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What if you quit during a redundancy notice period?

Are they still entitled to a payout?
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What if you quit during a redundancy notice period?

What if you quit during a redundancy notice period?

23 March 2021

What happens if an employee resigns during a redundancy notice period? Are they still entitled to a payout?

Redundancy pay is based on the number of years of continuous service an employee has completed with an employer. But what if someone finds a new job and leaves during a notice period? Do they forfeit their entitlement to redundancy pay?

This will depend on the terms of the applicable modern award or enterprise agreement, and the National Employment Standards (NES).

Award-covered employee

 A common term in modern awards provides that an employee who is given notice of termination in cases of redundancy may terminate their employment during the notice period.

The employee is entitled to receive the benefits and payments they would have received under the award (usually the redundancy pay provisions under the NES) had they remained in employment until the expiry of the notice period, but is not entitled to payment instead of notice. For example, the Clerks – Private Sector Award 2010 (cl 14.3) contains such terms.

Reference, therefore, should be made to the applicable modern award or enterprise agreement to determine whether an employee is entitled to redundancy pay if they resign before the period of notice has been completed.

Non-award/agreement employees

Non-award/agreement employees who resign before the date of redundancy may jeopardise their entitlement to redundancy pay unless payment is agreed during the redundancy consultation process.

The Fair Work Commission (FWC) heard a matter on this issue which related to an application for approval of an enterprise agreement.

The union objected to the proposed terms of the agreement relating to redundancy pay, which prescribed that redundancy does not include a situation where an employee terminates employment before the expiration of notice of the redundancy period without the company’s prior consent.

FWC reasoning

 The FWC noted that should an employee terminate their employment at their own initiative during the notice period, the employee's employment would be terminated other than for reason of redundancy as such, notwithstanding that notice of redundancy had been provided.

Consequently, such an employee would have no entitlement to redundancy pay under s119 of the FWAct (entitlement to redundancy pay). This is because such an employee would not be an employee who has been terminated at the initiative of the employer for purposes of s119(1)(a) of the act.

Instead, the employee would have terminated their employment at their own initiative, and for reasons other than redundancy itself.

Also, if an employee was to leave at their own initiative during the notice period they would not have ceased employment for reason of redundancy as defined in s119 of the Act. This is because during the notice period, the employer still requires the job to be done by the employee.

Other practical difficulties would arise if an employee could leave the employ of the employer during the notice period but retain an entitlement to redundancy. If this were the case, an employer may not be able to sustain the continuity of its operations over any notice period whatsoever. See Cement Australia Pty Limited T/A Cement Australia [2012] FWA 1949 (8 March 2012).
Before accepting an employee’s resignation, it would be prudent to advise the employee whether their resignation will mean the forfeiture of an entitlement to redundancy pay.

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