Employment Contracts: Do all members of your management team have a current employment contract?
The Supreme Court recently held that 10 months salary constituted reasonable notice for a Financial Controller following her termination at the instigation of her former employer. By way of background, the employee received a letter of appointment in 1987 when she started with the company (so she had been employed for more than 24 years when she was terminated), she was 49 years of age and she was on a salary package of more than $700,000 per annum. See Susanna Ma v Expeditors International Pty Ltd; Susanna Ma v Expeditors Pty Limited  NSWSC 859 (30 June 2014) for more details.
If you have a senior employee who does not have an employment contract, or their employment contract is out of date, that is, it doesn’t specifically relate to the role they currently occupy – you run the risk of that employee being able to make a reasonable notice claim in circumstances where you decide to terminate their employment for any reason other than serious misconduct.
What is “reasonable” will ultimately be determined by a court but the factors a court will ordinarily take into consideration include:
- the likely difficultly of the employee finding replacement work on the same or similar salary,
- the employee’s age,
- the seniority of the employee’s position, and
- the duration the employee has been employed.
The older the employee, the longer they have been employed, and the less likely are to find similar replacement work – the better positioned they are to be able to assert an entitlement to more notice. As a starting point, notice rarely exceeds 12 months pay, so the judgement to be made in such circumstances is where the employee fits on a scale of 1 month to 12 months having regard to all relevant circumstances.
Note: where a senior employee has an up-to-date employment contract – the amount of notice to be given or paid is as per the express term of the employment contract.
For further advice on employment contracts please contact our experienced employment lawyer: