The Financial Controller for a global shipping company has had her total termination payment increased from just over $50,000 to over $1 million dollars following a decision by the New South Wales Supreme Court.
The Financial Controller sued her former employer claiming (among other items) reasonable notice of termination.
The Financial Controller had become a key employee of the company over a period of 24 years. The Financial Controller had been earning a base salary of $70,000 per year, plus allowances and a significant bonus that ranged from approximately $500,000 –$900,000 each year. In late 2010, the company’s new managing director approached the Financial Controller about varying the terms of her employment. This variation included a 50% reduction of her monthly bonus. Unsurprisingly, this was rejected by the Financial Controller.
In June 2011, following further failed discussions, the Financial Controller’s employment was terminated. She was provided 5 weeks’ notice based on her salary and paid out her annual leave and long service leave entitlements based on her base salary. Importantly, there was never any express term as to the notice of termination that would be required in order to terminate the Financial Controller’s employment.
The Financial Controller commenced a claim demanding 12 months’ reasonable notice. Acting Justice Nicholas held that ten months’ notice was reasonable in the circumstances. He cited the Financial Controller’s age, service and seniority as circumstances supporting a longer period of notice. He also noted that she had low prospects of finding similar employment and remuneration.
Lessons for Employers
The actual value of the notice period awarded by the Court was likely to exceed $1 million dollars. A significant portion of that amount was attributable to the 10 months’ notice period. With no express termination clause in the contract of employment with the Financial Controller, the employer left itself exposed to a reasonable notice claim. This could have been avoided if the employer had put in place a suitably worded contract of employment.
Lisa Aitken is an accredited specialist in workplace relations law and the principal of Aitken Legal, a law firm specialising in employment law for employers. www.aitkenlegal.com.au. The information in this column is intended as a guide only. Liability limited by a scheme approved under professional standards legislation.