A. MINIMUM ENTITLEMENTS TO NOTICE UPON TERMINATION OF EMPLOYMENT
1. Minimum entitlements under legislation
When terminating a worker’s employment, it is important to ensure that an employee is given proper notice according to law (or paid an equivalent amount in lieu of notice) and has received payment of their accrued entitlements. This involves consideration of both an employee’s written contract and minimum legislative entitlements.
There is a minimum entitlement to notice under the Workplace Relations Act and state legislation which operates where a written contract is silent on the issue of notice or provides for less than the minimum required by legislation. The only exception to this requirement is if an employee has been sacked for gross misconduct and there is no challenge to the validity of the sacking. If an employee accepts that their termination is due to their gross misconduct, they will not be entitled to payment for notice although they will be entitled to payment for any annual leave or other entitlements owed.
The minimum entitlements to notice under both federal and state legislation are:
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Period of employee's service
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Required period of notice
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Not more than 1 year
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At least 1 week
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More than 1 year but not more than 3 years
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At least 2 weeks
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More than 3 years but not more than 5 years
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At least 3 weeks
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More than 5 years
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At least 4 weeks
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An employee who is over 45 years of age and has worked for the same employer for at least two years is entitled to an extra weeks notice.
It is important to note that these are minimum entitlements only and an employee may be entitled to a greater period of notice according to any applicable award and the circumstances of the case.
2. Giving notice or making payment in lieu of notice
An employer may require a terminated employee to serve out the notice period or may choose to terminate the employment with immediate effect (or within the next few days) and pay an amount in lieu of notice. It is necessary for the employer to weigh up the advantages and disadvantages of having a terminated employee remain on the work premises. If there is an amicable parting of the ways, then there may be no difficulty. However, disgruntled sacked employees have been known to tamper with records, computer systems and the like and productivity is often reduced in the notice period. This is something the employer will have to address on a case by case basis.
It is common for written contracts to enable either party to terminate the contract on the provision of notice. Often the contract provision merely reflects the statutory minimum requirements for notice. It is also common for contracts to contain periods of say a fortnight or a month for notice. It is important to note that if a contract provides for a period of notice which is less than the statutory requirement, it is still necessary to comply with the statutory requirements for notice.
If an employee resigns their employment, the employer should check that they have provided the appropriate notice. If they have not, the employer may be within their rights to withhold a sum of money equivalent to the amount of notice not given, eg from any annual leave due and payable to the employee.
3. Payment of other accrued entitlements
In addition to any notice, the employee is also entitled to payment for any outstanding annual leave entitlements and, in the case of long serving employees, long service leave entitlements. If an employee has worked for the one employer for more than seven years but less than 10 years, they may be entitled to payment for pro-rata long service leave in certain circumstances. Link to Minimum Terms and Conditions
4. Redundancy
What happens if an employer wants to make a particular job redundant? A position is said to become redundant where the employer decides that it does not wish a particular role to be performed anymore, or proposes to redistribute the duties of the job amongst other employees. The important thing about redundancy is that it relates to the position itself rather than the person holding the position. As a general rule, an employer should consult with the employee/s about the proposed redundancy and endeavour to re-employ the employee elsewhere in the organisation before terminating their employment.
You should firstly check for any award requirements affecting redundancy. Some awards require notification of employees and consultation with employees and unions prior to any redundancy occurring. This is particularly relevant for employers who are covered by state industrial law. At a federal level, the requirement to consult has been removed from many awards as part of the process of award modernisation which has been occurring in recent years. It remains to be seen whether the Rudd Labor government will reinstate a similar requirement.
There is no statutory requirement for additional amounts to be paid to employees whose positions are made redundant above and beyond the statutory minimum notice mentioned above. However, awards and collective agreements will often contain a requirement for an additional payment (often called a “severance” payment) and this may also be a requirement in the employment contract itself or the policies of the employer. So it is wise to check any award, the employment contract itself and company policies before making any position/s redundant. If the employment contract is silent about notice, it may be necessary to obtain advice about what is an appropriate amount of notice of termination of employment in the circumstances.
It is worth keeping in mind that employees can make a complaint to government authorities if they feel that they have not been paid their appropriate entitlements. Employees can make a complaint to the federal Workplace Ombudsman – www.wo.gov.au, a federal government authority established to provide a free service to assist employees obtain their proper entitlements, or the equivalent authority in each state. In Queensland, this is the Workplace Rights Ombudsman – www.wro.qld.gov.au and the Department of Industrial Relations – www.wageline.qld.gov.au.
B. WHAT LEGAL ACTION CAN A TERMINATED EMPLOYEE TAKE?
There are several possible forms of legal action open to a dismissed employee. The main types of action generally available on termination of employment are:
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Unfair dismissal claim in the Australian Industrial Relations Commission or state industrial relations commission;
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Unlawful dismissal claim in the Australian Industrial Relations Commission/Federal Court/Federal Magistrates Court or state industrial relations commission;
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Discrimination claim under state anti-discrimination legislation or federal human rights and equal opportunity legislation;
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Civil claim for breach of contract in the sate common law courts;
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Civil claim for breach of the Trade Practices Act 1974 in the state common law and federal courts.
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1. Unfair dismissal claim in the Australian Industrial Relations Commission
As a general rule, the quickest, cheapest and most practical way for an employee to make a claim of unfair dismissal is to lodge an application for reinstatement/compensation in the industrial relations commission with coverage of the employment. For those employers covered by federal law, this is the Australian Industrial Relations Commission. For those employers not covered by federal law, this will be the relevant state industrial relations commission.
In recent years, technical requirements have become more important, particularly in the federal jurisdiction. Before there is any consideration of whether a dismissal was unfair or not, an employer should obtain advice about whether any preliminary technical objections should be made to an application.
a. Time limit for lodging application
The first technical requirement is that an application for reinstatement/compensation must be lodged with the registry of the industrial relations commission by no later than 21 days after the date of termination of employment. There are very strict rules about extensions of time and extensions will not normally be granted. If you receive an unfair dismissal application which has been filed out of time, this would normally be a trigger for an objection which can be heard by the commission as a preliminary matter, either in an oral hearing or by consideration of written submissions.
b. Is the unfair dismissal claim excluded?
The next thing to check is whether an unfair dismissal claim might be specifically excluded by legislation. This does not mean that the registry of the industrial relations commission will not accept the application. What it does mean is that a respondent employer can object to the application and seek its dismissal at an early stage. If an application is filed with the Australian Industrial Relations Commission which involves one of these restrictions, the employer would normally file a document objecting to the jurisdiction of the Commission and the issue may need to be the subject of a preliminary hearing (either in person or by written submissions) before proceeding further.
The major grounds of exclusion are set out below.
i. Probation
The dismissal provisions of the federal and state legislation do not apply to employees during their first three (3) months of employment which is deemed to be a probationary period (subject to the proviso that an employee can at no time be dismissed for an invalid reason under the Act). An employee may serve a longer or shorter period of probation if there is agreement between the parties BEFORE the employment starts. An employer cannot unilaterally extend the period of probation during or after the probation period and cannot reintroduce a further probationary period later in the employment.
It is not necessary for an employer to give reasons for termination if the employment is ended during the probation period. However, an employee terminated during a probationary period can still take action for unlawful dismissal if they can show the employer terminated the employment for unlawful reasons. This exclusion exists under federal and state industrial law.
CASE EXAMPLE
PROBATION – EMPLOYERS ONLY GET ONE BITE OF THE CHERRY
Alison James and Gallang Place Aboriginal and Torres Strait Islanders Corporation, Queensland Industrial Relations Commission, Commissioner Thompson, Brisbane, 25 March 2003
It is common for issues with employees to only become apparent after the probationary period has finished. However, no matter how frustrating an employee’s actions might become, it is not a solution to invoke a second period of probation and then terminate the employment at the end of that period. The applicant had been employed as a counsellor on a full time basis by the employer, a provider of counselling services to the indigenous community, from 1 February 1999 to 11 January 2002. Her position had become permanent upon completing a 3 month probationary period. The employer contended that over a period of time, the employee had been involved in a range of inappropriate actions including breaches of confidentiality, improper mileage claims and intimidatory behaviour. The employer’s Board decided to confront these issues in November 2001 and the applicant was placed on a 3 month probationary period. The applicant was not provided with any reasons for her dismissal at the end of that period.
The Commission accepted on the evidence that the intention in putting the applicant on a second period of probation was to enable her dismissal without reason and was not a period of notice or review of her conduct, particularly given the applicant was absent on sick and annual leave for a majority of the 3 month period. The Industrial Relations Act 1999 (Qld) provides for a probationary period for employees for the first 3 months of their employment (s.72) and the Commission held that it was not within the employer’s power to place the applicant on a second period of probation.
Having decided the applicant’s termination was unjust, the Commission went on to consider the issue of remedy. The applicant had suffered only limited financial loss as she was without work for only a short time. However, the Commission took into account the hurt, humiliation and distress suffered by the applicant, particularly with regard to her professional reputation within the indigenous community and awarded the applicant $9000.00. The decision is important in reinforcing that there is no easy or inexpensive way for employers to rid themselves of “problem” employees and also in confirming that compensation is not necessarily limited to loss of wages.
ii. Qualifying period
Under the Workplace Relations Act, there is a further restriction which excludes employees bringing an unfair dismissal complaint to the Australian Industrial Relations Commission where the employee has not worked for the employer for more than 6 months. This is known as the “qualifying period”. This exclusion does not exist in most of the state industrial relations commissions.
iii. Does your business/organisation have 100 employees or less?
Employers with 100 or less employees are also protected from unfair dismissal actions in the Australian Industrial Relations Commission. The date for performing this calculation is the date of dismissal, not the date of filing the application or date of hearing. Part time and casual employees are also included in the head count. This exclusion does not exist in most of the state industrial relations commissions.
iv. Other exclusions
Other classes of persons excluded from taking unfair dismissal include:
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Short term casual employees (with less than a years service);
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Employees engaged for a specific period or task;
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Employees earning wages of more than $101,300.00 (this amount is subject to change from time to time) and whose employment is not subject to an award or existing collective agreement;
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Employees dismissed for genuine operational reasons; and
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Casuals and trainees employed under a traineeship agreement.
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c. Was the dismissal “harsh, unjust or unreasonable”?
A dismissal will be unfair even if it is not for an invalid reason where it can be shown to be “harsh, unjust or unreasonable”. There is a lot of case law about the meaning of these words but essentially a common sense approach is adopted so that employers are required to give employees “a fair go”.
The Commission will consider both whether the dismissal was procedurally fair and substantively fair. From a procedural point of view, it is relevant whether the employee has been given procedural fairness, i.e. whether allegations were put to an employee in sufficient detail, whether the employee was allowed to respond appropriately and whether the response was taken into account before a decision was made about termination. Apart from considering whether a dismissal was procedurally fair, the Commission will consider whether the dismissal was substantively fair, i.e. procedural fairness might have been given to the employee but the decision to terminate was itself unfair or not called for in the circumstances or some lesser penalty than termination would have been more appropriate.
d. What remedies can the Commission give?
The Commission must order reinstatement unless it is impracticable (in practice, reinstatement is rarely granted) and/or compensation up to a limit of six (6) months wages. This power is the same at both federal and state levels. The dismissed employee has a duty to mitigate their loss, i.e. they have to try and find other employment and not just sit back and wait for the unfair dismissal hearing. The Commission may reduce the amount awarded to the employee if it feels that the employee hasn’t made an effort to find other work.
CASE EXAMPLE
HOW TO CALCULATE COMPENSATION FOR UNFAIR DISMISSAL
Diana Gabriela Arndt AND Crown Business Solutions Pty Limited, Australian Industrial Relations Commission, Deputy President Ives, Melbourne, 22 July 2003
This case provides a good illustration of the process for calculation of compensation in the industrial relations commissions. The Commission found the employer had imposed quite unreasonable demands on the applicant to complete a database and termination based on failure to meet these demands was not a valid reason for termination. The Commissioner also found that the employer had not warned the applicant about her unsatisfactory performance or provided an opportunity to respond prior to the termination. The Commissioner considered that reinstatement would not be appropriate and turned to the issue of compensation. He adopted the following process:
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Assess the applicant’s loss by considering:
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the length of time the applicant would have been likely to remain in the employment had she not been terminated; and
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what income the applicant would have received in that time.
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Determine the applicant’s actual earnings since termination.
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Consider whether the applicant has made reasonable efforts to mitigate their loss.
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Discount any amount to take account of unknown contingencies such as sickness and accident.
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Here, the Commissioner considered the applicant would have only continued working with the employer for a further 4 months because of the extremely demanding nature of the job, the lack of assistance from the employer and the unlikelihood of the applicant moving to another similar position in the company. The second matter is a factual one. In deciding whether reasonable efforts to mitigate loss had been taken, the Commissioner considered the number of job applications submitted and Centrelink’s involvement in seeking work on the applicant’s behalf. Finally, the Commissioner decided that no discount should be made as the likely period of employment had already passed. The Commissioner ordered payment of a gross sum subject to taxation within a period of 3 months.
Whilst the Commission can order reinstatement and compensation, it does not automatically order that a losing party pay the legal costs of the other party. The general rule is that each party bears their own costs. The Commission does have a discretion to award legal costs if a claim is frivolous or vexatious or either party has acted in an unreasonable manner during the conduct of the claim. In practice, costs are only rarely awarded and it will be necessary for the dismissed employee to pay for legal costs out of any amount awarded by the Commission for compensation (unless they are represented by a union). This can often be a disincentive to engaging lawyers for the trial process.
e. What is the process?
i. File application for reinstatement/compensation
There is a time limit of 21 days for the former employee to lodge an application with the industrial relations commission after the date of dismissal. There is a small filing fee payable on the application. The application must generally set out the grounds and facts relied on for the application. Once the application has been filed, a copy must be sent to the employer as soon as possible.
ii. Conciliation conference
After filing and service of the application, (assuming that no application is made by the employer to dismiss the employee’s claim because of one of the exclusions) the Commission will usually convene a conciliation conference of the parties which is held at the Commission’s offices. This is usually held within two to three weeks of the application being filed. It is common for the employer to receive advice of the date of the conference at the same time as receiving a copy of the application itself.
The conciliation conference is a round table conference where the parties are able to speak about their claim (and in the case of the employer, their defence) and an Industrial Commissioner attempts to help the parties reach a resolution without the matter progressing further. The conference proceedings are confidential and what is said in the conference cannot generally be raised at a later date. The Commissioner who conducts the conciliation conference is not the same Commissioner that hears the matter if it proceeds to hearing. After opening statements by the parties, the Commissioner will normally speak with each of the parties privately and seek to negotiate a resolution, whether that be in the form of a monetary payment, provision of a statement of service, reinstatement or some other form of resolution. If the matter is resolved at the conference, then a deed of settlement is usually prepared by one of the parties or by the Commission recording the terms of settlement. If given an opportunity, it is preferable for the employer to have control of the agreement preparation process.
Deeds usually contain provisions for payment by the employer to the former employee in exchange for the withdrawal of the employee’s claim, the provision of a statement of service, confidentiality and a binding promise to make no further claims.
If the matter cannot be resolved at the conference, the commissioner must issue a certificate expressing views about the case and the former employee can proceed to the next stage of the process.
iii. Intermediate steps to prepare for hearing
If the matter has not been resolved at the conciliation conference and the Commissioner has issued a certificate, the former employee must file a formal document electing to proceed with their claim. Once the notice of election is filed, the Commission will normally call a directions hearing to prepare the matter for hearing. At this directions hearing, the Commission will generally ask the parties for their estimates of the number of witnesses and the length of hearing. Based on these estimates, the Commission will set the claim down for dates of hearing and make directions about dates for disclosure of relevant documents by the parties and the exchange of witness statements prior to the hearing.
Primary evidence (also called evidence in chief) is given by written witness statement with oral cross examination of any witnesses required for cross examination. A great deal of care should be taken with the preparation of witness statements (including the employee’s own witness statement). Notice must be given to the other side if any of their witnesses are required for cross examination. It is important to remember that there is no property in witnesses and it is quite acceptable for the former employer’s representatives to seek to speak with any persons who have filed witness statements in support of your case, just as it may be appropriate for you or your representatives to seek to speak with witnesses of the employer. However, harassment of witnesses or seeking to persuade them not to give evidence is not acceptable behaviour.
iv. Hearing and decision
In determining whether a dismissal was harsh, unjust or unreasonable, the industrial commissioner hearing the case (under federal workplace relations law) must consider:
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Whether there was a valid reason for the termination related to the employee’s capacity or conduct;
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Whether the employee was notified of the reason for termination and given any opportunities to respond to any reason relating to their capacity or conduct;
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Whether the employee has received any warnings about unsatisfactory performance before termination occurred;
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The degree to which the size of the employer’s business and/or the absence of a dedicated human resources management specialist would be likely to impact upon the procedures for terminating employment; and
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Any other matters the Commission considers relevant.
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Unfair dismissal claims are heard by a single member of the respective industrial relations commissions. After presentation of the primary evidence and any cross examination, each party is able to provide a closing statement to the commissioner hearing the matter and the commissioner will generally then reserve their decision. It is rare for a commissioner to provide a decision immediately after the conclusion of the hearing. It is more normal to have to wait a month or more for the commissioner to consider the evidence and write their decision. The decision is usually released to the parties without their having to appear again. There is the possibility of appeal from a decision of a commissioner but appeals can only be on questions of law and not generally on matters of fact or the credibility of witnesses.
2. Unlawful dismissal claims in the industrial relations commission/federal courts
a. What is unlawful dismissal?
It is a breach of federal and state industrial legislation for employment to be terminated on what are called “unlawful” grounds. Whether an employee is on probation or not, are full-time, part-time or casual, it is not a valid reason to terminate employment on one of these grounds. However, the unlawful dismissal provisions do not apply to employees earning over the income threshold and whose employment is not subject to award coverage. The major grounds covered by federal and state law are:
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Temporary absence from work because of illness or injury (commonly meaning periods of less than three (3) months in any one year);
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Trade union membership or participation in trade union activities outside working hours or, with the employer’s consent, during working hours;
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Non-membership of a trade union;
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Seeking office as, or acting or having acted in the capacity of, a representative of an employee;
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Filing a complaint or taking part in proceedings against an employer for alleged violation of laws or regulations or recourse to competent administrative authorities;
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Refusing to negotiate in connection with or make, sign, extend, vary or terminate an AWA or collective agreement;
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The employee or their spouse being pregnant or adopting a child, or applying for or being absent on parental leave; or
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Any of the grounds contained in federal or state anti-discrimination laws, e.g. race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
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b. Legal process
A claim of unlawful dismissal in the industrial relations commission can be made in conjunction with a claim of unfair dismissal. In most state industrial relations commissions, including the Queensland Industrial Relations Commission, the Commission can deal with claims of unlawful dismissal through to hearing. The process for hearing these claims is very much the same as the process for unfair dismissal claims. Much of the time, a claim of unlawful dismissal will also include a claim of unfair dismissal.
However, a different process applies at a federal level.
For those claims covered by federal workplace relations law which include a claim of unlawful dismissal, the Australian Industrial Relations Commission can only deal with the application as far as the conciliation conference. If the conciliation conference is not successful in resolving the claim, the claimant must elect whether to continue with the claim or not. If so, then rather than continuing in the Australian Industrial Relations Commission, fresh proceedings must be commenced in either the Federal Court of Australia or, more commonly, the Federal Magistrates Court. There are time limits on the commencement of these proceedings.
Proceedings in the Federal Magistrates Court are, generally speaking, more formal than in the Australian Industrial Relations Commission but the Federal Magistrates Court does try to deal with matters as informally and as quickly as possible. After filing and serving the initiating documents, the court will convene a directions hearing to prepare the case for hearing and will generally set the matter down for hearing once these steps have been completed.
The onus of proving that the termination did not rely on an unlawful ground is on the employer at the hearing.
In addition to the possibility of reinstatement and compensation, the court can also impose a penalty on the former employer for breaching the legislation. At the moment, the maximum penalty that can be imposed at a federal level is $10,000.00. Similar penalties can be imposed by the state industrial relations commissions. As with unfair dismissals, the court cannot award any amount for pain and suffering caused by the manner of the dismissal.
As with the industrial relations commissions, the general rule is that each party bears their own costs. Accordingly, it is necessary to consider the costs and benefits of engaging lawyers as part of this process.
3. Discrimination claims
For information relating to discrimination claims, click here.
4. Civil claim for breach of contract (“wrongful dismissal”)
If an employee is unable to take one of the forms of legal action listed above arising from termination of employment, they may be able to consider a legal action in the common law courts claiming a breach of the employment contract by the employer.
a. Legal grounds for action
i. Breach of a specific term of the contract
The most common claim made is for breach of the obligation in a contract to give reasonable notice. As an employer, if you are terminating a worker’s employment, you should check to see whether the employment contract contains a provision about the amount of notice required to be given. If there is no provision in the contract, then a term will be implied that the employer can only terminate on reasonable notice. This is a separate requirement to the minimum entitlements under legislation.
If the contract is for a fixed term, then the employee may be able to claim payment for the rest of the term of the contract if it is terminated early. This may depend on whether the contract provides for termination on any lesser period of notice.
What is reasonable notice will depend on a number of factors and will vary from case. Relevant factors include:
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Seniority of the position;
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Amount of remuneration;
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Educational qualifications;
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How easy it is to find employment of a similar nature and level;
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Age and financial commitments;
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Mobility – i.e., how easy it is for the employee to locate another centre in order to find employment
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The extent to which the employee’s conduct was responsible for the dismissal.
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There is a duty on the employee to mitigate their damage. This means that they have to take reasonable steps to find other employment of a similar nature. Any income earned by the employee will be taken into account in assessing monetary damages.
Whilst the former employee’s conduct may be relevant to an assessment of how much notice is reasonable in the circumstances, the same does not apply to the employer. This means that even if the termination has occurred in questionable circumstances, it is unlikely to result in a greater monetary award in the former employee’s favour. To put it another way, the employer’s conduct is not strictly relevant to the calculation of reasonable notice.
The amount of notice will vary depending on the facts of each particular case. At its highest, it may be more than a year.
ii. Breach of the implied terms of the contract
This is an area of the law that is receiving increasing attention because of the greater difficulty in making claims to the industrial relations commissions. Of most relevance is the duty of mutual trust and confidence between the employer and employee (otherwise called a duty of fidelity or good faith). This may cover situations where an employer acts unfairly or maliciously in terminating employment. There is relatively little case law about this area of implied terms although it has been the subject of a lot of legal debate.
The common law courts do not have the power to order reinstatement. Monetary damages are the normal remedy. In some circumstances, an application could be made to the court for an injunction to stop an employer from terminating the employment of its worker. However, this type of claim is rare.
The general purpose of a damages award is to place the dismissed employee in the same position as if the contract had been properly observed. A dismissed employee is generally able to sue for loss of wages and other remuneration which would have been earned but for the dismissal. This may include the loss of superannuation entitlements, employer benefits such as motor vehicle and telephone and bonuses. As with the statutory actions for unfair dismissal and unlawful dismissal, the courts do not award damages for distress and humiliation.
b. Legal process
Common law claims are most commonly conducted in the common law courts of the relevant state. In Queensland, this means the Supreme Court (which will hear matters where the amount claimed is more than $250,000), the District Court (where the amount claimed is between $50,000 and $250,000) or the Magistrates Court (for claims less than $50,000).
Claims are commenced by filing a claim and statement of claim in the relevant court and paying the applicable filing fee. A copy of those documents then must be served on the employer, who has a set time (normally 28 days) in which to file a defence to the claim. Depending on the circumstances, it may be necessary for a document replying to any issues raised in the defence to be filed.
Each of the parties is required to provide a copy of any relevant documents to the other party. Alternatively, a list of the documents can be provided and the other party can inspect the documents and obtain a copy of any relevant ones or just ask for a copy of any particular documents they want. It is generally a good idea to obtain a complete copy of any documents disclosed by the employee. Any other steps to prepare the matter for hearing, such as obtaining witness statements and obtaining the disclosure of relevant documents from third parties should be undertaken at this stage.
A compulsory conference must be held with a court registrar before the matter can be set down for hearing. Court hearings in the common law courts follow the normal civil format. i.e.,
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The plaintiff gets to present their case first which may involve an opening statement, the call of witnesses to give evidence and their cross examination by the other party;
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The defendants then call their witnesses subject to cross examination;
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Closing addresses to the court by the parties;
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Final decision by the magistrate or judge, normally after considering their reasons for some time.
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The normal civil rules in relation to costs apply which means that the losing party is generally responsible for the winning party’s costs, assessed on the applicable court scale. The general rule of thumb is that the winning party can recover half to two-thirds their actual legal costs from the losing party.
Claims in the common law courts can commonly take 12 – 18 months and longer to finalise.
There is a simplified process which exists in the Magistrates Court of Queensland for claims falling within its jurisdiction (i.e. claims for less than $50,000). Under this process, the first step after the filing of a claim document is a conference in the Queensland Industrial Relations Commission with an industrial commissioner. If this conference is not successful in resolving the claim, the defendant must then file a defence to the claim. A simplified process exists to take the matter to hearing and no costs are generally ordered against a losing party.
Advice should be obtained before commencing common law proceedings as these claims can be complex, time consuming and expensive.
5. Civil claim for breach of the Trade Practices Act 1974
a. Legal grounds for action
A terminated employee may also be able to bring legal action against their former employer for breach of trade practices legislation or equivalent provisions of state fair trading legislation.
This is another emerging area of law which has received greater attention since the Howard government’s reforms reduced access to the statutory unfair dismissal system. Most of the attention has been academic in nature though, mainly because these types of actions suffer from the same problems as common law actions. They are usually complex, time consuming and expensive and cost rules can apply.
The ground which has had most attention is misleading and deceptive conduct (s.52 Trade Practices Act). This means that an employee may be able to take action against their former employer where they can show the employer engaged in misleading or deceptive conduct towards the employee. There have been several cases where this ground has been relied on in the context of pre-employment representations about terms of employment which have not been carried out.
The other primary ground is unconscionable conduct (s. 53 Trade Practices Act). This ground is of potentially broader application than s.52 misleading and deceptive conduct but has not yet been the subject of any significant court decision.
b. Legal process
The process for taking legal action under the Trade Practices Act is similar to the process for common law claims. These claims are generally commenced in the Federal Court.
C. HOW TO ENFORCE POST EMPLOYMENT RESTRAINT PROVISIONS
a. Introduction
There will be times when an employee leaves your company and you find out later that:
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Several significant clients have left you and have followed this employee into their new business or employment; or
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b.
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The employee has established their own business in competition with your business nearby; or
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c.
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The employee has approached other employees of your own companies in an attempt to get them to leave and accompany him/her in their new business.
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What can you as an employer do about these situations? To a large extent, what you can do will depend on the quality of the restraint provision in the contract with the employee, your willingness to take legal action to enforce the contract restraint and the determination of your former employee.
b. Legal issues
The courts construe these types of restraints narrowly and only so far as necessary to protect the employer’s reasonable interests. The courts do not like to restrict a person’s ability to earn a living. A post-employment restraint will only be enforceable by a court if it is considered reasonable in its scope and for the protection of the employer’s legitimate business interests. Matters which will be considered by a court in determining whether the restraint is reasonable include:
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1.
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The geographic area of the restraint, and its length of time;
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2.
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The types of activities sought to be restrained;
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3.
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Whether the restraint reasonably protects the employer’s legitimate business interests; and
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4.
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Whether the restraint is unduly injurious to the interests of the employee and the public.
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Whilst courts are concerned not to hamper a person’s ability to earn their livelihood, the courts have demonstrated that they will protect an employer’s interests where there is clear evidence of breach of reasonable provisions. It is generally helpful if the employer can demonstrate the extent of harm or potential harm which may be done to their business as a result of the breach.
Generally, restraints on poaching other employees and clients are the easiest to enforce. Difficulties can arise where an employer wants to stop a former employee from conducting a business in competition to their own. These restraints often involve a combination of a geographical restriction and a time restriction. Restraints which have only one combination or which are broadly based are likely to be difficult to enforce. Courts will not substitute what they think to be a reasonable restraint if one is not provided in the contract. This has given rise to what is called a “cascading provision”. This is a provision which gives a court a variety of combinations of restraint to choose from. For example, a geographical restraint might be expressed as being for 10, 20, 50, 100, 200 or more kilometres from the employer’s place of business and a time restraint might be expressed as being for 1 month, 2 months, 6 months or 1 year. Evidence will need to be available about each matter to be proven. For example, the proper length of the restraint will also depend on evidence as to the length of time during which the former employee might affect the business of the company.
Another issue is likely to be whether the former employee is actually in competition with your business or not. For example, if you operate a business selling cardboard boxes and the former employee starts a business selling plastic boxes, there may be difficulties in obtaining an injunction.
c. Injunction process
The first step in enforcing a restraint provision is to contact the former employee in writing or by personal contact alerting them to the existence of the provision and requiring that they cease breaching the contract requirement immediately. Sometimes this may be enough of itself. If you are satisfied that the employee is intentionally breaching their contract provisions, then it is time to involve your lawyers.
Generally, the next step will be for your lawyers to write to the former employee requiring that they immediately stop breaching their contract provision and provide details of any clients with whom they have spoken after ceasing their employment with your company, for example and requiring written acknowledgement of the terms of their contract.
