Earlier this year, a Full Bench of the Federal Court handed down the decision in Westpac Banking Corporation v Wittenberg  FCAFC 33 (Wittenberg). That decision covered many topics relating to payments to employees upon the termination of their employment and included a relatively detailed history of implied terms of reasonable notice of termination in employment contracts. However, two post-Wittenberg cases came to very different conclusions and cloud, rather than clarify, the issue.
Implications for employers
This area of law appears to be developing and the opposing decisions of Kuczmarski and McGowan summarised below do not assist in clarifying the issue. What can be said with certainty is that where a contract of employment (or industrial award) specifically deals with the period of notice required for termination then that is the provision that should be applied. As such, express notice provisions should always be included in contracts of employment.
In cases where the contract of employment is silent and no industrial award applies, there are now two lines of authority. Ideally a superior court will examine the issue soon and provide greater clarity for employers and employees alike.
The implied term of reasonable notice has long been a feature of English and Australian law. Where employment contracts are silent on the period of notice an employer must give an employee before termination, an implied term of reasonable notice is traditionally read into the contract. However, over time this position has changed to some degree given the operation of certain instruments such as industrial awards. For example, there is a 2013 South Australian Supreme Court decision which is authority for the view that where an award covering an employee contains a notice period provision, no implied term of reasonable notice will be read into the contract.
Since Wittenberg there have been two cases that have dealt with whether an implied term of reasonable notice should be read into a contract in circumstances where the Fair Work Act (FW Act) applies. Section 117 of the FW Act provides for a minimum period of notice of termination, and so the issue arises as to whether this then displaces the traditional common law implied term of reasonable notice.
The South Australian District Court recently heard the matter of Kuczmarski v Ascot Administration Pty Ltd  SADC 65 (Kuczmarski),which picked up the concept of ‘necessity’ from Wittenberg. Clayton J held that this means that a term will only be implied into a contract where it is necessary to do so to prevent the enjoyment of rights conferred by the contract from being seriously undermined. Clayton J was persuaded by the employer’s argument that because section 117 of the FW Act prescribes a minimum period of notice for termination of employment, it is not necessary to also have an implied term of reasonable notice. Clayton J’s view was that the FW Act sets a minimum period that may be increased by agreement between the parties in any contract of employment. This is significant as it stands in opposition to a number of pre‑Wittenberg cases confirming implied terms of reasonable notice.
The Federal Circuit Court of Australia heard a similar matter in McGowan v Direct Mail and Marketing Pty Ltd  FCCA 2227 (McGowan). In this case, McNab J ultimately decided that there was no term of reasonable notice implied into the contract of employment due to the operation of a term in a previous iteration of the contract. However, McNab J did in closing discuss the interaction of section 117 of the FW Act and implied terms of reasonable notice.
McNab J directly referred to the decision in Kuczmarski, and noted that while the concept of necessity was important in Wittenberg, it was significant that that decision did not state that section 117 of the FW Act operated to remove the need to imply a term of reasonable notice where an employment contract is silent on the issue. McNab J held that the better view was that section 117 merely acted as part of the FW Act’s safety net, and it did not displace the common law right to reasonable notice. McNab J closed his argument by suggesting a hypothetical, where two people over the age of 45 working for the same company are terminated. In this hypothetical, one employee had worked for the company for 5 years in a mid-range role while the other was in a senior position with 25 years of service to the company. McNab J suggested that it was not Parliament’s intention that each of these two cases should be given the same 5 weeks’ notice of termination under the FW Act.
Kuczmarski v Ascot Administration Pty Ltd  SADC 65
McGowan v Direct Mail and Marketing Pty Ltd  FCCA 2227