How certain are the terms of your employment contracts?

In the recent case of McAlister v Yara Australia Pty Ltd [2021] FCCA 1409, an employer was ordered by the Federal Circuit Court to pay damages of approximately $143,000 plus statutory entitlements (less any amounts already paid) for wrongful termination representing 9-months pay in lieu of notice to an employee. This may have been avoided by treating the employee with dignity and fairness, and sufficiently defining a notice period in the employee’s contract.  

Background

Commencing proceedings against Yara Australia Pty Ltd (Yara), Ms McAlister claimed that her former employer of almost 19 years had breached her contract of employment and the Fair Work Act 2009 (Cth) (FWA). Ms McAlister was instrumental in early years of her employer’s operation in Australia. After Ms Magnussen, the Managing Director of Yara, was tasked with reviewing and improving the health of the business in terms of its efficiency and profitability, she believed there were performance issues and Ms McAlister could not continue to manage her role of Administration, HR and Logistics Manager going forward.

Being stripped of her position and responsibilities without notice or discussion, and “left with an empty title and no role description”, Ms McAlister was understandably unhappy with the way she was being treated by her long-time employer. The Court found her employer’s approach meant that Ms McAlister was ultimately not treated with dignity and fairness. Following a disciplinary meeting, Ms McAlister was dismissed summarily in October 2015 on the belief of her employer that she had “deliberately and knowingly acted in a manner” which breached their “Code of Conduct and Ethics”.  The evidence was to the effect that Ms Magnussen had already made the decision to terminate Ms McAlister’s employment before Ms McAlister was afforded procedural fairness in respect of the allegations. The Court found the performance interview was simply a motion which Yara went through as a matter of formality.

Termination Notice Period

Ms McAlister claimed she was wrong dismissed and the period of notice regarding her dismissal was unreasonable. She claimed due to her 19 years with Yara, her age and specialised but narrow skill set, 18, 15 or 12 months’ notice would be reasonable.

The Judge in this case looked at the specific circumstances of the employee as well as the interaction between the case law and legislation when reaching their decision.  For example, the Court observed, “there have been a number of decisions from various Courts across Australian jurisdictions, although the legal position as to whether s 117 [of the FWA about the requirement for notice of termination or payment in lieu] ousts the implied term of reasonable notice, being a term implied at law, is still be determined by a superior Court which is binding on this Court.”

Outcome

The Judge concluded Ms McAlister’s conduct did not involve a sufficiently serious breach of her obligations to her employer and did not amount to serious misconduct justifying termination of her employment contract. Ms McAlister employment was therefore wrongfully terminated. 

Further, “it is doubtful that Parliament intended that employees who served vastly different periods, such as 5 years as opposed to 20 years, would by the enactment of s117(2) be confined to receiving the exact same period of notice of termination, despite their widely different circumstances…As such, s 117 of the FWA does not displace the common law term of reasonable notice, such term being implied by law.”

The Court emphasised it is important to consider the actual wording of the contract of employment, which in this case included the following: “All other details to be accord to the rules and regulations set for by the appropriate Australian government authority(ies) between employer and employee,” and did not express provide a notice period.

The Court disagreed with the excessive notice period propounded by the employee and determined the contract contained the implied term of reasonable notice and a reasonable period of notice which was implied into the contract of employment is a period of 9 months.

The termination of Ms McAlister’s employment was in held to be in breach of the obligation to provide reasonable notice of 9 months. Ms McAlister was consequently entitled to damages and statutory entitlements in the amount she would have received in that 9-month notice period. Yara had paid Ms McAlister 5 weeks pay in lieu of notice, the amount of which was then subtracted from her remuneration from the 9-month period.

Treating employees with dignity and fairness and sufficiently certain contractual terms can prevent expensive payouts (including legal and insurance expenses) by businesses and provide employers and employees with clarity and certainty regarding their rights and obligations around termination of the employment relationship. 

If you need advice relating to employment contracts or other employment law matters, call Griffin Legal and make an appointment on 02 6198 3100 today.

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