Key Points
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Check your employment contracts are clear as to how much notice is required.
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Make it clear when the termination is to take effect.
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Put the notice in writing as soon as possible.
What happens if an employment contract is silent as to notice?
You look to the Fair Work Act right? Yes (assuming the employment is covered by that Act) but that may not give you all the answers you need.
The notice provisions in the Fair Work Act set out the minimum period of notice to be provided by employers in the event of termination but there are conflicting views as to whether an employee can argue for a greater notice period if their contract is silent on this issue.
In days gone by the usual practice for those without agreed periods of notice for termination in their employment contract was to rely on the implied term of reasonable notice. In order to determine the length of reasonable notice a number of factors were considered including length of service, seniority, qualifications and experience. It was not unusual for reasonable notice of up to 12 months to be implied by the courts.
However, the notice provisions in the Fair Work Act suggest that it is no longer necessary to imply a term of reasonable notice. This proposition has support from a number of decisions, most recently a Federal Circuit Court decision of Judge Toni Lucev in Elwin v Edwards Motors Pty Ltd & Ors [2015] FCCA 334. Her Honour held that there was no need to imply an obligation to give reasonable notice by virtue of the operation of the notice provisions of the Fair Work Act.
Section 117(1) provides that the employer must not terminate an employee’s employment without giving written notice of the day of termination. Section 117(2) states that the time between giving the notice and the day of the termination is to be at least the period set out in section 117(3) which takes into account age and length of service.
However, the more recent Federal Circuit Court decision below suggests this issue remains controversial and the outcome may be a wakeup call to employers to ensure that notice is properly dealt with in all contracts of employment.
McGowan v Direct Mail and Marketing Pty Ltd [2016] FCCA 2227 (30 August 2016)
Mr McGowan commenced employment with Direct Mail in 1999, he was promoted over time to the position of Group General Manager, and this was his position at the time of his dismissal. An employment contract between the parties was entered into when Mr McGowan commenced his employment and this contract was varied over time to take into account his promotions. The contract provided that in the event that either party terminated the employment they would provide the other party with reasonable notice.
In October 2014 Mr McGowan was sacked for misconduct. Direct Mail stated the Mr McGowan was rude and used crude language, was disrespectful, displayed a poor attitude and lacked interest in the business. Mr McGowan was given his minimum statutory entitlement of five weeks’ pay in lieu of notice pursuant to s117(2) of the Fair Work Act taking into account his period of service and age.
Mr McGowan claimed Direct Mail took adverse action against him because he made complaints to an external HR consultant. He also complained that his role was being undermined and usurped by the Managing Director. As well as the adverse action claim Mr McGowan was seeking payment for reasonable notice which he claimed was 12 months.
Mr McGowan was not successful with his adverse action claim. Judge McNab found in favour of Direct Mail accepting that Mr McGowan was sacked because of his behaviour and concerns about his performance and not because he made complaints about his workplace.
In relation to the claim for reasonable notice Judge McNab did not accept Direct Mail’s argument that s117 prevented the implication of a term of reasonable notice and therefore they were only obliged to pay what was required under s117. Judge McNab said the “better view” is that s117 is “in that part of the Act dealing with the National Employment Standards and is intended to provide a minimum period only. It does not displace a right to reasonable notice when the contract of employment is silent on the question of notice”.
Judge McNab went on to say that by paying the minimum notice period under s117(2) the obligation under the National Employment Standards (NES) was satisfied and the employer would not be liable for a claim of a breach of the NES, but this may not satisfy a [contractual] claim for reasonable notice.
His Honour expressed the view that it was unlikely Parliament intended by enacting s117(2) that the same notice period would apply to an employee who had worked five years in a mid-range role and to an employee who had worked 25 years with a series of promotions when under their contracts there was no provision for notice of termination.
What does this mean for employers?
It means that employers can be at risk of a claim for breach of an obligation to pay reasonable notice where the contract doesn’t contain an express notice provision. Employers can no longer safely rely solely on the provisions in s117. This decision turns the tables allowing employees the option of pursuing a claim for reasonable notice. If you haven’t checked your employment contracts recently to ensure that notice of termination is expressly dealt with now is the time to do so.
How should notice be given?
The Fair Work Act requires that written notice be given of the day of the termination. This seems straightforward but can give rise to issues as the following two cases demonstrate:
- In Duggan v Metropolitan Fire and Emergency Services Board [2017] FWC 1197, Mr Duggan was given notice in May 2016 that his employment was to be terminated but the termination would not take effect until the dispute between the parties had been resolved under the Agreement that applied to the employment. This dispute was resolved in November 2016 and Mr Duggan was advised that his employment would be terminated with immediate effect and he would be paid one week in lieu of notice.
Mr Duggan commenced unfair dismissal proceedings. His employer argued that he was not entitled to bring these proceedings because at the time he was given notice of termination (in May 2016) he had not served the minimum employment period.
It was held that because the notice of termination provided did not specify the date of termination it did not comply with section 117 of the Act. By the time proper notice of termination was given in November 2016 Mr Duggan had served his minimum employment period and was entitled to bring unfair dismissal proceedings.
- With better news for employers, in Rachael Raven v Bank Australia Limited T/A Bank Australia [2017] FWC 3289 the requirement to give written notice was not strictly enforced.
Ms Raven was employed subject to a probationary period ending on 3 April 2017. On 29 March 2017 she was requested to attend a meeting to discuss performance issues. At the conclusion of the meeting her employment was terminated with immediate effect. Written notice was prepared and posted to her on 31 March 2017. Ms Raven did not receive this letter until 5 April 2017 and argued that by then she had served her minimum employment period and was entitled to bring unfair dismissal proceedings.
In holding that the employee was clearly aware that her employment had been terminated on 29 March 2017 Commissioner Gregory took into account the following actions by the employee:
- she collected her personal belongings and threw her keys on the counter saying “I won’t be needing these anymore”:;
- she sent a text message to colleagues asking to be removed from an employee group chat;
- she sent a text message to a Branch Manager saying “Shit day John sorry, no longer with bank Australia” and received a reply confirming her departure and offering a reference;
- she called the Branch Manager on 31 March 2017 saying she was upset and didn’t understand why she had been dismissed;
- she received her termination payment but failed to question why it had been made.The employee turned up for work on Monday 3 April 2017 and remained until she was advised her employment had been previously terminated. Commissioner Gregory suggested this could be explained on the basis that she was endeavouring to ensure she had completed the minimum employment period.
Commissioner Gregory was satisfied that Ms Raven was told her employment had been terminated on 29 March 2017 prior to completing her minimum employment period and the fact that this was not in writing did not alter the date of termination.
Lessons for employers
Although the FWC adopted a practical approach in this matter this should not be relied upon. Best practice dictates that written notice of termination of employment clearly indicating the date of termination should be provided at the time of termination to ensure compliance with the Fair Work Act. Although the employer was successful in the Raven matter the Commissioner did point out that the notice provisions are a civil penalty provisions and the employer could have potentially been exposed to a civil penalty.
Post by Sarah Jones