Historically, it has been common practice for employers to pay termination payment entitlements either within seven days of termination or in the next pay cycle. However, the decision of Jewell v Magnium Australia Pty Ltd (No 2) [2025] FedCFamC2G 676 (Jewell v Magnium) earlier this year confirmed that employers who fail to pay entitlements on the final day of employment risk financial penalties.
Jewell v Magnium key facts
On 12 April 2023, Dr Jewell’s employment with Magnium Australia Pty Ltd (Magnium) ended due to redundancy. On 2 May 2023, Magnium paid Dr Jewell payment in lieu of notice and his accrued annual leave in its usual payroll run. Magnium incorrectly believed it was not required to pay redundancy pay but eventually paid this to Dr Jewell on 18 July 2023 and paid a further amount on 3 August 2023 to correct calculation errors.
Dr Jewell brought a general protections claim against Magnium which was unsuccessful, but during the proceedings Magnium admitted contraventions of the following National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (FW Act):
- Section 117(2)(b) which makes it unlawful to terminate an employee’s employment unless it has given notice or made a payment in lieu of notice;
- Section 90(2) which provides that accrued and untaken annual leave must be paid when the employment of an employee ends; and
- Section 119 which provides an employer must pay redundancy pay to an employee if their employment is terminated due to redundancy.
These admissions were made by Magnium because, although it had made the payments to Dr Jewell, the payments were made after the termination date.
The penalties
For each of the three contraventions, civil penalties of $6,200 were imposed on Magnium (approximately 7.5% of the maximum penalty), totalling $18,600.
When considering the level of an appropriate penalty, Justice Champion determined that Magnium was “careless in that it did not trouble to find out before effecting the termination that it had obligations to pay dismissal entitlements not later than the end of the employment”[1] but did not find that Magnium “acted in a way which deliberately flouted the law in not meeting those obligations”.[2]
The road to penalties
Jewell v Magnium has highlighted to employers the risk of financial penalties from technical breaches of the FW Act, even where those breaches are not deliberate. Earlier cases paved the way for Magnium’s admitted contraventions of the FW Act, and the order of penalties.
In Southern Migrant and Refugee Centre Inc v Shum (No3) [2022] FCA 481, Justice Snaden held that payment in lieu of notice paid four days after termination was a contravention of section 117(2) of the FW Act.
In Dorsch v HEAD Oceania, Justice Raper ordered that HEAD Oceania pay a penalty of $17,000 (25% of the maximum) because it had paid the employee’s accrued and unused annual leave entitlements three months after the final day of his employment. This case confirmed that the obligation to pay accrued annual leave under section 90(2) of the FW Act crystallises on the termination of the employment relationship.
We are unaware of any cases prior to Jewell v Magnium that addressed the position regarding redundancy pay, but it is clear that the Court in Jewell v Magnium viewed the obligation under section 119 of the FW Act to mean that the redundancy pay should be paid on the date of termination.
How do these cases sit with modern award provisions?
The established practice of many employers paying termination payments within seven days likely arose from modern award provisions which specify that all outstanding wages (up to the date of termination) plus all amounts owed to the employee under the award and the NES must be paid no later than seven days after the date of termination. While the recent cases appear to contradict this, awards contain a note specifically addressing that payment in lieu of notice must be paid at termination and, with respect to accrued leave and redundancy pay, awards will always operate subject to the NES. Therefore, in the event of an apparent inconsistency, between an award and the NES, the NES obligation will prevail.
Key takeaways for employers
The case law is now clear that employers must pay employees termination entitlements on their last day of employment, irrespective of any prior practice or modern award provisions. A failure to meet this obligation may result in the imposition of a penalty, regardless of any intention to pay the employee shortly after termination or practical explanations for time taken for payroll processing.
Recommendations
When preparing for an employee’s final day of employment we recommend employers:
- Communicate with payroll in advance, to ensure that an employee’s termination payments are ready to be made on their last day of employment;
- If there are restrictions on when payments can be made, consider aligning an employee’s termination date with a date on which their termination entitlements can be paid;
- If payments cannot be made on the termination date, consider the use of partial notice or garden leave for part of the notice period so that the termination date can align with the next payroll run to ensure that statutory entitlements are paid on the termination date.
For any questions in relation to this article, or employment relations more broadly, please contact our team here.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.
[1] Jewell v Magnium Australia Pty Ltd (No 2) at [31].
[2] Jewell v Magnium Australia Pty Ltd (No 2) at [33].
