Since the filter expression isn't just [last()], the normalization rules cause the type of the argument to fn:name being a zero-or-more sequence rather than a zero-or-one sequence as required.

(: Name: fn-name-6:)
(: Description: Evaluation of the fn:name function with the argument set to a no
n existing element.:)
(:Use of "fn:string-length" to avoid empty file.    :)

(: insert-start :)
declare variable $input-context1 external;
(: insert-end :)

for $h in ($input-context1/works/employee[2])
return fn:string-length(fn:name($h/child::text()[position() = last()]))