The Implied Term of Reasonable Notice
Recently, the District Court of NSW added to the several cases dealing with the much-discussed topic of reasonable notice and whether it is displaced by s 117 of the Fair Work Act 2009 (Cth) (FW Act). The case provides some certainty that the common law term of reasonable notice, implied by law, is not displaced by the statutory minimum notice period under section 117 of the FW Act.
The Case – Daigle v SCT Operations [2022]
The plaintiff, Luc Daigle, claimed that the defendant, SCT Operations Pty Limited, did not give 24 months’ notice of termination. The plaintiff claimed 99 weeks’ pay in lieu of notice (104 weeks less the 5 weeks paid).
If there is no express term regarding notice of termination in an employment contract, a period of reasonable notice may be implied. However, the defendant maintained that the plaintiff was paid the whole of his entitlement to payment in lieu of notice, that being 5 weeks as calculated according to s 117 of the Fair Work Act 2009 (Cth) (the Act). The minimum period of notice of termination under section 117 of the FW Act is a scale based on the employee’s length of service, with a maximum of five weeks’ notice available for employees over 45 years old and who have more than five years’ service. Here, the defendant advanced an argument that where the notice period is not expressly provided, the notice period within the NES ought to be the implied term of reasonable notice. This argument was not accepted by the Court.
The plaintiff’s claim for loss and damage was made up of the alleged failure to pay the quarterly instalment of the Performance Bonus in sum of $94,452, and the amount of $263,238.53 made up of superannuation and pay in lieu of notice entitlements, totalling $357,690.53. The defendant denied the whole of the plaintiff’s claim of entitlements.
The Outcome
The Court held that the minimum rights to notice periods within section 117 of the FW Act do not preclude the general rule at common law that if the contract of employment makes no express provision of notice, the law will imply a term of reasonable notice. The Court further held that section 117 of the FW Act does not grant a right for employers to rely on the minimum notice periods in the instance they fail to expressly specify the relevant notice in an employee’s contract of employment. As such, this provision of the FW Act is intended to protect employees, rather than provide employers with a ‘fail safe’ should their contracts not set out express notice periods.
The Court held that a term of reasonable notice, in the circumstances, was 8 months pay minus notice paid and money earnt during that period.
The Court also upheld a claim as to the bonus. It was held that the defendant’s unilateral alteration of the bonus clause to amount to a breach of contract. The reasons for this were that the plaintiff had already ‘earnt’ the bonus under the existing provisions, and by the defendant attempting to introduce a new term, the defendant attempted to withhold the bonus owing to the plaintiff.
The plaintiff is entitled to damages as follows:
- Bonus payment in the sum of $94,452.00
- Payment in lieu of notice in the sum of $63,782.50
- Excess above car allowance deduction in the sum of $31,408.00
- Balance: $126,826.50
Takeaway
The legal position on the interaction between the implied term of reasonable notice and section 117 of the FW Act remains to be determined by an appellate court. However, this decision provides clear guidance on the relevant principles and considerations and is an important addition to the authorities on the complex issues of reasonable notice and bonus.
This case also serves as a timely reminder to employers of the legal risks presented to businesses when employment contracts are incomplete and the importance of ensuring employment contracts contain express terms relevant to the individual employee. Employers who use ‘template’ or ‘boilerplate’ contracts run the risk of uncertainty and legal liability with respect to the same.
If you have any questions about drafting comprehensive employment contracts or matters involving an implied term of reasonable notice, please do not hesitate to contact Nick Stevens, Peter Hindeleh, Daphne Klianis or Josh Hoggett.
