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Have you considered obligations relating to reasonable notice?

McGowan v Direct Mail and Marketing Pty Ltd [2016] FCCA 2227

In this Federal Circuit Court of Australia case, Mr McGowan (“the Applicant”) commenced employment with Direct Mail and Marketing Pty Ltd (“the Respondent”) on 25 February 1999 as an Account Manager.

In 2009 the Applicant claimed that he and the Respondent entered into a Second Agreement for the position of Sales Manager. The Applicant alleged that in the event that either party was to terminate this Second Agreement, they would provide “reasonable notice” on termination.

On 3 January 2012, the Applicant and the Respondent entered into a Third Agreement, whereby the Applicant was employed in a position of Group General Manager. The Applicant claimed that in the event that either party was to terminate the Third Agreement they would provide the other party with “reasonable notice” on termination.

The Applicant’s employment was terminated on 17 November 2014 for the following reasons:

  1. Lack of work performance in Sales.
  2. Response to growth and continued development of sales was below an acceptable level.
  3. Little interest in the IDMs software.
  4. Rude and crude conduct and behaviour towards staff and clients.

The Applicant was paid five (5) weeks in lieu of notice.

The Applicant claimed that his employment was terminated due to his complaints to HR and that he should have been paid 12 months’ reasonable notice of termination of employment.

The presiding office, Judge McNab, did not accept that the Respondent terminated the Applicant’s employment because he made a workplace complaint and that it was not a factor in the decision to terminate the Applicant’s employment. Accordingly, the Applicant’s Adverse Action claim failed.

Turning to the Applicant’s reasonable notice claim, Judge McNab expressed the view that the Employment Contract which was entered into between the Applicant and the Respondent in 1999 continued to govern the terms of the employment at the date of the termination of employment.

The 1999 Agreement contemplated the terms of that Agreement continuing, unless explicitly replaced, notwithstanding amendments to the terms of the salary or the position. He found that there was no evidence of any such express agreement to replace the 1999 Agreement.

Therefore, the 1999 Agreement’s provisions with respect to notice of termination of employment were not replaced by an implied term of reasonable notice of termination.

Judge McNab further stated at paragraph 85 of his judgement that:

s.117 is in that part of the [Fair Work] Act dealing with National Employment Standards [NES] 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.  By paying or giving the minimum period of notice under s.117(2), the employer will have satisfied the National Employment Standard and not be liable for a claim of breach of those standards.

[Emphasis Added]

Message for Employers

Agreements referring to the notice provisions in the NES can create an apprehension that either party has only to comply with those minima. However, that is not the case and a court may be called upon to assess “reasonable notice”, particularly where the employer has ended the employment.  We recommend that all employers review the notice provisions in all contracts of employment of all staff.

If any Employment Contracts is silent on the notice provisions that apply on termination and the employer pays only the National Employment Standard, it does not limit the employer’s exposure to “reasonable notice” claims. The notice payment they make simply ensures that there is no breach of the National Employment Standards.

Furthermore, if Employment Contracts are being updated, all employers are encouraged to review the specific terms and conditions of their previous Employment Contracts to assess whether the employer wishes to replace, amend or add further provisions to them.