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The recent case in the Australian Industrial Relations Commission of McDermid v Samsung Electronics Australia Pty Ltd [2009] AIRC 171 demonstrated that intention determines whether verbal statements form part of the employment contract. The employee was employed on a fixed term contract that was terminated prior to the agreed termination date. The employee, Ms McDermid, alleged that Samsung initiated the termination, and that the termination was harsh, unjust or unreasonable. The employer argued that it did not initiate the termination, and if it did, it did so for genuine operational reasons.
The employee was on a fixed term contract and had requested to be made permanent. The employer did not commit to making the employee permanent, but the HR manager said to the employee words to the effect that “[E]verything would be OK” and that he was “working out the details.
However, the employee’s written contract included words to the effect that it set out “all the terms of your employment contract with the Company.” It went on to say that “If there are any other matters that you have relied on in our discussions to date or any other matters you wish to discuss please let the Company know before you sign the attached copy of this letter so that we can consider them and, if necessary, include them in the terms set out in this letter to ensure that it is complete when you sign it."
The words in the contract, in the Commission’s view, indicated that the parties intended that any contractual employment arrangements would be confirmed in writing. No such confirmation in relation to permanent employment was forthcoming. Therefore, the Commission held that the verbal statements from the HR manager did not form part of the contract of employment and did not bind the employer.
Interestingly, in spite of the contract being fixed, the Commission held that the employment was terminated at the initiative of the employer (and not the effluxion of time, as is normally the case with fixed term contracts). This is because the employer gave notice that the employment would terminate on a date prior to the date agreed in the fixed term contract. In the Commission’s view, the evidence showed that the termination was on performance grounds, not any genuinely operational reason.
• Deal with pre-contractual discussions in the written contract, such as by making it clear that it is intended that any details regarding the employment will be recorded in writing.
• Termination of a fixed term employee’s employment will be at the initiative of the employer where the employer gives notice of termination, other than to terminate at the end of the fixed term.
• Do not make concrete commitments if the Company does not wish to be held to those statements.
Michael Whitbread, Lawyer
