8 August, 2015
Jetgo Australia Holdings Pty Ltd v Goodsall [2015] FCCA 1378 and Jetgo Australia Holdings Pty Ltd v Goodsall (No 2) [2015] FCCA 1911
WHAT YOU NEED TO KNOW
- There can be little practical recourse for an employer when an employee fails to provide notice of the resignation of their employment because courts will generally not compel an employee to attend for work.
- A recent Federal Circuit Court decision upheld a novel approach to this issue. In the case, the former employer successfully brought proceedings against the employee for breach of the requirement to provide 2 weeks' notice of resignation under the relevant modern award.
- The employee was required to pay a penalty for failing to provide notice of resignation. However, the penalty was nominal ($2,550) and was ordered to be paid to the Commonwealth, not the employer.
- The Court declined to award costs, finding that it was not able to compartmentalise any part of the proceeding. The Court found that the employee had not acted unreasonably and caused the employer to incur costs.
- Where a court is satisfied that a person has contravened a civil remedy provision of the Fair Work Act 2009 (such as in this case), the court has power to order compensation for loss that a person has suffered because of the contravention. This argument was not explored in the Jetgo decisions, but is open where an employer can demonstrate loss due to an employee's breach of a civil remedy provision of the FW Act such as a contravention of a modern award or enterprise agreement.
WHAT YOU NEED TO DO
- Employers should consider the practical utility of initiating proceedings to deal with employees who leave without notice. If employers cannot recoup their costs and may not receive the penalty (as in this case), commencing proceedings for breach of an award or enterprise agreement obligation may not be worth the effort. However, if the employer can make out a claim for compensation or a counterclaim, this may be a strategy worth pursuing.
- For employers with high staff turnover and regular walk outs, this strategy may be worth the cost to take action and discourage future resignations without notice.
- Employers should evaluate the risks before relying on a contractual set off clause to hold back monies from an employee who fails to give notice. Contractual set off clauses are generally unenforceable but may have a deterrent effect
How would your organisation manage an employee walking out with no notice?
Many employers have long been frustrated by their inability to enforce notice periods when an employee resigns with no notice and no handover. The Federal Circuit Court of Australia recently imposed a penalty of $2,550 on a former employee for failing to provide his employer with two weeks' notice of termination of employment as required under the relevant modern award, the Air Pilots Award 2010.
Notice requirements
The Jetgo decisions concern an employee who was employed as a pilot. The employment contract contained an 8 week notice period. However, under the Award, the employee was required to give 2 weeks' notice.
Before commencing his employment, the employee was required to undertake training at his own cost to enable him to fly Embraer jets. The employment contract provided that the employee would be reimbursed by the employer over a 2 year period for the cost of this training. It eventuated that rather than the employee pay for the training, the employer used one of its training spots arising from a lease agreement for the Embraer jets and invoiced the employee for the cost of the training (which amounted to $39,600). The employee failed to pay the employer for the training.
The employee was to assume the position of Head of Flight Operations by July 2013. Before formally assuming this position, the employee was required to undertake further training in America at the employer's expense. Upon completing the training and returning to Australia, the employee resigned without providing notice.
During proceedings, it emerged that the employee had been actively seeking and had obtained alternative employment before his resignation.
Contravention of a term of a modern award
The former employer successfully brought proceedings in the Federal Circuit Court alleging a breach of the Fair Work Act 2009 on the basis that the employee failed to provide 2 weeks' notice of termination of employment as required by the Award.
The employer also successfully argued that the employee breached his contract of employment by failing to pay for his training costs. However, due to the employer utilising a training spot under the lease agreement for the Embraer jet, the Court assessed the loss suffered by the employer at $21,000. The Court also ordered that the employee pay restitution for the amount expended for his training immediately before his resignation, finding that it would be unjust for the employee to retain the benefit of the training at the employer's expense.
In response the employee alleged that the employer failed to pay him salary and allowances in accordance with the Award. These claims were not accepted by the Court. The Court found, by admission by the employer, that the employer failed to pay the appropriate amount of superannuation and accrued annual leave and so had also breached the Award. The Court imposed penalties of $850 and $1,700 respectively on the employer for these breaches. A further claim by the employee that the employer engaged in misleading and deceptive conduct under the Australian Consumer Law failed.
Penalty for failing to provide notice of resignation
Usually, proceedings for breaches of an award, an enterprise agreement or the FW Act are commenced against an employer. The Judge noted that the FW Act "does not differentiate between employers and employees as far as liability is concerned".
In determining the penalty to be imposed on the employee for breaching the Award by failing to provide the required notice, the judge considered that:
- the employee's failure to provide notice was deliberate;
- "the penalty also needs to illustrate to employees that complying with the Act is a 'two way street'"; and
- the breach attracted a need for both general and specific deterrence in the penalty.
Further, had the employee remained in employment for the 2 week notice period, the Court found that the benefit of the training undertaken by the employee could have been handed down to other employees and a successor could have been appointed to the position of the employee.
The Court imposed a penalty of $2,550, which is 25% of the available maximum. However, the Court required the penalty to be paid to the Commonwealth.
The Jetgo decision upholds a novel approach to employees' notice obligations. It is yet to be seen if the decision will be appealed, upheld or followed by other judges.
Costs
Where claims brought by an employee (including common law claims) comprise a single 'proceeding' for the purposes of section 570(1) of the FW Act, there is no jurisdiction to make an order for the recovery of costs in the proceedings unless the employer has acted unreasonably and caused the employee to incur costs.
The Court declined to award costs in this matter, finding that it was not able to compartmentalise any part of the proceeding. The Court found that the employee had not acted unreasonably and caused the employer to incur costs.
Implications for employers
Employers should consider the practical utility of initiating proceedings to deal with employees who leave without notice. If employers cannot recoup their costs and may not receive the benefit of the penalty (as in this case), commencing proceedings for breach of an award or an enterprise agreement obligation may not be worth the effort. However, if the employer can also make out a claim for compensation or a counterclaim, this may be a strategy worth pursuing.
Nevertheless, for employers with high staff turnover and regular walk outs, this strategy may be worth the cost to take action to discourage future resignations without notice.
Compensation orders
Where a court is satisfied that a person has contravened a civil remedy provision of the FW Act (such as in Jetgo), the court has power to order compensation for loss that a person has suffered because of the contravention. This argument was not
explored in the Jetgo decisions, but is open where an employer can demonstrate loss due to an employee's failure to provide notice of resignation as required by an award, enterprise agreement or the FW Act.
Contractual set off clauses
Contractual set off clauses are a more common strategy that some employers use to try and encourage employees to comply with their notice obligations. However, set off clauses in employment contracts are generally unenforceable due to the operation of the FW Act.
The FW Act provides that only certain deductions are permitted and that unreasonable payments and deductions that operate for the benefit of the employer are not permitted.
Employers should evaluate the risks before relying on a contractual set off clause to hold back monies from an employee who fails to give notice. While generally unenforceable, contractual set off clauses may have a deterrent effect.
MAKING THE CASE: Insights from Geoff Giudice
An employer may protect itself to some degree against an employee who may decide to terminate their employment without notice by including a term in the contract of employment requiring an employee who leaves employment with less than the period of notice required under the contract to repay the employer wages for a period equivalent to the notice not given. The term might also provide a limited right of set-off, although enforcing a set-off is fraught with difficulty.
If an employer takes action against an employee for breach of the notice provisions in the Fair Work Act any unsatisfied contractual obligation in relation to notice of termination could be included in the action. The employer would be in a good position to obtain an order for moneys due under the contract and, assuming the employee has no reasonable defence, an order for costs. Although the Court did not award the employer costs in Jetgo v Goodsall, the fact that there were multiple claims by the employer and the employee was a complicating factor. Any penalty for breach of a civil remedy provision of the FW Act, however, may well go to the Commonwealth.
