Pub­li­ca­tions

Rea­son­able notice on ter­mi­na­tion of employ­ment has it a future?

Intro­duc­tion

Ter­mi­na­tion of a con­tract of employ­ment upon rea­son­able notice has long been regard­ed as part of the employ­ment law land­scape. It bridges the gap where the par­ties to the employ­ment rela­tion­ship have failed to spec­i­fy in the con­tract of employ­ment, the peri­od of notice nec­es­sary to end the rela­tion­ship with­out cause. In such cir­cum­stances, the prin­ci­ple was devel­oped at com­mon law that the con­tract of employ­ment could be ter­mi­nat­ed on what­ev­er peri­od of notice was found to be rea­son­able. Notice peri­ods as divined under com­mon law prin­ci­ples have ranged up to 12 months Quinn v Jack Chia (Aus­tralia) Ltd (1992) 1 VR 567 (in New Zealand rea­son­able notice of 18 months has been award­ed: Ogilvy & Math­er (NZ) Ltd v Turn­er [1996] 1 NZLR 641).

The abil­i­ty to ter­mi­nate on rea­son­able notice will only be implied into an employ­ment con­tract where it is nec­es­sary for busi­ness effi­ca­cy. In oth­er words, where there exists a pro­vi­sion deal­ing with notice of ter­mi­na­tion (ie under an express term of the con­tract) there will be no require­ment to fill the gap” and no need to imply a term of rea­son­able notice to make the employ­ment con­tract work”.

How­ev­er debate has recent­ly become enlivened over whether and the extent to which, award and min­i­mum statu­to­ry require­ments which con­cern notice peri­ods, are prop­er­ly to be regard­ed as fill­ing the gap (thus in effect ren­der­ing rea­son­able notice claims obsolete).

This arti­cle looks at recent devel­op­ments and the var­i­ous and dis­parate approach­es by courts and tri­bunals on this question.

Incon­sis­tent approaches

Even before the Fair Work Act 2009 and the intro­duc­tion of the mod­ern award sys­tem, there were a num­ber of deci­sions where claims for rea­son­able notice were refused because it was held that the exis­tence of an award or statu­to­ry pro­vi­sion deal­ing with notice meant that there was no neces­si­ty to imply such a term. Such was the posi­tion in Brack­en­ridge v Toy­ota Motor Cor­po­ra­tion Aus­tralia Ltd (1996) 67 IR 162, Elliott v Kodak Aus­trala­sia Pty Ltd [2001] FCA 807; (2001) 108 IR 23, Holt v Mus­ketts Tim­ber Sales Pty Ltd [1994] FCA 137 and Aus­tralian Nation­al Hotels Pty Ltd v Jäger [2000] TASSC 43; (2000) 9 Tas R 153.

It has also been held that the exis­tence of a work­place agree­ment which dealt with notice meant that there was no neces­si­ty to imply a term of rea­son­able notice – see Hast­ings v JH Cor­po­rate Secu­ri­ty Ser­vices Pty Ltd No SCGRG-00 – 436 [2000] SASC 216.

How­ev­er there are some deci­sions where the exis­tence of award pro­vi­sions deal­ing with notice was not found to be a bar to a rea­son­able notice claim. See for exam­ple: West­en v Union Des Assur­ances De Paris (No 2) (1996) 88 IR 268 (con­sid­ered lat­er in this arti­cle). See also Logan v Otis Ele­va­tor Co Pty Ltd [1999] IRCA 4; (1999) 94 IR 218 (where before the Full Bench of the Indus­tri­al Rela­tions Court of Aus­tralia it was not sug­gest­ed by the employ­er that the award notice pro­vi­sion had any con­trac­tu­al or deci­sive sig­nif­i­cance” to the rea­son­able notice argu­ment albeit it should be tak­en account of in deter­min­ing what con­sti­tut­ed rea­son­able notice).

In Stew­art v Nick­les [1999] FCA 888 the Fed­er­al Court decid­ed that the statu­to­ry notice pro­vi­sions under the then Work­place Rela­tions Act 1996 did not dis­place an implied con­trac­tu­al pro­vi­sion for ter­mi­na­tion by rea­son­able notice.

There are a num­ber of recent NSW Supreme Court deci­sions, where claims for rea­son­able notice have suc­ceed­ed, with­out judi­cial con­sid­er­a­tion of whether an enti­tle­ment to a min­i­mum statu­to­ry notice peri­od (for exam­ple under the Fair Work Act 2009) oper­at­ed to pre­clude such a claim (see for exam­ple Susan­na Ma v Expe­d­i­tors Pty Lim­it­ed [2014] NSWSC 859 (See also Ware v Ama­r­al Pas­toral Pty Ltd (No 5) [2012] NSWC 1550).

In 2013, the Full Court of the South Aus­tralian Supreme Court, reignit­ed debate over the rea­son­able notice ques­tion in its deci­sion in Bren­nan v Kan­ga­roo Island [2013] SASCFC 151 (20 Decem­ber 2013). Oth­er deci­sions in this area have sub­se­quent­ly flowed from Bren­nan.

Bren­nan v Kan­ga­roo Island

In Bren­nan the Full Court of the South Aus­tralian Supreme Court held that Ms Bren­nan (whose con­tract of employ­ment did not deal with notice) was not enti­tled to rea­son­able notice because her employ­ment was cov­ered by an award which spec­i­fied a peri­od of notice required to ter­mi­nate the employ­ment. There was there­fore no neces­si­ty to imply a term of rea­son­able notice into the employ­ment contract.

The plain­tiff in Bren­nan made a spe­cial leave appli­ca­tion to the High Court which was deter­mined in August 2014. The appli­ca­tion was reject­ed by the High Court on the basis that the Full Court’s analy­sis is con­sis­tent with the state­ments in Byrne v Aus­tralian Air­lines Ltd” (1995 185 CLR 410) and there­fore there were not suf­fi­cient prospects of suc­cess to war­rant a grant of spe­cial leave. Whilst the High Court’s dis­po­si­tion of the spe­cial leave appli­ca­tion does not rep­re­sent a detailed exam­i­na­tion of the author­i­ties, it is arguably an indi­ca­tion of the High Court’s present atti­tude on whether award notice peri­ods bridge the gap”.

The deci­sion by the High Court not to accede to the spe­cial leave appli­ca­tion and revis­it the rea­son­able notice issue has added to cur­rent uncer­tain­ty, and in the post Bren­nan world, com­pet­ing deci­sions have con­tin­ued to multiply.

West­pac Bank­ing Cor­po­ra­tion v Wittenberg

In West­pac Bank­ing Cor­po­ra­tion v Wit­ten­berg [2016] FCAFC 33 (14 March 2016) Buchanan J reviewed the author­i­ties on rea­son­able notice. He referred to the deci­sions in Jäger and Bren­nan and con­sid­ered that they had been decid­ed con­sis­tent­ly with the fol­low­ing state­ment of prin­ci­ple by the major­i­ty of the High Court in Byrne:

In the absence of any pro­vi­sion in the award and of any express pro­vi­sion in the con­tract of employ­ment the law would regard it as a legal inci­dent of the con­tract that it should be ter­minable upon rea­son­able notice or sum­mar­i­ly for seri­ous breach”.

Whilst in Wit­ten­berg it was decid­ed that a term of rea­son­able notice could not be implied due to pre-exist­ing con­trac­tu­al pro­vi­sions deal­ing with notice, the deci­sion may be con­sid­ered as pro­vid­ing sup­port for the propo­si­tion that statu­to­ry notice peri­ods (Jäger) and award pro­vi­sions (Bren­nan) fill the gap and leave no room for imply­ing a term of rea­son­able notice.

Kucz­mars­ki v Ascot Administration

In Kucz­mars­ki v Ascot Admin­is­tra­tion Pty Ltd [2016] SADC 65 (1 July 2016) the Dis­trict Court of South Aus­tralia held that the Fair Work Act 2009 notice pro­vi­sions bridged the gap”.

Mr Kuczmarski’s employ­ment was not cov­ered by an award (he was the Nation­al HR Man­ag­er) and he did not have a writ­ten con­tract of employ­ment. The only pro­vi­sions deal­ing with notice were there­fore those min­i­mum peri­ods of notice set out in sec­tion 117 of the Fair Work Act 2009.

Mr Kuczmarski’s employ­ment was ter­mi­nat­ed by his employ­er pay­ing him 5 weeks’ notice in lieu (the min­i­mum stip­u­lat­ed by the Act). Mr Kucz­mars­ki then brought a claim for dam­ages on the basis that – giv­en his senior­i­ty and length of ser­vice – a peri­od of 12 to 18 months’ notice would have con­sti­tut­ed rea­son­able notice.

On behalf of Mr Kucz­mars­ki, coun­sel sought to dis­tin­guish this case from Bren­nan. It was sub­mit­ted that there was a fun­da­men­tal dif­fer­ence between the pro­vi­sions of the award that cov­ered Ms Bren­nan and the pro­vi­sions deal­ing with notice in the Fair Work Act 2009. In the for­mer, the award stat­ed a spe­cif­ic peri­od of notice that an employ­er must give an employ­ee to ter­mi­nate their employ­ment. Under the Fair Work Act 2009 the require­ment was that the employ­er must give notice of at least those peri­ods stat­ed, in oth­er words they were min­i­mum requirements.

Judge Clay­ton was unper­suad­ed by these argu­ments and found that there was no mate­r­i­al dif­fer­ence (in this con­text) between an award requir­ing a spe­cif­ic peri­od of notice and the Fair Work Act 2009 set­ting a min­i­mum notice peri­od – the exis­tence of either was fatal to a rea­son­able notice claim. The fact that s 117 of the Fair Work Act 2009 con­tained a peri­od of notice (albeit a min­i­mum peri­od) meant that there was no gap to fill” and there­fore no neces­si­ty for an implied term of rea­son­able notice.

His Hon­our also accept­ed sub­mis­sions from the employ­er to the effect that s117 of the Act dis­places or pre­cludes any impli­ca­tion by law or fact, of a term requir­ing rea­son­able notice. In par­tic­u­lar, he accept­ed the employer’s sub­mis­sion that by pre­scrib­ing a min­i­mum notice peri­od, Par­lia­ment had recog­nised that the par­ties could express­ly agree a longer notice peri­od, but Par­lia­ment was to be tak­en to have intend­ed to exclude the implied term of rea­son­able notice. 

It is under­stood that Kucz­mars­ki was appealed to the South Aus­tralian Supreme Court but that the appeal was dis­con­tin­ued in Decem­ber 2016.

McGowan v Direct Mail and Marketing

In McGowan v Direct Mail and Mar­ket­ing Pty Ltd [2016] FCCA 2227 (30 August 2016) in the con­text of an adverse action, the Fed­er­al Cir­cuit Court had cause to con­sid­er the poten­tial impact of the notice pro­vi­sions of s 117 of the Fair Work Act 2009 on the impli­ca­tion of a term of rea­son­able notice. Judge McNab declined to adopt the rea­son­ing in Kuczarmars­ki and con­sid­ered that s 117 of the Fair Work Act 2009 would not dis­place a right to rea­son­able notice, or in his words:

I think the bet­ter view is that s.117 is in that part of the Act deal­ing with 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. 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. How­ev­er, it is strong­ly arguable that pay­ment or pro­vi­sion of that notice will not nec­es­sar­i­ly sat­is­fy a claim for rea­son­able notice.”

The propo­si­tion may be test­ed where the employ­ment of two employ­ees is ter­mi­nat­ed. Both are over 45 years of age. One has worked for 5 years in a mid-range role, the oth­er has worked for 25 years and worked her or his way up on a high lev­el role. Both are employed under con­tracts that make no pro­vi­sion for notice of ter­mi­na­tion. I doubt that par­lia­ment intend­ed that both would receive the same peri­od of notice of ter­mi­na­tion by the enact­ment of s.117(2) of the Act.”

Whilst ulti­mate­ly Judge McNab deter­mined that it was not nec­es­sary to imply a term of rea­son­able notice into the employ­ment con­tract due to the con­tin­ued oper­a­tion of the ter­mi­na­tion pro­vi­sion in the employ­ment con­tract, his rea­son­ing (whilst not bind­ing) is at the very least, persuasive. 

Oth­er deci­sions post Brennan

In Elwin v Edwards Motors Pty Ltd & Ors [2015] FCCA (24 Feb­ru­ary 2015) the Fed­er­al Cir­cuit Court fol­lowed the prin­ci­ples in Bren­nan, Brack­en­bridge, Jäger and Kodak and deter­mined that s 117 of the Fair Work Act pre­clud­ed a claim for rea­son­able notice. In Pap­pas v P & R Elec­tri­cal Pty Ltd & Anor [2016] SADC 132 (4 Novem­ber 2016) the Dis­trict Court of South Aus­tralia referred to Bren­nan and Kucz­mars­ki as author­i­ty for the propo­si­tion that rea­son­able notice is not required to fill the gap where the con­tract of employ­ment does not pro­vide for notice as s117 of the Fair Work Act 2009 estab­lish­es the employee’s enti­tle­ment to notice. 

The Full Bench of the West­ern Aus­tralian Rela­tions Com­mis­sion in Richards and Nico­let­ti [2016] WAIRC 00941 in a major­i­ty deci­sion deliv­ered on 22 Decem­ber 2016 held that there was no room for impli­ca­tion of a term requir­ing rea­son­able notice to ter­mi­nate an employ­ment con­tract. In a pow­er­ful minor­i­ty deci­sion, Smith AP con­duct­ed a detailed analy­sis of case law to date, ulti­mate­ly find­ing in favour of the posi­tion adopt­ed in cas­es such as McGowan and West­en. In doing so she found that the pur­pose of s 117 of the Fair Work Act 2009 was to pro­vide min­i­mum peri­ods of notice, and that such pro­vi­sions did not exclude the oper­a­tion of the right to rea­son­able notice.

Byrne v Aus­tralian Air­lines revisited

In both Bren­nan (on appeal) and Kucz­mars­ki reliance was placed on pas­sages from the High Court deci­sion in Byrne v Aus­tralian Air­lines Ltd (1995) 185 CLR 410. In that deci­sion, atten­tion was direct­ed, amongst oth­er things, to whether a pro­vi­sion in the Trans­port Work­ers (Air­lines) Award 1988 — (cl 11(a), which stat­ed that a dis­missal could not be harsh, unjust or unrea­son­able) could be implied into the employee’s con­tract of employ­ment. The High Court found that clause 11 (a) of the award was not implied into the employ­ment con­tract (as a mat­ter of con­tract law) as it was unnec­es­sary to do so for the effec­tive oper­a­tion of the contract. 

In address­ing this issue the High Court made the fol­low­ing statement:
the answer must be that it is not nec­es­sary to imply a term in the form of cl 11(a) for the rea­son­able or effec­tive oper­a­tion of the con­tract of employ­ment in all the cir­cum­stances. In the absence of any pro­vi­sion in the award and of any express pro­vi­sion in the con­tract of employ­ment the law would regard it as a legal inci­dent of the con­tract that it should be ter­minable upon rea­son­able notice or sum­mar­i­ly for seri­ous breach.” (our emphasis)

As not­ed in Wit­ten­berg, the above state­ment has been regard­ed as a gen­er­al state­ment of legal prin­ci­ple and as author­i­ty for the propo­si­tion that it is unnec­es­sary to imply a term of rea­son­able notice where an award so pro­vides. It is sug­gest­ed that the posi­tion may not be so clear cut. 

First the High Court in Byrne did not dis­cuss or review the doc­trine of rea­son­able notice in detail. The claim it had to deter­mine was not a claim based on rea­son­able notice. Indeed the major­i­ty stat­ed (at para 28) that:
The claim which the appel­lants advance is not a claim for wrong­ful dis­missal based upon a fail­ure to give rea­son­able notice. It is a claim for dam­ages for loss of employ­ment for, it would seem, an indef­i­nite peri­od, based upon the inabil­i­ty of their employ­er, because of cl 11(a), to ter­mi­nate the employ­ment relationship”.

Sec­ond­ly it is arguable that the prin­ci­ple which has been drawn from the above state­ment is not the only way such state­ment can be inter­pret­ed. Anoth­er inter­pre­ta­tion of the above state­ment is that rea­son­able notice can still be a term implied into employ­ment con­tracts unless an award specif­i­cal­ly excludes the right to rea­son­able notice or the right to dis­miss sum­mar­i­ly (or where there is an express con­trac­tu­al pro­vi­sion deal­ing with these issues). 

Third­ly it is arguable that the High Court stat­ed (at para 27) that it was not going to (and did not) decide the rea­son­able notice issue because in the con­text of the case, it was not nec­es­sary to do so:
Ter­mi­na­tion of employ­ment in breach of cl 11(a) is, of course, a breach of the award, but since cl 11(a) is not, unless made so, a term of the con­tract, it is not a breach of con­tract. It is a dif­fer­ent ques­tion whether a dis­missal, if wrong­ful, oth­er­wise amounts to a breach of con­tract sound­ing in dam­ages. In the absence of any­thing to the con­trary and putting to one side the pro­vi­sion in the award for notice, at com­mon law a con­tract of employ­ment for no set term is to be regard­ed as con­tain­ing an implied term that the employ­er give rea­son­able notice of ter­mi­na­tion except in cir­cum­stances jus­ti­fy­ing sum­ma­ry dismissal(43). Clause 11(d) of the award pre­scribes peri­ods of notice vary­ing accord­ing to the length of ser­vice and the age of the employ­ee. If that pro­vi­sion were not to pre­clude the impli­ca­tion of a term that rea­son­able notice be giv­en, it might pro­vide evi­dence of what con­sti­tutes rea­son­able notice at com­mon law. Upon the basis of such an implied term, the appel­lants might pos­si­bly have been able to mount a claim for dam­ages for wrong­ful dis­missal because of the fail­ure to give them the appro­pri­ate notice (44). But it is unnec­es­sary for the pur­pos­es of these appeals to deter­mine the point”. (our emphasis)

The con­clud­ing sen­tence But it is unnec­es­sary for the pur­pos­es of these appeals to deter­mine the point” appears to be direct­ed towards the poten­tial rea­son­able notice points that they out­line. The court express­ly stat­ed that it was putting to one side” the award notice pro­vi­sion. And by using the sub­junc­tive (“If that pro­vi­sion were not to”), the court indi­cates that the sub­ject mat­ter is hypo­thet­i­cal — sug­gest­ing that the court is not decid­ing the point one way or anoth­er. In par­tic­u­lar it is not decid­ing if the award pro­vi­sion pre­cludes the impli­ca­tion of a term of rea­son­able notice (the infer­ence being that the award notice pro­vi­sion might not have that effect). 

While the para­graph above may sug­gest that the court might lean towards the award notice pro­vi­sion pre­clud­ing a rea­son­able notice claim if it had to decide the point, it is sug­gest­ed that it is rea­son­able to argue that the court express­ly did not decide that point.

Fourth­ly if the major­i­ty in Byrne did not review the author­i­ties on rea­son­able notice and did not make a deter­mi­na­tion on rea­son­able notice the fol­low­ing state­ment of the minor­i­ty judges (McHugh and Gum­mow JJ) is par­tic­u­lar­ly note­wor­thy. In decid­ing whether it was nec­es­sary to imply into the employ­ment con­tract, clause 11(a) of the Award (which as not­ed above, dealt with dis­missal), they said:
Nor could it be said that the impli­ca­tion into the con­tract of employ­ment of a term to the effect of cl 11(a) of the Award would be nec­es­sary for their rea­son­able or effec­tive oper­a­tion. In the absence of such a con­trac­tu­al pro­vi­sion, there would remain unaf­fect­ed the enti­tle­ment of the employ­er at gen­er­al law to ter­mi­nate at will on giv­ing rea­son­able notice and to dis­miss sum­mar­i­ly for mis­con­duct. That this would be the case was accept­ed in the sub­mis­sions of both sides to this Court. Thus, there would be no gap” which it was nec­es­sary to fill by a pro­vi­sion such as cl 11(a).

Accord­ing­ly, we accept the sub­mis­sions for the respon­dent that the term for which the appel­lants con­tend is not to be implied as a mat­ter of busi­ness effi­ca­cy in its con­tracts of employ­ment with the appel­lants.” (our emphasis).

In oth­er words, the minor­i­ty judges took the view that the enti­tle­ment to dis­miss on rea­son­able notice remained — despite the fact that anoth­er award pro­vi­sion (clause 11(d)) dealt with notice.

To con­clude Byrne is a deci­sion not direct­ed to a con­sid­er­a­tion of the author­i­ties on rea­son­able notice and its rela­tion­ship to awards. To the extent to which the deci­sion tra­versed this ques­tion it is sug­gest­ed that it has not con­clu­sive­ly dealt with it.

Review of the approach in West­en v Union des Assur­ances de Paris

We now turn to look at the alter­na­tive approach in West­en v Union des Assur­ances de Paris (No 2) (1996) 88 IR 268 (which came after the High Court deci­sion in Byrne). In that deci­sion, Madg­wick J, sit­ting as the Indus­tri­al Rela­tions Court of Aus­tralia, took the view that min­i­mum notice pro­vi­sions in an award did not lim­it the employee’s right to rea­son­able notice.

In doing so he not­ed that the pro­vi­sions of the Work­place Rela­tions Act 1996 deal­ing with ter­mi­na­tion of employ­ment, stat­ed that their object was to give effect to the Inter­na­tion­al Labour Organization’s Ter­mi­na­tion of Employ­ment Con­ven­tion (to which Aus­tralia was a signatory). 

The Con­ven­tion pro­vid­ed at Arti­cle 11:
A work­er whose employ­ment is to be ter­mi­nat­ed shall be enti­tled to a rea­son­able peri­od of notice or com­pen­sa­tion in lieu there­of, unless he is guilty of seri­ous mis­con­duct, that is, mis­con­duct of such a nature that it would be unrea­son­able to require the employ­er to con­tin­ue his employ­ment dur­ing the notice peri­od.” (our emphasis)

Fur­ther­more, s 170HA of the 1996 Act stat­ed that any award that was incon­sis­tent with the require­ments of the Con­ven­tion would not have effect to the extent of the incon­sis­ten­cy. Thus the award could not have the effect sought to be attrib­uted to it by the employer.

Madg­wick J not­ed, with ref­er­ence to the rel­e­vant notice clause in the award:
The clause does not say, nor does it nec­es­sar­i­ly imply, that the right of rea­son­able notice, for employ­ees for whom such notice might be months longer than four weeks, is to be abol­ished or made inop­er­a­tive. The award can have a sen­si­ble and rea­son­able oper­a­tion if it is read as mean­ing that an employer’s oblig­a­tion to give rea­son­able notice is assumed and endures, but, rea­son­able or no, the employ­er must give the min­i­mum peri­ods of notice pre­scribed in the award.”

Madg­wick J con­sid­ered that if an Act of Par­lia­ment was to reduce com­mon law rights it need­ed to say so. Noth­ing in the rel­e­vant Act (Work­place Rela­tions Act 1996) empow­ered the award to reduce the rights of cer­tain employees. 

As not­ed above this theme was echoed by Judge McNab in McGowan where he con­sid­ered that s 117(2) of the Fair Work Act 2009 as part of the NES, is only intend­ed to pro­vide a min­i­mum and not to dis­place a right to rea­son­able notice. A sim­i­lar view was expressed in the minor­i­ty deci­sion of Smith AP in Richards.

It should be not­ed that in both Bren­nan and Kucz­mars­ki the posi­tion in West­en was reject­ed.

Con­clu­sion

Con­sid­er­a­tion of the rel­e­vance of and the extent, if any, to which leg­isla­tive inten­tion had in mind the abo­li­tion of the com­mon law right to rea­son­able notice, should con­tin­ue to play a sig­nif­i­cant role in the ongo­ing rea­son­able notice debate. 

Whether notice pro­vi­sions are expressed in terms of a min­i­mum amount or are oth­er­wise expressed, may also con­tin­ue to be re-agi­tat­ed as an issue. Whether notice pro­vi­sions arise under an award or direct­ly under statute, is we sus­pect, like­ly to exit the debate as a point of distinction. 

It is sug­gest­ed that fur­ther eval­u­a­tion of the High Court deci­sion in Byrne ought to play a sig­nif­i­cant part in any future supe­ri­or court deter­mi­na­tion on this question.

The rea­son­able notice debate has a dis­tance to run and although per­haps less like­ly, it should not come as a total sur­prise if states oth­er than South Aus­tralia choose not to fol­low Bren­nan and Kucz­mars­ki.