Notice of termination – does contract override NES?

Notice of termination – does contract override NES?
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By Paul Munro on 14 November 2017 Does a notice period in an employment contract override provisions in the National Employment Standards?

This question was recently sent to our Ask an Expert service.

Q Our company has decided to dismiss a manager whose contract of employment stipulates that notice of termination of employment is one month. The manager has been employed for about 6 ½ years and is aged in his fifties.

The company intends to provide the appropriate notice as set out in the contract of employment , that is, one month’s notice. The manager claims he has an entitlement to five weeks’ notice because he is over 45 years of age.

What period of notice applies in this case – the notice in the contract of employment or the notice required under the National Employment Standards?

A Where an employee’s employment is terminated by the employer, the Fair Work Act (s117) provides an entitlement to a minimum period  of notice, or payment in lieu of notice.  In this case, the minimum provisions under the National Employment Standards would prevail as the terms of the contract of employment are inconsistent with the minimum provisions of NES. This means the employee is entitled to five weeks’ notice (or payment in lieu).

What period of notice applies?

Generally speaking, the relevant legal obligation with respect to the applicable minimum notice of termination would be as follows:
  1. Is there a notice period in the contract of employment? If yes, the contract notice period will apply if it is greater than the National Employment Standards. If the notice period in the contract of employment is less than the NES, the NES will prevail.
  2. Is the contract of employment for a fixed term or specific task? The contract ceases at the end of the fixed term or specific task. No notice of termination is required.
  3. If there is no notice period in the contract of employment (and it is not fixed term or specific task)? In this situation, the notice of termination provisions in the applicable modern award or enterprise agreement will apply. These usually specify the minimum notice period provisions under the National Employment Standards. If the person is an award/agreement-free employee, then reasonable notice will apply.
  4. If there is no contract of employment? Reasonable notice will apply.
NOTE: The period for giving notice of termination by an employer to an employee under the NES is the minimum period an employer must give (or pay in lieu) on termination of employment.

Reasonable notice – common law

The courts consider the primary purpose of giving a period of notice is to enable an employee to obtain new employment of a similar nature.

While the Fair Work Act details the minimum periods of notice of termination to be given by an employer to an employee, a greater period of notice may be required to be given under an individual’s contract of employment, particularly in relation to senior executive employees.

In the absence of an express contractual term dealing with notice in a contract of indefinite duration, the law will imply a contractual term entitling an employee to reasonable notice of termination.

What is considered ‘reasonable notice’ varies depending on the circumstances. Relevant factors to take into account when considering what may be reasonable notice for an employee include:
  • length of service
  • seniority and status of the position
  • the level of remuneration, experience and expertise
  • whether the employee was approached by the employer to join the organisation
  • the prospects for the employee to find alternative employment.
In determining reasonable notice, a court will bear in mind the primary purpose of such notice, namely, to enable an employee to obtain new employment of a similar nature. The determination of what is reasonable notice must be determined at the time the notice is given.

In circumstances where an employee has been wrongfully dismissed on account of an employer’s failure to provide reasonable notice, damages are generally limited to the gross amount (including superannuation) that would have been earned during the period of reasonable notice had the contract continued.

The bottom line: The terms of a contract of employment do not override the minimum provisions under the National Employment Standards where the contract is less beneficial than the Standards.
 

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COMMENTS

  1. MDC L:
    While we agree that reasonable notice ought to prevail over the NES minimum notice, note:• Richard v Nicoletti [2016] WAIRC 00941• Westpac Banking Corporation v Wittenberg [2016] FCAFC 33• Kuczmarksi v Ascot Adminstration Pty Ltd [2016] SADC 65• Elwin v Edwards Motors Pty Ltd & Ors [2015] FCCA 334Mark Irving has argued cogently why this line is wrong, but his arguments were dismissed in Kuczmarksi. Is there a prevailing authority you rely on to the contrary in your article?

    Report abuse 1day ago

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