In certain circumstances a court can imply into an employment
contract a period of "reasonable notice" upon
termination. Past cases have shown that this notice period can be
as much as 12 months; meaning, in such a case, that the court would
order the employer pay the employee 12 months' salary.
A term of reasonable notice can be implied into a contract of
employment where the contract makes no provision for notice or
payment in lieu of notice upon termination; or where the contract
does make provision for notice or pay in lieu,
but, for example, the employer relies on a summary termination
clause to terminate the contract without notice or pay in lieu in
circumstances where it did not (or where a court concludes it did
not) have grounds to do so.
The default rule is that under contracts of employment for an
indefinite period, termination may be effected by either party
giving the other reasonable notice of their intention. Where there
is no express term, a term may be implied. The term of reasonable
notice implied by a court is generally determined by reference to
circumstances as at the date of termination and what is reasonable
will very much depend on the circumstances of each individual case.
Despite that, it is possible to glean a number of relevant factors
which a court will likely take into account.
The factors a court may consider include the employee's age
and length of service; the nature of his or her responsibilities,
remuneration and relative seniority in the organisation; evidence
as to industry practice; anything given up by the employee to take
on the position; and any expectation as to the duration of the
Generally speaking, if the employee is in an important position
at a higher grade, with a large salary and is long serving, with,
for example, only a few years to serve until retirement, the amount
of notice implied will likely be high, perhaps in the order of nine
or twelve months' salary. Conversely, an employee in a low paid
position in a routine job could expect the award of a much shorter
period of notice.
Two recent Queensland decisions bear mention.
In the first one, Macauslane v. Fisher & Paykel Finance
Pty Ltd (a 2003 decision of the Court of Appeal), the
plaintiff was a financial controller in his mid 30s with less than
three years' service. The court appealed from awarded the
plaintiff nine months' salary. Despite two judges remarking (to
the effect) that they believed six months to be closer to the mark,
the Court of Appeal affirmed the decision, concluding that no error
could be demonstrated in the decision to award nine months. The
nine months' salary awarded in that case has since been
criticised by commentators as "somewhat generous"
– but it remains the law.
The decision in Macauslane was later relied upon by the
Supreme Court in what appears to be the most recent Queensland case
directly on point, Taske v Occupational & Medical
Innovations Limited , where nine months' salary was
again awarded. In that case, the plaintiff was a chief executive
officer in a senior position with remuneration at a high level,
having regard to the size of the company, and at the age of 66,
with his qualifications and experience, the judge concluded that he
"ha[d] limited prospect of obtaining an equivalent
position in a company conducting a business of the kind conducted
by the defendant". He had though only been employed with
the company for a year.
There are numerous decisions of courts in the other Australian
jurisdictions which provide guidance – and sound a
warning – about the potential hidden cost to employers.
It is abundantly clear that quantifying reasonable notice is not a
precise science. Nonetheless, given the effect of a range of cases
over a long period of time; the prospect of judgments in the
amounts referred, and the cost of litigation, employers should be
vigilant about ensuring the quality of termination clauses in their
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.
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