The recent decision of the Federal Court in the matter of Dorsch v HEAD Oceania Pty Ltd (penalty) [2024] FCA 484 has highlighted the importance of employers promptly paying employees their accrued entitlements on termination of employment.
The Respondent employer was ordered to pay a penalty of $17,000 (approximately 25% of the applicable maximum penalty) for breaching section 90(2) of the Fair Work Act 2009 (Cth) (FW Act). That section requires an employer to pay an employee accrued annual leave entitlements on termination of their employment. The employer claimed that the delay was due to a mistaken suspicion that the employee’s annual leave records were incorrect, and a further mistaken belief that annual leave could be “offset” by days that the employee purportedly failed to attend the office (at [25]).
The Applicant had accrued annual leave in the sum of $8,022.82 at the date of termination of their employment on 9 December 2021. However, the Respondent did not pay the Applicant this accrued entitlement until 30 March 2022, over three months after his employment with the Respondent came to an end.
In arriving at the ultimate financial penalty out of a possible maximum penalty of $66,000, Raper J at [12] –[14] set out a helpful summary of the common law principles that apply when considering an appropriate penalty under section 546(1) of the FW Act, and a thorough application of those principles to the circumstances of the case at [15] to [38]. Ultimately, his honour found this was not a total failure to pay accrued annual leave but rather a significant delay in payment. It was also found that this delay did have an adverse material effect on the Applicant given it was approximately 10% of his annual salary. After taking into account the weight to be given to general and specific deterrence, including mitigating factors that could be drawn from the available evidence, His Honour arrived at the ultimate penalty.
Employer’s with longer pay cycles (eg. monthly) should have particular regard to this case, and ensure that departing employees’ accrued entitlements are paid promptly on termination.
