Redundancy conditions promised so added to written contract

Cases

Redundancy conditions promised so added to written contract

In a case serving as a warning to all HR and managerial staff, an employee succeeded in her claim for more than $100,000 severance pay before the Federal Magistrate’s Court because a manager had made certain promises to the employee in pre-employment negotiations.

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In a case serving as a warning to all HR and managerial staff, an employee succeeded in her claim for more than $100,000 severance pay before the Federal Magistrate’s Court because a manager had made certain promises to the employee in pre-employment negotiations.
 
The employee argued that by refusing to make a severance payout, the company had either breached her employment contract or made false representation breaching s53 of the Trade Practices Act.
 
The employee had kept notes of the negotiations conducted with her by the managing director in which he allegedly said that the company always looked after its staff and had a very generous redundancy policy compared to the industry standard. He allegedly added that in the unlikely event that her position was made redundant, she would be well looked after.
 
The company attempted to cast doubt on the authenticity of the notes, but this was rejected by the court.
 
Written contract was not complete contract
 
The company also argued that a contract signed after the negotiations by the employee supplanted and replaced any contractual commitments made by the manager during the negotiations.
 
This argument was also rejected despite the clause providing that ‘this letter sets out the entire agreement with you regarding the terms and conditions of your employment with the company’.
 
Federal Magistrate Raphael said the entire agreement clause did not extinguish the redundancy term of the contract because the company’s HR manager had told the employee that it was intended only to improve her bonus arrangements and not change any other term. It was also noted that the company had continued to provide two other entitlements (a Qantas lounge membership and an all-costs-paid mobile phone) that were agreed in the negotiation with the manager and not included in the written contract.
 
The court noted:
'The respondent’s case against the existence of the supplementary parol term is firstly that there was no agreement between the applicant and Mr Dillon made in the telephone conversation. I believe that there was. The words used by Mr Dillon in response to Ms McRae’s questions about redundancy were intended to, and did constitute an offer and acceptance of the additional parol term of three weeks salary per year of service. Ms McRae had made it clear this was what she wanted.
 
Mr Dillon had said nothing that would have led her to believe it would not be paid. Secondly, the respondent says that the representation that these terms were not included in the contract meant that any such arrangement was not contractual. I have found that this was not what Mr Dillon intended to mean, nor what Ms McRae understood it to mean ...’
The court concluded that the redundancy provision formed part of the employee's contract and ordered the company to pay her the amount she would have been entitled to, just over $106,000, in damages for breach of contract.
 
The Trade Practices Act claim did not need to be pursued as the the employment contract claim was successful.
 
 
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