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12 months' notice for 3 years work

Excerpts from this article first published in ‘Human Resources’ Magazine, Issue 75, 8 March 2005

The Industrial Relations Commission of New South Wales recently ordered the Moree Plains Shire Council to pay a former General Manager, Mr Paparo, an additional 9 months’ pay in lieu of notice as well as a $4,000 performance bonus. The total payment ordered by the Commission was $105,250. The General Manager had only worked for the Council for 3 years. At the time of termination, Mr Paparo was paid a salary of $135,000 per annum.

The Council terminated Mr Paparo for his alleged defiance of a Council decision to stop redundancy payments being made to two employees following a restructure. On termination, the Council provided Mr Paparo with 3 months’ pay in lieu of notice.

Mr Paparo commenced proceedings in the Commission under the unfair contract provisions contained in s.106 of the NSW Industrial Relations Act 1996. In his application to the Commission, he claimed an additional 9 months’ pay in lieu of notice and payment of $20,000 as a performance bonus.

Mr Paparo’s contract with the Council was for an initial period of 4 years.. The termination provision of the contract provided that the contract could be terminated if 3 months notice was given for each remaining year of the contract’s 4 year term or the remaining term of the contract, whichever was the lesser. The contract also provided for payment in lieu of notice.

The Council sought to defend Mr Paparo’s claim by arguing that it justifiably terminated his employment because he breached a fundamental duty to Council and therefore, it was not unfair to terminate him by providing 3 months' pay in lieu of notice.

The Commission ultimately rejected the Council’s defence. Despite the contract of employment only entitling Mr Paparo to 3 months’ pay in lieu of notice, the Commission exercised its power to vary the contract to provide for an additional 9 months pay in lieu of notice. In awarding an additional 9 months’ pay, the Commission had particular regard to the fact that Mr Paparo was 51 years of age; had relocated to the eastern states from Western Australia with his family; was financially committed to the Moree area having purchased a family home there; had only been able to secure limited part-time employment since his termination and had little prospect of ever working in local council again.

The Commission also varied the contract to provide for a $4,000 bonus payment despite there being no agreement or arrangement between the employer and employee in relation to a bonus payment.

HR Tip

Employees whose remuneration does not exceed $200,000 per annum, and who are able to demonstrate that their work has sufficient connection with the NSW jurisdiction, are able to gain access to the unfair contract provisions of the NSW Industrial Relations Act 1996. These provisions essentially allow the Commission to rewrite any contract. When terminating employees, expecially senior executives, employers should consider seeking advice on the implications of unfair contract laws.

Jason Donnelly

Senior Associate

Australian Business Lawyers