In the absence of a formal written employment contracts, especially for long-serving, senior employees, and well-paid employees, there’s a possibility they might claim ‘reasonable notice’ upon termination.
Reasonable notice can range from 6 to 12 months termination pay, and in some cases, up to 24 months pay.[1]
This notice period is subjectively determined based on factors such as:
- job position,
- employee’s age,
- duration of employment, and
- job market mobility.
Usually the standard notice terms would apply under the Fair Work Act 2009 (Cth) however in some circumstances and especially if there are no certain written contractual terms, reasonable notice may be payable.
Some Case Examples
In the case of Roderick v Washington H Soul Pattinson & Company Limited (No 2) [2020] NSWSC 1224, the employee, who advanced from chief financial officer to finance director and board director without signing a new contract, claimed 24 months’ salary as notice. The court recognised a new contract implied by the conduct of both parties, despite few terms from her previous role being applicable.
The court, in assessing the employee’s situation, found her age (49), her 12 years as CFO and finance director, and her high compensation relevant. It ruled that a 12-month notice period, valued at $960,000.00, was reasonable.
In Daigle v SCT Operations Pty Limited [2022] NSWDC 364, a geotechnical engineer with over 16 years of service was made redundant without a contract specifying termination notice terms. Although the employee received five weeks’ pay and 12 weeks’ redundancy pay, the court decided he was entitled to a further 8 months of reasonable notice.
In Ostle v Wilson Mining Pty Ltd [2022] FedCFamC2G 109, an employee with verbal contract terms since 1995, serving as a director and in senior management, was made redundant and given 8 weeks’ notice pay. The court inferred a reasonable notice clause into the verbal contract and determined 6 months as the reasonable notice period, considering the employee’s 25-year tenure and high-level positions.
In Connolly v Queensland Rugby Union Ltd [2017] QDC 221, Mr. Connolly’s contract issue with Queensland Rugby Union, agreed upon in a brief phone call, revolved around whether termination could happen before the agreed term ended. The court needed to ascertain the actual agreement terms.
Despite an unsigned employment contract and a subsequent contractor agreement not agreed upon by Mr. Connolly, the court concluded that the initial phone call was the only binding agreement. It lacked terms for early termination, rendering Mr. Connolly’s contract termination by QRU as unlawful, leading to a compensation order of $150,000.00 plus costs and interests to Mr. Connolly.
A Written Employment Contract is super important
Reasonable notice is only 1 factor as to why a written contract should be in place. A properly drafted contract will provide certain terms – one of those certainties may well be termination notice under the Fair Work Act 2009 (Cth). Alternatively, an Employer may choose to have in place a longer notice period taking into account the person’s position, handover required when they exit and as a recruitment and retention strategy.
Immediate Steps for Employers and Human Resources
This is a great time to undertake a full review of all Employment Contracts especially for employees who have:
- been at the organisation for a long time,
- senior or executive roles,
- higher salaries,
- old employment contracts in place and have either not been looked at for a awhile or are not updated.
Apart from notice clauses other clauses to pay close attention to include:
- confidentiality,
- restraint of trade,
- award coverage,
- off-set clause,
- warranties,
- probationary period.
[1] Rankin v Marine Power International Pty Ltd (2001) 50 AILR 087; [2001] VSC 150, Cray v Tynan Motors Pty Ltd 1992 AILR 201; Quinn v Jack Chia (Australia) Ltd 1991 AILR 361.
Our article Employment Contract Clauses – 6 Key Clauses All Contracts Need (and must be reviewed) to Protect Employers provides a nice summary of these clauses in an employment contract to keep an eye on.
Prevent months and months and $960K in damages and get properly written employment contracts drafted and reviewed.
At NB Employment Law (formerly NB Lawyers), our employment lawyers Brisbane team offers an obligation-free consultation for employment contract clauses and reviews – for employment law advice call us on +61 (07) 3876 5111 to arrange a consultation to discuss your inquiries and we will do our best to provide a helpful, practical solution.
Written By
Director
About the Author
Jonathan Mamaril leads a team of handpicked experts in the area of employment law who focus on educating clients to avoid headaches, provide advice on issues before they fester and when action needs to be taken and there is a problem mitigate risk and liability. With a core value of helping first and providing practical advice, Jonathan is a sought after advisor to a number of Employers and as a speaker for forums and seminars where his expertise is invaluable as a leader in this area as a lawyer for employers.
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