In a recent decision the Federal Court has found that an energy company was required to pay 3 months’ termination notice to an employee it had incorrectly considered was a contractor and with whom it had no written agreement.
The Facts
The worker began as a freelance contractor in 2005 providing database management services. He invoiced his services. He had been providing similar services to other companies.
In January 2006 the company put him on its payroll and began deducting and remitting amounts for income tax and superannuation. The worker kept invoicing for his services until 30 June 2006 when he was issued with a group certificate.
His work continued, and his evidence was that “there was no clear end” to the work he was performing.
He continued to be paid for the hours he worked and from time to time his hourly rate increased. He sometimes took leave by a largely informal process but was not paid for it.
There was no written engagement agreement. The basis of his engagement was discussed but no concluded outcome was reached or documented.
On 28 November 2020 he was given a letter notifying that his engagement as a contractor was terminated as the services of Senior Application Developer were no longer required.
The letter notified that he would be paid the same amounts as permanent employees in the position for termination pay (5 weeks), long service leave (12 weeks) and redundancy pay (12 weeks).
He brought proceedings in the Federal Court claiming entitlements on the basis that he was a permanent employee. His claim included reasonable termination notice, annual leave and public holiday entitlements, and penalties for contravention of the Fair Work Act.
The Decision
The Federal Court found that although he began in early 2005 as a contractor, the engagement changed in January 2006 to permanent employment. As such he was entitled to be paid for annual and public holiday entitlements.
The Court carefully considered his claim for reasonable termination notice, observing that:
- The Fair Work Act only stipulates a minimum period of termination notice that the employer must give.
- Where a right of termination is not expressly given by an employment contract or another instrument, the law will imply an entitlement to termination on “reasonable notice”.
The Court found that reasonable termination notice was 3 months considering that he was a professional person approaching 70 years of age, now retired, had worked for the company for 14 years, and at the time of termination had annual earnings of about $130,000.
Implications
For employers the case is a reminder of the critical importance of having written agreements that clearly define the engagement and its key terms, including termination notice.
For workers the case is also a reminder of the importance of negotiating their key terms and having them confirmed in a written agreement, to avoid the time, cost and inconvenience of a legal dispute.
At WorkLegal our experienced team can answer your questions and put you on the right track. A range of fixed-price Initial Consultations will suit most people’s needs in quickly learning what their options are.