Failure to pay termination payments on final day of employment results in financial penalties for employer

What you need to know

• Employers who fail to pay termination payments (including annual leave, payment in lieu of notice and redundancy pay) on an employee's final day of employment may be liable for financial penalties.
• This Federal Circuit and Family Court of Australia decision highlights that Courts are strictly enforcing technical breaches of the Fair Work Act and are awarding financial penalties against employers.

What you need to do

• Ensure your business has a system in place for the payment of termination entitlements on the final day of employment.
• Where possible, consider timing the final day of employment to coincide with existing payroll processes or utilise notice periods or gardening leave to provide additional time for the business to facilitate the payment of termination entitlements.
• Where agreed separation terms are being negotiated, it is important to ensure that statutory entitlements are paid on the final day of employment, even where negotiations surrounding enhanced termination payments remain on foot. If agreement isn't reached, the employer may be exposed to penalties for late payment.

Jewell v Magnium Australia Pty Ltd (No 2) [2025] FedCFamC2G 676 - Background

In the decision of Jewell v Magnium Australia Pty Ltd (No 2) [2025] FedCFamC2G 676 the Federal Circuit and Family Court of Australia awarded penalties against Magnium Australia Pty Ltd's (Magnium) due to its failure to comply with statutory obligations to pay termination entitlements to an employee on the final day of employment.

Magnium was 12 days late in making payment for accrued an unused annual leave and payment in lieu of notice. Magnium was almost 3 months late in making payment for redundancy. The total of the late payments amounted to $72,784.

In the principal judgment, Judge Champion made three declarations as to breaches of section 44 of the Fair Work Act 2009.

In respect of making these findings the court held:

• The breaches were due to carelessness and ignorance of the law, not deliberate flouting.
• Magnium took reasonably prompt corrective action, paying most entitlements within two weeks and redundancy pay within three months.
• There was no evidence of previous similar conduct by Magnium.
• Senior management was involved in the breaches, but not to the level of accessorial liability.
• Each failure to pay a separate entitlement was a distinct contravention to be penalised separately

Relying on the established High Court authority of Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 540; [2022] HCA 13, in assessing the penalties to be awarded, the Court considered that the purpose of civil penalties are primarily the promotion of public interest in compliance with the provisions of the FW Act and deterrence of further contraventions.

Ultimately the court imposed a penalty of $6,200 for each contravention (approximately 7.5% of the maximum penalty) totalling $18,600.

Key Takeaways

Historically, late payment has generally been regarded as a technical breach, and often part of the negotiation process of the termination of employment. Such conduct has not commonly been the subject of civil penalties. This case serves as an important reminder that courts are strictly enforcing FW Act obligations including paying termination entitlements on the employee's final day of employment, regardless of the intention of the employer.

The processing of termination entitlements on the final day of employment, will no doubt result in operational and administrative challenges for many businesses. This issue emphasises the need for consideration of existing payroll processes to ensure payments can be made in a timely manner. It also raises considerations of whether businesses can be more strategic in aligning final days of employment with existing pay cycles or utilise notice periods or gardening leave to ensure payment can be made on time.

Authors: Jennie Mansfield, Partner and Heidi Kornman, Senior Associate.