Employment Law Update
Current Issue: Employment Contracts, including notice period

Seamus Burke
November 2014

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We have received a high number of queries recently in relation to drafting and interpretation of individual employment contracts. These are typically in the form of a letter of offer, a short-form contract or a comprehensive employee services agreement.

Essential matters that should be covered in an individual employment contract include:

  • the term of the employment;
  • the employee’s position, location of work, hours of work and reporting structure;
  • a probationary period (for new employees);
  • requirements as to how the employee is required to perform his/her duties, including a specific requirement not to act in conflict with his/her employer;
  • the remuneration being offered to the employee, including superannuation, bonuses (if any) etc.;
  • the employee’s leave entitlements (paid/unpaid);
  • confidentiality and intellectual property rights provisions;
  • confirmation that the employer’s policies and procedures are not binding as a matter of contract;
  • termination provisions (including the period of notice required that either party is required to give to terminate the employee’s employment, and the right of the employer to make a payment in lieu);
  • a suspension provision (with pay);
  • post-termination restraints (where applicable, which will usually be with key employees); and
  • general provisions (e.g. governing law clause, entire agreement clause etc.).

Where no period of notice (to terminate an employee’s employment) is included in a contract this can give rise to an implied term of ‘reasonable notice’. The implied term requires determination of what period would be reasonable in all of the circumstances to terminate an employee’s employment. Determining reasonable notice is not a precise science. Some of the factors taken into account include the following:

  • the age, qualifications and experience of the employee;
  • the seniority of the employee’s position;
  • the size of the employee’s salary;
  • the nature of the employee’s employment;
  • the employee’s length of continuous service;
  • how long it may take the employee to find new employment; and
  • had the employment not ended, the period of time the employee would have likely continued in the job?

Depending upon the facts and circumstances, reasonable notice can be up to 12 months (and beyond in limited circumstances).

It is often the case that the employment contracts of long term employees were signed many years ago and don’t reflect the current role, salary, seniority etc. held by the employee. This can mean that the contract is no longer applicable to the employee, which in turn means that there is no agreed period of notice (to terminate the employee’s employment) and a term of ‘reasonable notice’ can be implied. This can substantially increase the period of notice (and cost) which an employer is required to give to end the employee’s employment.

If you would like your employment contracts reviewed, please contact Seamus Burke.

For further information, please contact:

Seamus Burke | Partner
P: +61 2 4926 1733

This document contains information only and should not be relied upon by anyone as constituting legal advice