions relating to mobilisation and demobilisation, fares for travel and accommodation.

The second point about R&R leave under cl.31 is that entitlement to it is expressed in terms of one work cycle consisting of 10 days R&R leave after the completion of 23 days on site. The applicant points to a number of other clauses in which the term work cycle is used, in particular cl.21(b), which states that the company is to determine the work cycle. Ordinarily, the same word or phrase used within the document will be given the same meaning. However, that is not possible in this case.

It is to be recalled that a document such as the Agreement must be construed with a practical bent in order to give effect to its evident purposes: Kucks v CSR Ltd (1996) 66 IR 182 at 184 (Madgwick J). Here, with that approach in mind, the work cycle referred to in cl.21 is not meant to be a defined term, but rather deals with the allocation of hours worked to employees. Clause 21 deals with hours of work and is located in a part which otherwise deals with rostered days off, rest periods, meal breaks over time, shift work and local work provisions. In other words, it deals with the organisation of employees within the time frame during which they are actually working.

Clause 31.2, read in its context, provides for a roster of four weeks on, one week off. In essence, it compresses the period of work into the 23 day period and the non-work period into the 10 days R&R leave. As was the case in Kentz, this arrangement is of significant practicality and utility given the fly-in fly-out arrangements in the geography of the Project.

That is emphasised by the fact that the R&R leave must be taken (cl.31.3(c)) and must be taken off site (cl.31.3(d)). First, unlike annual leave, R&R leave cannot be postponed and paid out upon termination. Secondly, bearing in mind the requirement to work reasonable overtime (cl.24.1(a)), and the flexibility in the arrangement of the ordinary hours worked (cl.21), the requirement that R&R leave be taken off site can be seen to ensure that, in contrast to the 23 days on site, it is a non-work period.

Clause 31.4 deals with payment for R&R leave. The first matter to note is that, after the first R&R leave period, the amount of pay is for 7.2 hours at the employee’s ordinary rate: sub-cl.31.4(b)(i). That equates to one ordinary working day excluding the period of 0.8 hours which would ordinarily accrue towards a rostered day off: cl.22.1 of the Agreement.

The second matter to note is that certain paid leave (RDO, GSL and annual leave) can be taken concurrently with R&R leave: sub-cl.31.4(b)(ii). This highlights a number of differences between R&R leave and those other types of leave including that it is largely unpaid and must be taken at a certain time and off-site. This makes any comparison to cases dealing with annual and other similar types of leave inapt.

The third matter to note is sub-cl.31.4(b)(iv) which provides that “any additional time off is unpaid leave”. Counsel for the applicant argued that “additional time off” in this subparagraph refers to time outside the 10 day R&R leave. That cannot be right. First, it follows immediately from two subparagraphs dealing with certain types of leave; and secondly, it is in the context of cl.31.3(d) which requires an employee to return to site on the final day of R&R leave. Rather, what this subparagraph means is that, except for the matters referred to in subparagraphs (i) to (iii), R&R leave is unpaid leave. That makes the analogy of this type of leave closer to the weekend for a weekday worker and, again, emphasises the compression of the non-work periods of employment into the 10 day period.

It is true, as the applicant argues, that, like other types of leave, R&R leave can be taken in advance: cl.31.6(b). However, it is important to note that that entitlement is limited to Christmas. The chapeau of cl.31.6 relevantly states:

31.6          Employees who qualify for the provisions of this subclause may return to their home or any other place mutually agreed between the Company and the Employee at Christmas…

(Emphasis added)

This limitation upon the entitlement to take R&R leave in advance again distinguishes it from other types of leave.

I also accept, as submitted by the applicant, that the stated purpose of requiring that the R&R leave be taken off site, is to ensure a proper period of recuperation: cl.31.3(d). However, I do not accept the consequence of that purpose. The applicant argued that this period of recuperation was guaranteed as an entitlement. That entitlement would be denied upon the giving of a notice of termination during the R&R leave period. That would be so because, it was argued, the purpose of the notice was to give the applicant the opportunity to find alternative employment. However, what if the applicant had been given notice upon return to the Project and had been required to work out the period of notice? How could he have looked for other employment in those circumstances?

The real purpose of recuperation is so that, upon any return to work, the employee can properly and safely fulfil his or her function. That is of benefit both to the employer and to the employee. If an employee is not to return to work because his or her work is terminated, then neither the purpose of the recuperation period, nor that of the notice period is undermined.

For the reasons set out above, the following passage in Kentz applies with equal force to the circumstances of the applicant in the context of the Agreement:

[118]        Characterised as the block of authorised non-work time which forms an integral part of the work cycles, the entitlement of the relevant employees, had their employment continued over the notice period, was to authorised unpaid non-work time in respect of the R&R period and working of and payment for any work-time within the cycle. Termination with immediate effect, subject to the payment made in lieu, was to the same effect-time off without payment in respect of the R&R periods and payment for the “hours the employee would have worked had the employment continued until the end of the minimum period of notice”, save that the employees were not required to work the work-time hours within the work cycle for which they were entitled to payment. The employees were paid what they were entitled to be paid had they remained in their employment during the notice period. Further, there was no practical inhibition of the opportunity of the employees to respond to changed circumstances, re-organise their lives and seek alternative employment.

In other words, the respondent was entitled to give notice of termination to the applicant concurrently with the period of R&R leave, and the payment which it made in lieu of the period of notice required to be given, was in the amount to which the applicant was entitled.”