It is generally accepted that the common law will imply a term of “reasonable notice” into a contract of employment which makes no provision for termination notice. However, this general rule was displaced by the case of Brennan v Kangaroo Island Council [2013] SASCFC 151 which found that reasonable notice may not be implied in circumstances where an employee is covered by a modern award which prescribes a period of termination notice. Recent cases have considered whether s 117 of the Fair Work Act 2009, which prescribes a minimum period of termination notice, should also displace the general rule. Whilst this was supported by the South Australian District Court in Kuczmarski v Ascot Administration P/L [2016] SADC 65, in the more recent case of McGowan v Direct Mail and Marketing Pty Ltd [2016] FCCA 2227 Judge McNab of the Federal Circuit Court of Australia (FCCA) confirmed that s 117 provides minimum periods of termination notice only, and consequently does not displace a right to implied reasonable notice.
In the Kuczmarski case, Mr Kuczmarski was terminated in 2015 by Ascot Administration (Ascot) on the ground of redundancy. Mr Kuczmarski’s employment contract did not specify a termination notice period, but he was provided with 5 weeks’ pay in lieu of notice, being the minimum termination notice prescribed by s 117. Mr Kuczmarski brought proceedings alleging that Ascot had breached his contract by not providing him with “reasonable notice” of 12 to 18 months. He argued that nothing in s.117 impeded the legal operational practical effect of an implied term about reasonable notice. That is, s 117 addressed ‘minimum’ notice requirements only and, accordingly, imposed an obligation to provide only ‘at least’ the specified period of notice, whereas the common law articulated that which is reasonable notice and how it is to be determined.
By contrast, Ascot argued that whilst s 117 imposed a minimum obligation it was not ‘necessary’ to imply a term requiring reasonable notice into Mr Kuczmarski’s contract because Parliament had already imposed an obligation on employers to give a period of termination notice under the Act.
The Court agreed with Ascot and held that there was no necessity for a term requiring reasonable notice to be implied into Mr Kuczmarski’s contract because a provision establishing his entitlement to notice was already contained in section 117 of the Act. Had Mr Kuczmarski not been covered by the Act, then Judge Clayton found he would have been entitled to 6 months “reasonable notice”.
Two months after the Kuczmarski case was decided, the FCCA came to opposite conclusion about reasonable notice in the McGowan case. Mr McGowan’s employment was terminated in November 2014 for reasons including his “rude and crude conduct”, and his lack of interest and knowledge in the software component of the employer’s business. He was provided with 5 weeks’ notice of termination, based on a termination clause in a 1999 contract of employment. That contract provided that it would continue until it was terminated in accordance with its provisions, or until superseded by a further agreement which “explicitly replaces this agreement”.
Mr McGowan brought a general protections claim alleging that the employer had engaged in unlawful adverse action in dismissing him as a result of a complaint or enquiry about his employment he had made prior to his dismissal regarding his treatment by the general manager. Mr McGowan also alleged that he was entitled to reasonable notice of 12 months on the basis that promotions he had received in 2009 and 2012 resulted in new contracts of employment being created, which did not contain termination provisions. The employer argued that there was no basis for implying reasonable notice because either the 1999 contract continued to apply to Mr McGowan’s employment even after receiving the promotions or, in the alternative, if the 1999 contract did not apply s.117 of the Act prevented the implication of reasonable notice.
Judge McNab found that there was no evidence of unlawful adverse action, on the basis of a complaint or enquiry as the employer had dismissed Mr McGowan for reasons including his lack of capacity to perform the role, and his behaviour. Judge McNab also found that the 1999 contract was not displaced by the 2009 and 2012 promotions because there was no evidence that the correspondence and communications in relation to those promotions “explicitly” replaced the 1999 contract, as required by that contract. Consequently, the 1999 contract continued to apply, including the termination notice clause.
The FCCA also considered the employer’s alternative argument that s 117 of the Act prevented the implication of the term of reasonable notice. Judge McNab rejected this argument on the basis that s 117 provides a minimum period of notice only and does not displace a right to reasonable notice when the contract of employment is silent on the question of notice. In support of this conclusion Judge McNab noted that it was significant that neither s 117 nor the explanatory memorandum to that section makes reference to removing the common law right to reasonable notice of termination.
Employers should take steps to review their contracts of employment to ensure they contain not only an express notice of termination clause, but also an additional clause which specifies that irrespective of any variations to an employee’s position, duties, role or levels of responsibility during the employment, the remaining terms of the contract will continue to apply, unless otherwise agreed in writing. Notwithstanding these clauses, employers should also ensure their HR practices are sufficiently robust to ensure that when variations are made, such as a promotion, they are confirmed in writing with the employee, in addition to confirming that the remaining terms and conditions of the contract of employment continue to apply.
