29/10/2014

Terminating an employee is never easy, particularly if they have been with your business for a long time. It can become even more complex when trying to determine how much notice you should give them when there is nothing in writing. So when you are ready to give someone their marching orders, how do you figure out the appropriate time period?

This issue recently appeared in a NSW Supreme Court case. Ms Ma, a very senior employee of a global logistics company, was terminated following a disagreement over pay conditions. Her employment contract did not contain any details about a minimum notice period and, as a result, the Company decided to give her five weeks' notice.

In this case, Ms Ma had been with the company for more than 24 years. She received a substantial salary, reported directly to the managing director, and supervised a number of workers. Her quality of work was shown to be trusted and appreciated by her employer.

Taking her matter to Court, Ms Ma argued that the company failed to provide her with reasonable notice, a term implied in her employment contract. In contrast to the five weeks given by the company, Ms Ma stated a reasonable notice period for someone in her position was instead 12 months – a considerable financial difference for both parties.

The Court shared Ms Ma's view. It found that where the facts are silent as to what notice period was agreed between an employer and employee, a reasonable notice period should be implied. What is reasonable notice will depend on a number of factors including salary, length of service, and the difficulty for the employee to obtain a similar position elsewhere. The Court will also look at how current the employment contract is and whether it is still reflective of the employee's position in the business.   

After considering these factors, the court determined the notice period was not long enough in the circumstances, particularly because it was going to be extremely difficult for a person in Ms Ma's position to find a similar position on such short notice. All these factors assisted the court in ultimately finding that Ms Ma should be given a 10-month notice period – a sizeable increase from what the employer initially provided!

So what should you do as an employer to ensure you don't have to give lengthy (and costly) notice to a worker like Ms Ma?
 
1.    Make sure your employment contracts contain terms regarding notice periods. Failure to include them could see your worker hanging around a lot longer!

2.    Schedule regular reviews of employment contracts to ensure they contain a suitable notice period for each particular employee.

3.    If an employee receives a promotion or their role changes, update their employment contract including, if you choose, to increase the notice period.

For further information regarding this article, please call Townsends Business & Corporate Lawyers on (02) 8296 6222.