FWC clarifies continuous service requirements despite ongoing leave accrual
The Fair Work Commission (FWC) recently dealt with a case concerning an unfair dismissal application where the key question was whether a worker's period of employment satisfied the minimum employment period required under the Fair Work Act 2009.
The worker argued that despite his formal resignation, his employment had actually been continuous because he had negotiated a higher salary before his resignation took effect. He pointed to payslips showing he had taken annual leave during the gap period rather than receiving a termination payment.
The employer countered that the resignation had genuinely ended the employment relationship, and the worker was later rehired on a new contract after their chosen replacement candidate withdrew from consideration.
The worker started employment as an estimator with a Queensland plumbing business in March 2023. Though based in Queensland, he worked remotely from Melbourne due to family health issues, under an agreement that was initially for 12 weeks but extended several times.
On 3 June 2024, the worker resigned by email, stating: "Please accept this letter as a formal notification that I am resigning from my position as Estimator with [the employer]. My last day will be Friday, 14 June [2024]."
The construction manager testified he had tried to convince the worker to stay during the notice period. Text messages from 13 June showed the construction manager asking "Did you talk to Andrew," referring to the managing director. The worker had replied that he "spoke briefly about variations but haven't asked him."
Two days after his resignation took effect, the worker sent a message to the managing director expressing that leaving was a difficult financial decision, concluding: "I would really like to continue to grow with the company into the future."
The key dispute centered on when the discussion about re-employment occurred. The worker claimed he had negotiated his return before his resignation took effect, while the employer maintained this happened days after the worker had left.
The managing director testified that after receiving the resignation, he had advertised the position and offered it to another candidate. Only after this candidate withdrew did he contact the worker on 18 or 19 June to offer re-employment at $120,000 (up from $110,000) starting 21 June 2024.
The accounts and operations manager corroborated this timeline, stating the managing director first informed her on 18 June about re-engaging the worker "on a contract basis at $120,000 commencing from 21 June 2024."
Instead of processing a termination payment, the worker's payslip showed he had taken four days of annual leave between his resignation date and new start date. The worker argued this demonstrated his employment was continuous.
The accounts and operations manager explained she had questioned this approach: "[The accounts manager] said she cautioned [the managing director] about this, and said they should be paying [the worker] out because his new employment contract starts on 21 June 2024 and it is at a different rate, but that she understood it was a 'tax thing' and [the worker] didn't want to pay, so she just did what she was told to do."
She testified that the managing director had told her that "the worker had requested not to get paid out the full entitlement because of the tax implications," despite her concerns about the different salary rate in the new arrangement.
For an unfair dismissal claim to proceed, the worker needed six months of continuous service as defined by the Fair Work Act. The worker was dismissed on 14 December 2024, so the question was whether his service from March 2023 counted as continuous despite his June resignation.
Section 384(1) of the Act states: "An employee's period of employment with an employer at a particular time is the period of continuous service the employee has completed with the employer at that time as an employee."
The Commissioner concluded: "I am satisfied on the balance of probabilities that no employment relationship existed between [the worker] and the employer from that time, and it was not until Tuesday 18 June 2024 that [the managing director] and [the worker] had a conversation and reached an agreement that [the worker] would recommence employment with the employer on Friday 21 June 2024 on a higher salary."
The Commissioner found that the administrative handling of leave on payslips couldn't override the legal effect of resignation.
"None of the statutory provisions in s.22, which deem service to be continuous despite a break in the employment relationship, apply here. The employment relationship was broken by the resignation."
The decision explained: "Despite the retrospective decision after the employment relationship had ended to pay the [worker] annual leave for the intervening period before the restoration of the employment relationship, the fact remains the service up to and including 14 June 2024 does not count for the purposes of assessing whether the minimum employment period has been satisfied."
The unfair dismissal application was dismissed because: "Because it does not count, the [worker] does not satisfy the minimum employment period of six months and therefore falls outside the jurisdiction of the Commission to hear his application."
The case highlights how resignations create a clear break in continuous service that administrative arrangements about leave and pay don't overcome, even when a worker is rehired by the same employer shortly after resigning.
