Employment Law - Unfair dismissals under the Fair Work Act - Common Law Contracts

Date: April 15, 2010

Authors: Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.

Finally, common law contracts of employment will continue to regulate a large number of employment relationships under the Fair Work Act. This will continue to be the case notwithstanding the creation of ‘Modern Awards’ by the Australian Industrial Relations Tribunal since January 2010. These Modern Awards cover ten modern award conditions which are similar to the National Employment Standards that provide the basic safety net for employees.

Common law contracts of employment cannot provide terms less beneficial to an employee than the National Employment standards or the applicable Modern Award. However, the standards will not be enforceable as contractual terms unless expressively incorporated into an employment contract.

In many common law contracts, an entitlement to redundancy may be inadvertently incorporated or an employer may maintain a deliberate redundancy policy. This will occur where a contract of employment requires an employee to ‘abide by’ or ‘comply with’ employer policies. The employee will still have entitlements to redundancy even where an employer considers he or she retains the discretion to influence such a policy. Alternatively, a policy may be incorporated by custom and usage in circumstances such as where the policy is available on the company website and is consistently complied with. A policy providing for notice of termination might similarly be incorporated by reference in the same manner.

Where an employment contract is silent on the length of notice to be given to an employee upon termination, a court will imply that the contract may be terminated on the employer giving reasonable notice. In some cases, ‘reasonable notice’ has been found to be as long 12 months. In assessing what might be ‘reasonable’ notice, courts will consider a number of factors including the duration of employment, the employee’s seniority, the employee’s remuneration, what the employee gave up to except or continue employment, the executive’s age and chances of re-employment, and industry practise.

Even where the employment contract does proscribe length of notice provisions which are not inconsistent with the National Employment Standards, an employee who is simply terminated by an employer in accordance with those provisions without other explanation of cause may still be able to argue he or she has been unfairly dismissed pursuant to Section 385 of the Fair Work Act. The general effect of that section (and of the four tests discussed above) is to ensure that employees are given a ‘fair go all round’ which may not occur if the employee is simply terminated without any reasonable cause in accordance with minimum notice provisions. Again, Fair Work Australia may consider the sorts of factors set out in the preceding paragraph. In other words, this effectively increases defacto notice periods for senior employees over the age of, say 55 years, with more than 15 years employment to up to six months.

This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.

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