Terminating a Contract of Service

Both an employer and an employee can terminate a contract of service. A

termination may arise from the expiry of contractual terms (e.g. completion of
specific project, completion of specific period of time).

• Termination of Contract with Notice

• Termination of Contract without Notice
• Changes to Employee's Terms and Conditions of Work
• Rejection of an employee's resignation
• Compensation from employees for terminating a contract

Termination of Contract with Notice

The party who intends to terminate the contract must give notice to the other
party in writing.

The notice period to be given depends on what is agreed in the written contract.
If there is no written contract, the notice period to be given depends on what the
parties have agreed upon verbally.

If there is no such period previously agreed upon, the following shall apply:

Length of Service Notice Period

Less than 26 weeks 1 day

26 weeks to less than 2 years 1 week

2 years to less than 5 years 2 weeks

5 years and above 4 weeks

The day on which the notice is given shall be included in the notice period.

The length of notice to be given by an employee (in a resignation) and an

employer (in a termination of employment) are the same.

By mutual consent, notice can be waived.

Taking of Annual Leave during Notice Period

As the notice period is meant to be served, the employer cannot force his
employee to go on leave during the period of notice, unless the employee
consents to it. Any unconsumed annual leave can be encashed by the
employee.

Offsetting of Annual Leave

An employee can use his annual leave to offset the notice period for termination
of contract. If an employee uses his annual leave to offset his notice period and
to bring forward his last day of work, he would only be paid till his last day
of work and the annual leave used to offset his leave will not be paid. By
bringing forward his last day of employment with the company, he is no longer
considered an employee of the company and hence he may start work
immediately with his new company.

If an employee chooses to offset his leave during the notice period, it is different
from situation where he applies to go on approved leave during the notice
period.

If an employee applies for annual leave to cover all or part of his notice period
and approval has been granted by the employer, he will be paid his salary for
the full notice period. In this case, he is considered as an employee of the
company until the last day of his notice period. If he wants to join a new
company, he can do so only after the last day of his notice period.

Taking Sick Leave during Notice Period

If the employee was on sick leave (whether paid or unpaid) during the notice
period, the sick leave taken should be treated as part of the notice period. The
employer cannot claim for any short notice from the employee.

Starting Work with New Employer while serving Notice of Termination

with Current Employer

The employee serving the notice of termination is still considered an employee

of his current employer. Unless his current contract of employment allows him
to work with another employer before the date of termination, he has to seek
written permission from his current employer to do so.

Using Reservist Period as Notice of Termination

As the notice period is meant to be served, the reservist training cannot be used
to offset the notice period. However, both parties may mutually agree to waive
the required notice.

Salary In-lieu of Notice (Notice Pay)

Salary-in-lieu of notice does not attract CPF contribution. However if an employee

has fully served the required notice period, his salary for the notice period will be
subjected to CPF. CPF contributions must be made by both the employer and
employee for the salary earned if the employee was working during the notice
period, or considered as an employee of the company and hence prohibited to
join another company during the notice period.

Termination of Contract without Notice

Both employer and employee may terminate a contract of service without

waiting for the required notice period to expire, by paying the other party a sum
equal to the salary that would have been earned by the employee during the
required period of notice.
An employee may terminate an employment relationship without giving notice to
the other party, if:

- The employer fails to pay his/her salary within seven days after salary is due;
or

- He/she is called upon to do work that is not within the terms of the contract of
service.

An employer may terminate an employment relationship without giving notice to

the other party, if:

- The employee is absent from work continuously for more than two working
days, without approval or good excuse;

- The employee is absent from work continuously for more than two working
days without informing or attempting to inform the employer of the reason for
absence.
The party that breaks the contract will have to pay to the other party salary in-
lieu of notice.

Changes to Employee's Terms and Conditions of Work

Employers cannot change the terms and conditions of employment, unless his
employee agrees to it.
If the employee does not agree to the changes, he should bring up the matter to
his employer and try to negotiate for an acceptable agreement to both parties.
If there is no agreement to the dispute, either party may choose to end the
employment relationship by serving the appropriate notice to the other party.

Rejection of Employee's Resignation

An employer cannot reject an employee's resignation. The employee has the

right to resign at any time by serving the required notice or by compensating the
employer salary in-lieu of notice. Failure of the employer to allow an employee
to leave his service is an offence. The employer shall be liable on conviction to a
fine not exceeding $5,000 or to imprisonment for a term not exceeding six
months or to both.

Compensation from employees for terminating a contract

Contracts that require employees to pay a monetary compensation (in addition

to notice pay) to the employer for terminating the contract before the completion
of a specified period are not covered by the Employment Act. An employee can
resign at any time by serving the required notice in accordance with the
provisions in the employment contract.

The terms pertaining to monetary compensation (in addition to the notice pay)
for terminating the contract prematurely is a contractual term and not governed
by the Employment Act. Where there are disputes, the civil court will have
jurisdiction in deciding the outcome.

Employee Misconduct, Dismissals & Appeals

Misconduct
An employer may, after an inquiry, terminate an employee's services without
notice if the employee is found guilty of misconduct by failing to fulfil the
expressed or implied conditions of employment.

Inquiry to follow the rules of natural justice:

• No man shall be a judge in his own cause

• No man shall be condemned unheard

Misconduct refers to a breach of duty or discipline which is inconsistent with the

express or implied conditions of an employee's contract of service. Examples of
misconduct are theft or dishonesty, disorderly or immoral conduct at work, willful
insubordination etc.

If the employee has committed an act of misconduct, the employer should

conduct an inquiry before deciding whether to dismiss the employee or to take
other forms of disciplinary action.

Procedures of an Inquiry

The employer must hold an inquiry into the misconduct. If, after the inquiry, the
employee is found guilty of the misconduct, the employer may:

(a) terminate the employee's service without notice; or

(b) instantly downgrade the employee (with no pay reduction); or
(c) instantly suspend him from work without payment of salary for a period not
exceeding one week.

There is no prescribed procedure for conducting an inquiry into an act of

misconduct. As a general guideline,

1) the person hearing the inquiry should not be in a position which may suggest
bias; and
2) the employee being investigated for misconduct should have the opportunity
to present his case.

Under the Employment Act, the employer may suspend the employee from work
during an inquiry, for a period not exceeding one week. The employee should be
paid not less than half his salary for the suspended period.

If the inquiry does not disclose any misconduct on the part of the employee, the
employer must restore to the employee the full amount of salary that was
withheld.

An employer cannot downgrade an employee with a pay cut if the employee has
been found guilty of misconduct unless there is mutual agreement between both
parties, or if the employment contract provides for it.

Appeals

Employees who feel that they have been unfairly dismissed* by their employers
may appeal to the Minister for Manpower to be reinstated to their former
employment.

Appeals must be made in writing within one month of dismissal.

If the employer has given notice and the contractual terms of termination are
complied with, the onus would be on the employees to show proof that the
dismissal is unfair. The Ministry of Manpower will continue to be stringent in
assessing such appeals.

If it can be established that an employee was unfairly dismissed, the Minister

may consider reinstating the employee in his former employment or ordering a
sum of money as compensation, as the Minister deems fit.

* Dismissal means termination of the contract of service of an employee by his

employer, with or without notice and whether on grounds of misconduct or
otherwise.

Transfer of Employees

An employer has the right to transfer his employees to another employer. He

may do so if there is a restructuring of the organisation. This may involve
another company and can be a merger, take-over, sale of parts of the employer's
operation or setting up a subsidiary company. The employees can therefore be
transferred to a related company such as a subsidiary or associated company, or
to a totally unrelated company.

Obligations of an Employer to his Employees in a Transfer

The employer is required to:

(a) notify the affected employees or their union within a reasonable time of the
impending transfer;
(b) inform the affected employees about the terms of transfer so as to enable the
employees or their unions to enter into consultations with the company; and
(c) ensure that there is continuity of the period of employment of the affected
employees when they are transferred to a new employer and that their terms of
employment are not less favourable than what they have been enjoying before
the transfer.

Rights and Obligations of Employees in a Transfer

The rights of the employees are:

a) to be notified by the employer of the transfer and matters relating to the

transfer;
b) to be given the opportunity to have consultation with the employer; and
c) to hold the period of employment and terms and conditions of employment
with the original employer as continuing and preserved under his employment
with the new employer.

The obligation of the employee is:

- On his transfer, he is to serve the new employer as if the latter is the original
employer who had entered into the employment contract with him.

Obligations of Transferee (Employer who Takes over the Transferred

Employees)
The transferee must inform the transferor (previous employer) of matters
relating to the transfer which will affect the employee and the transferor must
convey such information to the employee within a reasonable period.

On the completion of a transfer, the transferee shall take over from the previous
employer all rights, powers, duties and liability which had been entered into in
any contract of service or agreement with the employee's union before the
transfer.

The transferee is not allowed to change any terms and conditions of employment
of the transferred employee unless the transferred employee agrees.

Dispute or Disagreement between Transferred Employee or Transferee

Either party to the dispute or disagreement may refer the matter to the
Commissioner for Labour for adjudication.

The Commissioner is empowered to:

(a) delay or prohibit the transfer of the employee concerned, or
(b) order the transfer of the employee and set such terms as the Commissioner
considers just.

Dispute with Supervisor

The Ministry has no jurisdiction to intervene in any ‘personal dispute', e.g.

management style or lack of sensitivity on the part of the employer. The
employee is advised to approach the company's top management if he wishes to
lodge a complaint against the behaviour of the supervisor. Nor does the Ministry
intervene in cases of a criminal nature, such cases should be referred to the
police or other relevant agencies.

TERMINATION OF EMPLOYMENT
Unfair dismissals
Common law
Most claims in relation to termination of employment fall into three categories:

1. unfair dismissals under the FW Act;

2. dismissals otherwise prohibited under the FW Act; and
3. common law claims for wrongful dismissal.
This section will deal with unfair dismissals and common law claims for wrongful
dismissal.

The "General Protections" section of this chapter deals with dismissals that are
otherwise prohibited under the FW Act.

This chapter does not deal with claims under other legislation relating to
termination of employment, such as equal opportunity legislation and the Trade
Practices Act 1974 (Cth).

Unfair dismissals
From 1 July 2009 a new system of unfair dismissals will operate.

A person has been "unfairly dismissed" under section 385 of the FW Act if all of
the following apply:

 the person has been dismissed; and

 the dismissal was harsh, unjust or unreasonable; and
 the dismissal was not consistent with the Small Business Fair Dismissal
Code; and
 the dismissal was not a case of genuine redundancy.

The person must be protected from unfair dismissal to be eligible to apply for a
remedy for unfair dismissal (see: "Persons protected from unfair dismissal",
below).

HARSH, UNJUST AND UNREASONABLE

In considering whether a termination was harsh, unjust or unreasonable, the
following must be considered (s.387 FW Act):

 whether there is a valid reason for the dismissal connected with the
employee's capacity or conduct;
 whether the employee was notified of the reason relied on by the
employer;
 whether the employee was given an opportunity to respond to the
allegations made in relation to the employee's conduct or performance;
 any unreasonable refusal of the employer to allow the employee a person
to assist in discussions related to the termination;
 if the termination related to performance, whether warnings were given;
 the degree to which the size of the employer impacted upon the
procedures followed in effecting the termination; and
 the degree to which the absence of dedicated human resource
management specialists impacted upon the procedures followed in effecting
the termination,
as well as other relevant matters.

Case study

In Woodman v Hoyts Corporation (2001) 107 IR 172, a full bench of the AIRC
reinstated a casual cinema worker who was accused of allowing another off-duty
employee to take a company product from the Candy Bar without paying and
later lying about the incident. The full bench found that the employee's conduct
amounted to a valid reason for termination but that termination in all the
circumstances of the case was disproportionate. The employee had not himself
participated in the theft and the lie was not premeditated or intended to benefit
the employee himself. The AIRC was satisfied "in all the circumstances" that
reinstatement was appropriate.

HAS THE PERSON BEEN DISMISSED?

For the purpose of section 385 of the FW Act, the person has been dismissed if
they were terminated at the initiative of the employer or they were forced to
resign because of the conduct or course of conduct of the employer, (s.386).
A person will not be dismissed, for the purpose of the unfair dismissal provisions,
if:

 they were employed under a contract of employment for a specified

period or specified task or specified season and the employment ended at
the end of the period, task or season;
 they were employed under a training arrangement for a specified period
or for the period of the training and the employment ended at the end of the
training; or
 they were demoted but the demotion does not involve a significant
reduction in their remuneration or duties (s.386).
If the person has not been dismissed they would not be able to make out the
necessary elements of section 385 of the FW Act for the termination to be an
unfair dismissal.

SMALL BUSINESS FAIR DISMISSAL CODE

The Minister for Workplace Relations may declare a Small Business Fair Dismissal
Code. A person's dismissal will be consistent with the Code if the employer was a
small business employer at the time of the dismissal and the employer has
complied with the provisions of the Code in relation to the dismissal (s.388 FW
Act).

For the period from 1 July 2009 to 31 December 2010 the definition of "small
business employer", will be a business with less than 15 full-time equivalent
employees. At the time of writing (July 2009) the Bill to implement this provision
has not yet passed the Senate. It is expected that the method of calculating the
number of full-time equivalent employees will be the average weekly total
number of hours worked in the business in the four weeks before the termination
divided by 38.

For the period after 1 January 2010, the definition of "small business employer"
will be a business with less than 15 employees by head count.

A code has not yet been declared by the Minister, however a draft code has been
released. Part of the draft code states that a dismissal will be fair where an
employer dismisses an employee where the employer believes on reasonable
grounds that the employee's conduct is sufficiently serious to justify immediate
dismissal. If the draft Code becomes the declared Code, an employer does not
need to prove the misconduct actually occurred.

If the employer is a "small business employer" and the employer complied with
the provision of the code, the termination will be deemed to be fair and the
elements of an unfair dismissal required for section 385 will not be made out.

If the employer is not a small business employer or a small business employer

has not complied with the code in terminating the employee, then the dismissal
will not be consistent with the Small Business Fair Dismissal Code and the
necessary element of section 385 will be made out.

GENUINE REDUNDANCY
A person's dismissal will be a genuine redundancy if both of the following
requirements are met (s.389 FW Act):
  the person's employer no longer requires the person's job to be done by
anyone because of changes in operational requirements; and
 the employer in dismissing the employee complied with any consultation
obligations in a modern award or enterprise agreement.
Under section 389(2) of the FW Act it would not be a genuine redundancy if it
was reasonable to redeploy the person within the employer's enterprise or an
associated entity.

If a person's dismissal was found to be due to a genuine redundancy, the person

would not be able to make out the required element of section 385 of the FW
Act for the dismissal to be an unfair dismissal.

PERSONS PROTECTED FROM UNFAIR DISMISSAL

To make an application for unfair dismissal the person making the application
must be protected from unfair dismissal. Under sections 382 to 384 of the FW
Act, a person is protected from unfair dismissal if the following applies to them:

1. The employee has completed a minimum period of employment of:

a. one year for an employee of a small business employer (as defined
above);
b. six months for an employee of a business other than a small
business employer.
2. One of the following applies to the employee at the time of termination:
a. the employee was covered by a modern award; or
b. the employee was covered by an enterprise agreement; or
c. the person's income was less than the high income threshold. At the
time of writing (July 2009) the high income threshold is yet to be formally
established, but is likely to be set at $100,000 and indexed from August
2007.
3. If the person was a casual employee of a business other than a small
business employer and was employed on a regular and systemic basis for
more than six months, and the employee had a reasonable expectation that
such employment would continue.
4. If the person was a casual employee of a small business employer and was
employed on a regular and systemic basis for more than one year, and had a
reasonable expectation that such employment would continue.

REMEDIES
The primary remedy for a dismissal found to be harsh, unjust or unreasonable is
to reinstate the employee to the same position or to a comparable position as
they held prior to the termination. FWA has the power in certain circumstances
to reinstate a worker to an equivalent position with an associated entity of the
employer. A reinstated worker can seek an amount representing their lost wages
between the date of termination and the reinstatement, and to have all
employment benefits continue to accrue without loss of continuity.

Where reinstatement is inappropriate (for example, where the position has been
filled by another worker or where tensions in a small workplace would be
insurmountable if the dismissed employee returned to work), compensation may
be ordered instead of reinstatement. The maximum compensation payable to
employees covered by an award is six months wages; and for non-award
employees is half the amount of the high income threshold (discussed above in
"Persons protected from unfair dismissal") or six months wages, whichever is
less.
PROCEDURAL MATTERS
Applications for a remedy for unfair dismissal must be made within 14 days after
the day on which the termination took effect, or such period as FWA allows (see:
s.394 FW Act). The matters to be taken into account for an extension of time to
lodge an application have been codified in section 394(3) of the FW Act.

A number of matters must be decided by FWA before the merits of an unfair

dismissal are considered. These matters are:

a. whether the application was made within 14 days or such further period as
FWA allows;
b. whether the person is protected from unfair dismissal;
c. whether the dismissal was consistent with the Small Business Fair
Dismissal Code;
d. whether the person was dismissal because of genuine redundancy.
The first step for a worker who applies for a remedy for unfair dismissal is usually
a conciliation conference with the employer at the AIRC. If the matter is not
resolved at that stage, it then usually proceeds by way of arbitration. The FW
Act gives FWA considerable discretion in relation to the method of finalising the
claim.

Appeals to a Full Bench of FWA can be made on a question of law or a significant

question of fact.

Costs against a party in an unfair dismissal can only be awarded against an

Applicant if an application was made vexatiously or without reasonable cause, or
if it should have been apparent to the Applicant that the application had no
reasonable prospect of success. Costs will only be awarded against a Respondent
if the response to an application was made vexatiously or without reasonable
cause, or if it should have been apparent to the Respondent that the response
had no reasonable prospect of success (s.611 FW Act)

Costs can be awarded against a lawyer or paid agent where they caused the
other party to incur costs by some unreasonable act or omission or because they
encouraged a person to start or continue a matter when it should have been
apparent to them that the person had no reasonable prospects of success
(s.401).

Common law

WRONGFUL DISMISSAL AT COMMON LAW

Workers who are not entitled to bring proceedings for unfair dismissal may still
be entitled to bring proceedings elsewhere for the wrongful termination of their
contract of employment.

If the contract is for a fixed period, it terminates when that period expires; no
special notice is required. If the contract is for a fixed period and the contract is
terminated by the employer before the end of the fixed period, the employee
maybe able to sue for damages relating to the remainder of the fixed period.

If the contract is not for a fixed period, and the employee is dismissed, or if the
employee is dismissed prior to the end of the contract, then there may be an
action for wrongful dismissal. In the absence of misconduct or any other
circumstances justifying immediate dismissal, the employee is entitled to be
given notice in accordance with the written contract of employment (if any), or if
there is no express term for the period of notice the employee would be entitled
to rely upon an implied term of reasonable notice. The question of what is
reasonable will depend on the circumstances (including position, seniority,
salary, length of service and age).

An employee who can show that the dismissal was wrongful has a claim for
damages. The amount of damages may relate to the wages that could have been
earned during the "reasonable" period of notice, taking into account whether the
employee has subsequently found work.

SUSPENSION AND STAND DOWN OF EMPLOYEES

Unless specifically authorised by an award or employment agreement, an
employer has no general right to suspend employees without pay, but an
employee who is not ready, willing and able to work in accordance with the
obligations under the contract of employment may not be entitled to be paid.

At common law, an employer does not have the right to stand down employees
without pay when they cannot be usefully employed. Unless there is some
provision in the contract of employment or award to the contrary, an employer
who cannot usefully employ their employees has the alternative of either paying
them wages during the period or dismissing them. In dismissing an employee in
these circumstances, the employer should take careful note of the unfair
dismissal provisions (see: "Unfair dismissals", above).

Some awards permit deductions of pay where employees cannot be usefully

employed for reasons such as a strike, a breakdown of machines or a stoppage
of work for which the employer cannot reasonably be held responsible.