A common question of employers is, ‘what are my rights when an employee resigns without giving the required notice?’ The answer is that an employer may be entitled to claim a deduction from an employee where minimum notice requirements have not been fulfilled by the resigning employee.

The Fair Work Act 2009 (Cth) (the Act) regulates (among other things) the payment of wages and the circumstances where an employer may make deductions from employees’ wages. Generally speaking, when an employee resigns, the employer must pay the employee in relation to work performed and any other accumulated entitlements and superannuation. The failure of the employer to do so would constitute a breach of the Act unless a deduction is made in accordance with the Act. Pursuant to the Act, an employer may make a deduction from an employee’s pay, where (among other things) it is authorised by a modern award or consent is given by an employee in an industrial agreement.

Under most modern awards, if an employee resigns without giving the required notice under the award, an employer may make a deduction from wages owing to the employee at termination[1], provided the employee is over 18[2]. Importantly, an employer can only deduct from the wages due to the employee under the award, an amount that is no more than one week’s wages for the employee.[3]The deduction cannot be made from superannuation or other entitlements[4].

In 2018, the Fair Work Commission[5]confirmed that the value of the deduction is to be calculated based on the award rate for the employee and does not include any over award payments[6]. In this regard, the Fair Work Commission found that authorising deductions of over award payments may have the consequence of overriding private contractual arrangements by which such payments are made, in circumstances where it had no knowledge as to the terms of such arrangements[7]. In those circumstances, the Fair Work Commission was reluctant to interfere with such arrangements by increasing the amount that can be deducted from an employee’s pay.

If you have any questions in relation to resignation or termination notice periods, or any other employment matter generally, please contact us.

By Matt Krog & Jemma Heran

[1] [2018] FWCFB 3009 at [84, 85].[2] [2018] FWCFB 3009 at [200].[3] Ibid at [211, 223].[4] Ibid at [55,58] [5] [2018] FWCFB 3009.[6] Ibid at [65].[7] Ibid at [67].