It is quite common for employers to assume that the notice required to terminate an employee’s employment is the period stated in either section 117 of the Fair Work Act 2009 (Cth) or in an applicable Award or other industrial agreement (normally an enterprise agreement).
However, that is not always the case. We must also consider the notice period required by the employees’ contract and whether there has been any change to that contract since it was first made.
When there is a written contract with a clear unambiguous notice clause
If the employee’s contract is written and contains a clear express clause stating how much notice must be given, then we must consider:
- Has there been any change to the terms of the contract since it was made? If there have been changes, could that have altered the notice period that may be required?
- Is the contractual notice period more than that required by the Fair Work Act, an applicable Award or other industrial agreement? If yes, then the contractual notice period must be given. If the contractual requirement is less than that required by the Fair Work Act, an applicable Award or other industrial agreement, then the greater period will normally apply.
What if there is no written contract or the written contract does not specify a period for notice?
If there is no written contract or the written contract does not specify a period for notice, then the Courts are likely to imply a ‘reasonable notice period’ for termination into the contract.
There are a number of decisions to illustrate a common approach taken by the Courts to a dispute of this kind.¹ In one recent decision, Ostle v Wilson Mining Pty Ltd², the terminated employee was found to be entitled to 6 months’ notice of termination.
For many small and medium sized businesses, paying the value of half a year’s wages to a terminated employee may result in insolvency. In comparison, it is a small price to pay to check whether you have appropriate written contracts with each of your staff.
What action can I take?
Prevention in this situation is much to be preferred than the cure.
The first step is to make sure you have a clear, written employment contract with each of your employees that clearly spells out how much notice you are each required to give to the other to terminate the employment.
The next step is to consider whether those basic contracts are adequate for your more senior employees. One common (costly) mistake is to use a ‘boiler plate’ contract when an employee starts in a junior role and to forget to update to a more appropriate contract as the employee progresses in seniority.
Finally, if you are having concerns with an employee, seek appropriate advice before you terminate that employee’s employment to ascertain what risks, including financial, your business may face once in terminating their employment.
If you need further assistance in understanding your obligations to give notice of termination or have any other employment related concerns, please get in touch with us on (03)57224681.
MORGAN COUZENS LEGAL
¹Guthrie v News Ltd VSC 196, McGowan v Direct Mail and Marketing Pty Ltd [2016] FCCA 2227, Richards v Nicolette [2016] WAIRC941, McAlister v Yara Australia Pty Ltd [2021] FCCA 1409, Daigle v SCT Operations [2022] NSWDC 364.
