Implied terms for notice of termination of employment

The common law of Australia will no longer imply into contracts of employment which are otherwise silent on the point  a term to the effect that an employer must provide reasonable notice of termination of employment.

“Consideration – Breach of Contract – Implied Term as to Notice

At common law, where a contract of employment is, as here, silent on its termination and the necessary notice period, as a matter of law, a term is to be implied into that contract giving the right to terminate upon the giving of reasonable notice: Rankin v Marine Power International Pty Ltd [2001] VSC 150; Byrne v Australian Airlines Ltd (1995) 185 CLR 410.

The common law position set out above precedes the statutory safety net entitlement as to notice of termination and payment in lieu introduced by the FW Act. The National Employment Standard set out in section 117 of the FW Act prohibits a national system employer, such as PFP, from terminating an employee’s employment unless the employer has given written notice of the specified notice period. Relevantly, in all the circumstances of the Applicant, this would be a period of 5 weeks, as a minimum: see s.117(3) of the FW Act.

It is not in dispute that PFP paid Mr Carrabba three months’ pay in lieu of notice.

The effect of s.117 of the FW Act upon the implication of a period of notice into a contract otherwise silent on the point was dealt with by the District Court of South Australia in Kuczmarski v Ascot Administration Pty Ltd [2016] SADC 65; (2016) 259 IR 233 (“Kuczmarski”) at [53]-[68] per Judge Clayton where it was held that:

  1. a)where termination on notice is dealt with in a contract, award or Act it is not “necessary” to imply the term because the topic has been addressed. Section 117 of the FW Act prescribes a minimum period of notice. As such it is not “necessary” to imply an additional term as to notice into the employment contract because Parliament has already imposed an obligation on employers to give a period of notice. As such, there was no relevant “gap to fill”; and
  2. b)section 117 of the FW Act excludes or displaces the implied term, sets a minimum standard or safety net, and leaves the parties to contracts of employment free to agree expressly a greater period of notice should they wish to do so.

In Kuczmarski the District Court of South Australia followed the judgment of the Full Court of the Supreme Court of South Australia in Brennan v Kangaroo Island Council [2013] SASFC 151; (2013) 120 SASR 11 (“Brennan”). In Brennan it was said, at [34] per Vanstone, Anderson and Parker JJ, that:

  1. a)the implication of an obligation to give reasonable notice was not necessary to give business efficacy to an employee’s employment contract where the employee’s employment was covered by an award, because the existence of an award provision dealing with notice on termination of employment was effective without any need to imply an obligation into the employment contract to give reasonable notice, and was so notwithstanding that the award operated and had effect independently of the employment contract; and
  2. b)because of the award it could not be said that the implication of such a term would have been accepted by the contracting parties as a matter so obvious as to “go without saying”.

In Brennan v Kangaroo Island Council [2014] HCASL 153 (“Brennan – Special Leave”) the High Court refused special leave to appeal Brennan, observing at [5] per Bell and Gageler JJ that the analysis in Brennan was consistent with that of the High Court in Byrne. In Australian National Hotels v Jager (2000) 9 Tas R 153 (“Jager”) the Full Court of the Supreme Court of Tasmania held that the trial judge had been wrong to imply a term of notice into a contract where the State industrial relations law provided for minimum periods of notice on termination of an employment contract. Having regard to the judgments of the High Court in Byrne and Brennan – Special Leave, and of two Full Courts of State Supreme Courts in Brennan and Jager, and the District Court of South Australia in Kuczmarski, the Court will apply the latter three judgments which are plainly correctly decided (particularly in light of Brennan – Special Leave), and decline to follow this Court’s judgment in McGowan v Direct Mail and Marketing Pty Ltd [2016] FCCA 2227 which is, with respect, wrongly decided.

In the circumstances, Mr Carrabba’s contract is effective and has business efficacy without implying any additional period of what would otherwise be reasonable notice.

The alleged breach of contract claim brought by Mr Carrabba must therefore fail, and be dismissed.”

CARRABBA v PFP (AUST) PTY LTD & ANOR [2019] FCCA 2857 delivered 9 October 2019 per Lucev J