Implications of Terminating Employment Contract

Topics: Employment, Termination of employment, Contract Pages: 6 (1909 words) Published: January 16, 2009
Implications of terminating an employment Contract

An employment contract is an informal (oral) or formal (written) legally binding agreement between an employer and an employee specifying the legal rights and obligations of each party. (Stone 2006 p.682) This essay will discuss the implications of having no written or no relevant employment contract for both the employer and the employee, it will also discuss the implications that can arise once employment has been terminated. Specifically, Four main points will be identified and researched to help Kings St Industries formalise this situation. These main points are; How can the company successfully terminate Bert’s employment? What restrictions apply to Bert if he leaves and joins a competitor? What happens if Bert provides confidential marketing information to a new employer? And, what happens if Bert lures away and hires other staff currently employed by King Street Industries?

In order for King St Industries to terminate Dooleys employment successfully they must determine the nature of the dismissal. A dismissal by where there has been no serious misconduct by the employee and there has been a serious downturn in business is referred to as an employment redundancy. “Redundancy is a dismissal based on the employers commercial or economic decisions regarding the management of the business, it is the termination of an employment contract due to the permanent elimination of a position.” (Stone 2006, p. 132)

A well drafted and documented employment contract can minimise employment disruptions caused by disgruntled ex-employees, both in terms of public relations and potential litigation. (Stone 2006, p. 113) However, by Law in cases such as King St Industries where there is no formal written contract all elements of employment including the employment terms, will revert back to the state award and federal award. When terminating an employment contract the employer should be aware of consequences that could arise due to the termination. One potential consequence is litigation regarding the nature of dismissal, “Under the Workplace Relations Act 1996 Commonwealth (Cwlth), it is wrongful to dismiss an employee without a “valid reason”. (Stone 2008, p.137) An employee who feels they have been unfairly dismissed can legally lodge a claim of unfair dismissal. However, under Section 64 (8) of the Workplace Relations Act 1996 (Cwlth) an employee cannot make an unfair dismissal claim if their employment is terminated for genuine operational reasons.

Due to the serious downturn in business at King St Industries the company could use the economic hardship as the genuine operational reason for making the sales managers position redundant and would be exempt from an unfair dismissal claim.

A written contract can include provisions for termination, however as King St Industries did not provide Dooley with a written employment contract they will need to comply with the protocol for terminating an employment contract under the State Award. Under Section 170CG(3) of the Workplace Relations Act 1996 New South Wales (NSW) a redundancy for genuine operational reasons must comply with the following requirements (1) Must inform employee in writing of intention to terminate employment, (2) Must give a period of notice & could be required to produce a statement of reasons of the termination, (3) Must pay the redundant employee a severance pay and (4) Must pay all employee entitlements owing including Annual Leave and Long Service Leave.

King St Industries must provide a letter of intention to terminate Dooleys employment contract, it should clearly state redundancy for genuine operational reasons, as the reason for termination. According to New South Wales (NSW) Industrial Relations website in order for a letter to be deemed enforceable it must include (1) the name and address of the employee concerned, (2) the position or duties occupied or performed by the employee,...
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