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Excerpts from this article first published in ‘Human Resources’ Magazine, Issue 109, 24 July 2006
The Federal Court of Australia in Walker v Citigroup Global Markets Australia Pty Ltd has awarded an employee $2.3 million for lost earnings and $100,000 for damage to the employee’s reputation and personal life arising from a breach of the contract of employment by his employer.
The case highlights the risks associated with an employer relying upon ‘standard form’ clauses in contracts of employment where such clause are inconsistent with clauses that have been ‘specifically framed’ to meet individual circumstances.
In about August 1997 Mr Walker, who at the time was working in a senior position with ABN AMRO, was approached by a head hunter in relation to a position with NatWest (a business subsequently acquired by Citigroup).
NatWest was keen to secure Mr Walker. After much negotiation over terms and conditions, a contract of employment was entered into on 20 January 1998. Mr Walker was not expected to commence employment with NatWest until March 1998. The commencement date was delayed so that Mr Walker could access bonus and other entitlements from ABN AMRO.
NatWest clams that in February 1998, it received ‘negative feedback from the market’ about Mr Walker. This resulted in NatWest ultimately refusing to employ Mr Walker.
Mr Walker subsequently commenced proceedings against NatWest on a number of grounds, including breach of contract. NatWest initially denied the existence of a valid contract of employment but, in any event, argued that any damages for breach of contract should be limited to one months’ pay. This was consistent with the ‘standard form’ termination provision in the contract of employment which allowed NatWest to terminate Mr Walker on one months’ notice at any time.
The Court found that the ‘standard form’ termination provision was inconsistent with ‘specific provisions’ of the contract which had been tailored to meet the requirements of the parties following their extensive negotiations.
These ‘specific provisions’ provided that Mr Walker would be promoted to the position of ‘Director of Research’ at the end of 1998 and that he would receive a bonus for the 1998 calendar year in February 1999. The Court stated that these ‘specific provisions’ plainly contemplated Mr Walker remaining employed for the whole of the 1998 calendar year and for this reason were inconsistent with the ‘standard form’ termination clause that allowed the contract to be terminated prior to February 1999 on one months’ notice.
In upholding Mr Walker’s claim for breach of contract, the Court stated that where there are clauses of a contract ‘specifically’ framed with individual circumstances in mind, together with ‘standard form’ clauses, it will normally be appropriate to give greater weight to the ‘specifically’ negotiated clauses.
The Court ultimately decided that Mr Walker would most likely have remained in employment with NatWest until 30 June 2003 and calculated damages on this basis.
HR Tip
When drafting contracts of employment, employers should ensure that ‘standard form clauses’, commonly used in contracts of employment, are consistent with specifically negotiated provisions of the contract. If there is a conflict between the two types of provisions, the specifically negotiated provision may override the standard form clause. As demonstrated by the above decision, this could lead to substantial liability for employers.
Jason Donnelly, Senior Associate
