25 August 2016
Reasonable notice for termination of employment
Do I still get reasonable notice?
That is a very good question, and until very recently we would have said, Yes!
For those without an agreed period of notice for termination of their employment, the implied term of reasonable notice was a comforting backup. But there are now a few straws in the wind telling us that reasonable notice may be no more.
What is reasonable notice?
How would you know when your employment would end if there were no agreement about the period of notice to be given?
The courts have an answer for that problem: the period of notice will be implied by the court, and that period will be reasonable notice. The term of reasonable notice is implied into the contract of employment as a matter of law. The courts do so because the term is necessary to make the contract operate. If the courts did not imply that term of reasonable notice, then there would be no clear way to terminate employment.
So reasonable notice is what you get if there is no agreement about notice.
The length of that reasonable notice is subject to many factors, but in general, the longer the service and the higher the seniority, the greater the period of the reasonable notice, often as much as 12 months or even more.
Does the Fair Work Act make a difference?
It may be that the notice provisions of the Fair Work Act 2009 mean that it is no longer necessary for the courts to imply a term of reasonable notice. If the Fair Work Act deals with notice is there a need for the courts to imply reasonable notice?
Section 117(1) of the Fair Work Act provides that employment is not to be terminated without the employer giving written notice of the day of the termination.
Section 117(2) requires that the time between giving the notice and the day of the termination is to be at least the period set out in subsection 117(3), being the minimum period of notice being one to five weeks depending on age and length of service.
These provisions are based on international conventions and extend not only to all the employees within the Federal system, but also most state public sector employees other than those at the core of the State governments.
Has the Fair Work Act displaced reasonable notice?
This is an important question for those many employees with no agreement about notice. Access to reasonable notice of perhaps 12 months is a valuable entitlement compared to the statutory minimum of a maximum of five weeks notice of dismissal.
So why is the idea of reasonable notice under a cloud?
There are now at least two decisions where the courts have concluded that there is no need to imply a term of reasonable notice because the Fair Work Act now provides the notice to be given.
Back in February 2015, Mr Elwin, from Western Australia, added a claim for six months reasonable notice to his adverse action claim. He did quite well with his adverse action claim but not so well with his claim for reasonable notice. Not only did he not get the one month’s notice the judge would have ordered if there was an implied term, he ended up with just two weeks pay in lieu of notice as provided under the Fair Work Act. In light of the Fair Work Act there was no necessity to imply a term of reasonable notice.
And on 1 July 2016, Mr Kuczmarski, from South Australia, lost his claim to six months reasonable notice and had to make do with the five weeks provided by the Fair Work Act. In a detailed decision that covered a number of important authorities, the District Court of South Australia considered it was not necessary to imply a period of notice given that “Parliament has already imposed [an] obligation” under the Fair Work Act.
For some, the decisions establish an attractive principle because, at a stroke, there will now be no more claims of reasonable notice. For others, the result cuts across decades of belief that the case-law was to the contrary. Whilst the decisions relate to the Fair Work Act as in force since 1 January 2010, the earlier history of statutory and award minimum periods of notice had not produced any decisions negating reasonable notice.
Whether the decisions are right or wrong, they stand. Employers will feel no obligation to allow for reasonable notice, and employees are now unlikely to pursue claims for reasonable notice. There will be pressure from employees to reach agreement on long periods of notice, and in writing.
But is the picture yet clear?
The logic of the decisions is that if the Fair Work Act were repealed or amended then the implied term of reasonable notice would return to all those employment relationships from which it has just disappeared.
And perhaps there are other implications. The Fair Work Act sets a minimum rate of pay. Does that mean that claims based on reasonable remuneration, or quantum meruit, are to be recalculated at the current Fair Work Act minimum rate of pay of $17.70 an hour?
Is this what Parliament intended? Probably not. Perhaps somebody will argue The Vibe and say that losing the entitlement to reasonable notice by Act of the Commonwealth Parliament is an acquisition of property not on just terms, and is therefore in breach of s51(xxxi) of the Constitution – The Castle – Part 2?
All this confusion is overall good for employers and overall bad for employees. Even if you believe the recent decisions are wrong in principle, the practical prospects of now pursuing a claim for reasonable notice are, to borrow from Monty Python’s Dead Parrot sketch - Bereft of life.
Author: Mark Paul
 Elwin v Edwards Motors Pty Ltd & Ors  FCCA 334.
 Kuczmarski v Ascot Administration P/L  SADC 65.