What happens when an employee takes unpaid leave during the probation period?
Over the past few months, we have been asked this question several times, as clients have had performance issues with new employees during their probation period and such a significant amount of Personal Leave has been accessed by the probationary employee that that they are now on unpaid Personal Leave (“first scenario”).
The issue has also arisen in the context of a client buying out another employer’s business and taking on the old employer’s staff. Can they remove any newly acquired poor performing employees during the first six months of their employment with the new employer (“second scenario”)?
The legal positions are as follows:
An employee cannot take Unfair Dismissal Proceedings in the Fair Work Commission (“FWC”) if they have not completed a minimum employment period.
Section 383 of the Fair Work Act (“FW Act”) defines the minimum period of employment as follows:
The minimum employment period is:
(a) if the employer is not a small business employer—6 months ending at the earlier of the following times:
(i) the time when the person is given notice of the dismissal;
(ii) immediately before the dismissal; or
(b) if the employer is a small business employer—one year ending at that time.
In other words, for employers with over 15 employees, the “minimum employment period” for a new employee is six months and it is 12 months for new employees where their employer has under 15 employees. Until those dates have passed, the employer cannot be the subject of Unfair Dismissal Proceedings.
Section 384(1) of the FW Act then discusses what is constituted by an “employment period”. It notes that the “employment period” is the period of “continuous service” the employee has completed with the employer.
However, s.384(2) of the FW Act does have a number of exceptions. These are:
(a) a period of service as a casual employee does not count towards the employee’s period of employment unless:
(i) the employment as a casual employee was on a regular and systematic basis; and
(ii) during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis; and
(i) the employee is a transferring employee in relation to a transfer of business from an old employer to a new employer; and
(ii) the old employer and the new employer are not associated entities when the employee becomes employed by the new employer; and
(iii) the new employer informed the employee in writing before the new employment started that a period of service with the old employer would not be recognised;
the period of service with the old employer does not count towards the employee’s period of employment with the new employer.
In other words “true” casuals cannot accrue “continuous service” unless they are regular and systematic workers with a reasonable expectation of on-going employment (perhaps created by their appearance on a monthly roster).
Similarly, employment with a previous employer can constitute “continuous service” unless the new employer has taken steps to break that continuity. In answer to the second scenario posed above, this means that the new employer cannot remove them from their employment and expect to rely upon the s.383 FW Act exclusions to block Unfair Dismissal Proceedings in the FWC.
But what is “continuous service”?
Section 22 of the FW Act defines “service” to be a period during which the employee is employed, except for any period (an excluded period) that does not count as service because of subsection (2).
(2) The following periods do not count as service:
(a) any period of unauthorised absence;
(b) any period of unpaid leave or unpaid authorised absence, other than:
(i) a period of absence … which deals with community service leave; or
(ii) a period of stand down … under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or
(iii) a period of leave or absence of a kind prescribed by the regulations;
(c) any other period of a kind prescribed by the regulations.
Accordingly, in answer to the first scenario posed above, the probationary employee who, during their probation period, takes any unauthorised absences or any periods of unpaid leave or unpaid authorised leave, cannot count those periods as continuous service. This means that the employer can validly extend the probation period past the six / 12 months anniversary dates and can continue to performance monitor the employee or alternatively can terminate the employment if the six / 12 months of “continuous service” have not yet accrued, even if the anniversary date of the commencement of their employment has passed.
However, this does not mean that the employer can act with impunity. We have been involved in several cases recently where the employee who has had their employment terminated in the probationary period has avoided the impact of s.383 of the FW Act by commencing Adverse Action (aka General Protection) proceedings in the FWC seeking reinstatement.
Message for Employers
While s.383 of the FW Act provides some protection for employers from the commencement of Unfair Dismissal Proceedings in the FWC, there are exceptions to those provisions and employees have other alternatives under the legislation.
Accordingly, care should be taken when performance managing all employees, not just those who have survived their initial probation periods.