A recent decision from the Federal Court of Australia has once again highlighted a critical compliance risk for employers: if your employment contracts don’t include a valid termination clause, courts may imply a right to reasonable notice. This can lead to significantly higher termination payments than you anticipated.
The risk: implied reasonable notice
In its judgment, the Court confirmed that where an employment contract is silent on termination, a term allowing the employer to terminate with “reasonable notice” may be implied by law. What’s considered reasonable depends on a range of factors, including the employee’s length of service, age, seniority, and how easily they could find other work.
In practice, that could mean:
- 3-6 months’ notice for a mid-level employee or even more for a senior executive
- A substantial payout, even where you’ve complied with the minimum statutory notice under the Fair Work Act 2009
The solution: compliant contracts with clear termination provisions
This case reinforces the importance of using well-drafted employment contracts that:
- Include clear and enforceable termination clauses,
- Provide for notice that meets or exceeds the Fair Work Act 2009 minimums, and
- Avoid the uncertainty (and cost) of implied terms.
How Xemplo can help
At Xemplo, we make employment compliance simple. Our dynamic contracts are:
- Legally reviewed and compliant with the latest developments in Australian employment law
- Customisable by role, award coverage, and employment type
- Delivered through our tech platform so that you can deploy, manage and update contracts at scale
Need to update your contracts across the business? Xemplo lets you:
- Roll out new templates with the click of a button
- Ensure consistency across jurisdictions
- Track which employees have signed the latest terms
Don’t let outdated contracts cost you
Without a compliant termination clause, you may face exposure to claims for months of “reasonable notice,” far exceeding what’s required under the law. Let Xemplo help you avoid that risk. Get in touch today to review your current contracts or to roll out a new compliant contract across your team.
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