Notice Periods – What is reasonable

A recent Federal Court decision has emphasised the importance of having a notice period set out in the contract of employment.

A notice period in a contract of employment is the length of time an employer or employee must give before ending the employment relationship. It’s essentially the "warning time" before the final day of work, allowing both sides to prepare for the change.

So why is there a requirement for a notice period? When an employee is terminated and given notice it allows them time to look for another job, wrap up tasks, and hand over responsibilities. When an employee resigns it gives the employer time to find a replacement, reassign duties, or adjust workloads.

The National Employment Standards (NES) provide for minimum notice periods that an employer must give an employee when terminating the contract of employment. The awards now provide for minimum notice periods that an employee must give when terminating the contract of employment, e.g. by resigning.

However, it should be noted that these are minimum requirements. It is sometimes the case that the contract of employment will provide a notice period that is longer than the statutory minimal. This is particularly the case for more senior roles.

In a recent Federal Court matter there was not a written contract of employment. The Court has confirmed that they will imply a contractual term requiring reasonable notice of termination into employment contracts where necessary, and that in this case, notice of termination in excess of the minimum requirements under the National Employment Standards was appropriate. The conclusions in this case reinforce the need to ensure written employment contracts are issued and regularly reviewed to ensure they accurately define the nature of a person's engagement and contain clear provisions regarding notice of termination.

However, not all employment relationships require a notice period. No notice is needed if:

• The employee is dismissed for serious misconduct.

• The employee is a casual.

• The employment is for a fixed term that ends on the set date.

• The employment is for a specific task and the task has been completed.

In the case before the Federal Court it was found that the appropriate notice period was three months based upon the employee’s,

• period of service with the employer of approximately 14 years;

• his age and his tertiary qualifications; and

• his income at the time of the termination.

The employee was also entitled to damages for breach of contract the employer’s failure to provide reasonable notice of the termination of his employment.

Employers should check their contracts of employment and if you have any questions please contact Andrew.