Australia: Case shorts on employment law

1. Reasonable notice of termination

The decision by the High Court of Australia to refuse special leave to appeal(1) to an employee from a decision of the Full Court of the Federal Court of Australia(2) significantly reduces the likelihood of employees seeking to argue that they are entitled to "reasonable" notice of termination which exceeds statutory and Award minimums.

Traditionally, where an employment contract does not include an express provision in relation to notice of termination, or alternatively, an employment contract which includes a notice provision is an outdated contract which does not relate to the employee's current position, the Courts have implied a term into the employment contract such that the employer is required to provide the employee with "reasonable" notice of termination. In practice, senior employees with long periods of service have been able to claim between 12 and 18 months as a reasonable period of notice of termination.

In the Brennan decision, Ms Brennan was originally employed as HR Manager however at the time of her dismissal on the grounds of redundancy, was occupying the position of Deputy Chief Executive Officer. On termination, Ms Brennan received notice of termination in accordance with her initial contract of employment. Ms Brennan's employment was also covered by the South Australian Municipal Salaried Officers Award (Award).

Essentially the Court was tasked with assessing whether there was room for implication of a term requiring reasonable notice of termination in circumstances where the Award set minimum periods of notice. Earlier decisions on this point had left open this question and inferred that an Award which set minimum periods of notice did not prevent an argument that reasonable notice may still be required.

The Full Court in Brennan held that the application of the Award meant that it was not necessary to imply an obligation to give reasonable notice. Ms Brennan's application for special leave to appeal to the High Court was refused on the basis that an appeal would not have reasonable prospects of success.

The implication of this decision is that employees covered by an industrial instrument such as an Award are unlikely to be able to establish that they are entitled to reasonable notice of termination, on the basis the instrument will set minimum periods of notice of termination.

It is also arguable that because the National Employment Standards, which apply to all employees and not only Award-covered employees, contain a provision regarding minimum periods of notice of termination, non-Award employees may also be unable to argue that they are entitled to reasonable notice of termination. It must be stressed that the High Court did not consider this point, however it appears an analogous argument is available.

2. Poor investigation breached employment contract

In a decision which emphasises that any breach by an employer of its workplace policies is likely to result in damages, the Full Federal Court has ruled(3) that a shipping company breached an employee's contract of employment when it conducted a flawed investigation into allegations of bullying by a colleague. Notwithstanding the company arguing that the relevant harassment and discrimination policy was simply a set of directions, the Court held that the policy formed part of the employee's contract given language in both the contract (such that the policies were to be "observed at all times") and language in the policy itself.

Hence, the Court in this case found that the employer had breached its policy, including by:

  • dealing with an email by the employee as a formal complaint, and failing to consider informal options set out under the policy;
  • failing to properly document the investigation; and
  • failing to properly investigate the allegations.

The Court remitted to a single judge the issue of damages and the question of whether the employer repudiated the contract of employment.

This case should serve as a warning to organisations who are of the view that simply stating that workplace policies do not form part of contracts of employment will protect the organisation from employee claims. The recent trend in decisions indicates that Courts will find a way to penalise employers who breach their own policy documents, particularly in circumstances where employers expect employees to comply with obligations in such policy documents.

3. Annual leave on termination

A recent decision of the Federal Court(4) has clarified a long running dispute as to the calculation of annual leave payable to employees on termination of employment.

The case concerned a provision in an enterprise agreement which stated that annual leave on termination of employment would be calculated based on the ordinary weekly rate of pay of employees. This was contrasted with a clause in the agreement providing that employees taking annual leave were to be paid the greater of their ordinary weekly rate plus either a 20% loading, or their rostered overtime, shift allowance, weekly penalty rates and bonus. In effect, employees received greater payment for annual leave when taking annual leave, than they did on termination.

In rejecting a declaration sought by the employer that the relevant clause did not contravene the National Employment Standards, the Court held that the relevant NES provision (section 90(2)) "is not confined to a statement of a minimum obligation, but is a statement to the effect that an employee should not suffer a reduction in the value of unpaid annual leave if employment comes to an end while paid annual leave remains untaken".

The effect of this decision is that annual leave on cessation of employment must be paid at least at the same rate that an employee would have received had they taken the annual leave whilst still at work. The practical impact of this decision is particularly significant for employees entitled to guaranteed remuneration increases during the term of their employment. Arguably, the increased remuneration would need to be built into any annual leave payment on termination of employment if the amount of accrued annual leave is such that the employee would have received the remuneration increase had they taken the annual leave.


1Brennan v Kangaroo Island Council [2014] HCASL 153
2Brennan v Kangaroo Island Council [2013] SASCFC 151
3Romero v Farstad Shipping (Indian Pacific) Pty Limited [2014] FCAFC 1777
4Centennial Northern Mining Services Pty Limited v Construction, Forestry Mining and Energy Union (no. 2) [2015] FCA 136

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Kemp Strang has received acknowledgements for the quality of our work in the most recent editions of Chambers & Partners, Best Lawyers and IFLR1000.

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