A recent judgment of the District Court of South Australia has held that a term providing for termination on reasonable notice should not be implied into an employment agreement because of the application of the statutory minimum period of notice required by the Fair Work Act 2009 (Cth) (FWA).
In Kuczmarski v Ascot Administration P/L1 (Kuczmarski), the plaintiff was made redundant following a period of employment from 2002 to 2015 with Ascot Administration and other companies in the Scott Group of Companies. The plaintiff received accrued entitlements for annual leave, long service leave and redundancy pay on termination of his employment. However, the plaintiff’s contract was silent on a period of notice for termination. As part of the National Employment Standards, section 117 of the FWA requires a ‘minimum period of notice’ for employees determined on the basis of his or her years of continued service. As such, the plaintiff was entitled to five weeks’ notice for more than 5 years of continuous service, which was paid by the employer in lieu of notice.
The term on reasonable notice
The plaintiff argued that a term for reasonable notice should be implied by law into the contract and that because of his senior position in the Scott Group of Companies as the National Group Human Resource Manager, a period of 12 to 18 months’ notice would have constituted reasonable notice.
Australian courts have held that terms should only be implied by law into employment contracts if 'by reference to the imputed intention of the parties … it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case'.2 The implication of a term is also subject to the express provisions of the contract and any applicable statutes3 and awards.4 In Kuczmarski, Auxiliary Judge Clayton held that because of the operation of section 117 of the FWA, it was not
necessary to imply a term for reasonable notice. There was ‘no gap that needs to be filled’.5 His Honour applied a recent judgment of the Full Court of the Supreme Court of South Australia, Brennan v Kangaroo Island Council, in which the Court held that the operation of an award requiring notice for termination meant that a term did not need to be implied.6 His Honour considered it ‘inconsequential’ that section 117 only provides for a ‘minimum’ period of notice, rather than a reasonable period of notice.7
The decision has been appealed to the Supreme Court of South Australia. Thirty superior court judgments prior to this decision implied a term requiring reasonable notice for contracts regulated by section 117(2) of the FWA or an equivalent predecessor.8 As such, this decision of the District Court of South Australia represents a considerable departure from the case law and so warrants consideration at an appellate level. If the decision is upheld it will have significant consequences for employment agreements covered by the FWA that do not specify periods of notice for termination, as it may be that only the statutory minimum period of notice will apply.
Regardless of the outcome, the decision serves as a reminder for employers to ensure that their employment agreements are sufficiently comprehensive to prevent a court from implying terms, which may increase employee entitlements on termination.