Australia: The Fair Work Act Does Not Deny Implication of a Term of Reasonable Notice: Federal Court of Australia

A Federal Court Judge has stated that the provision of a minimum period of notice under section 117 of the Fair Work Act 2009 (Cth) does not proscribe the implication of a term of reasonable notice into a contract of employment, responding to recent decisions to the contrary.

In Heldberg v Rand Transport (1986) Pty Ltd [2018] FCA 1141, Justice White criticised the recent line of developing South Australian authorities, which suggest that the statutory prescription of a minimum period of notice has rendered otiose the need to imply an implied term of reasonable notice into a contract of employment.

Section 117 of the Fair Work Act provides that an employer must not dismiss an employee from their employment, unless the employer has given the employee their minimum period of notice, which is to be calculated based on the employee’s length of service with the employer. Relevantly, the maximum period of notice an employee is entitled under the Fair Work Act is 5 weeks’ notice.

South Australian Courts have placed doubt over where an implied term of reasonable notice could coexist with the statutory prescription for a minimum notice period, initially in Brennan v Kangaroo Island Council (2013) SASR 11, and, more recently, in Kuczmarski v Ascot Administration P/L [2016] SADC 65.

• In Brennan v Kangaroo Island Council, the Supreme Court of South Australia held that a Deputy Chief Executive Officer, who had been given notice in accordance with the South Australian Municipal Salaried Officers Award, could not rely on an implied term of reasonable notice in circumstances where her contract of employment did not include an express term of reasonable notice.
• In Kuczmarski v Ascot Administration P/L, the District Court of South Australia applied the reasoning of the Supreme Court of South Australia, in Brennan v Kangaroo Island Council, and held that, due the statutory prescription of a minimum period of notice under section 117 of the Fair Work Act, there was no basis for the Court to imply a term of reasonable notice into the plaintiff’s contract of employment as there was “no … gap to fill”.

These South Australian cases are significant, because the implication of a term of reasonable notice may entitle some employees to substantial periods of notice of up to 12 or 18 months’ notice in certain circumstances, an amount much greater than that prescribed under an applicable Modern Award or the Fair Work Act.

Although Justice White was not required to imply a term of reasonable notice in Heldberg v Rand Transport (1986) Pty Ltd, his Honour weighed in on these South Australian decisions and held that those judgments had not had regard to, or failed to sufficiently take into account, the following considerations:

• that section 117 of the Fair Work Act had been intended to provide a minimum period only, and not to displace a right to reasonable notice;
• that the implied term of reasonable notice confers a right to terminate a contract of employment, subject to the provision of notice, whereas section 117 prohibits the right to terminate a person’s employment, unless the minimum stipulated notice is given;
• that there is a presumption against construing a statutory provision in a way that modifies or abolishes a common law right, unless there is a clear intention to do so;
• that section 117 of the Fair Work Act does not, on its face, preclude a term requiring a greater period of notice to be given;
• that Modern Awards and Enterprise Agreements are drafted with circumstances of particular industries and employments in mind, whereas section 117 applies generally to all employees covered under the Fair Work Act. As such, excluding the implication of a term of reasonable notice could result in an inappropriate outcome in which employees in significantly different circumstances are given the same minimum period of notice upon termination of their employment.

Because his Honour’s analysis on the implication of a term of reasonable notice was not essential to the Court’s decision, the observations of Justice White do not bind lower courts on this issue. Notwithstanding, these observations are highly persuasive and support the proposition that an implied term of reasonable notice may still be alive in Australian employment law.