Is there a formal definition for the term material breach in regards to a clause in an employment contract that refers to conduct that would justify summary dismissal which includes a material breach of the Employment Agreement?
Definitive advice on the meaning of a particular term in a contract would require a thorough analysis of the contract as a whole. However, there are some general principles that may be used to consider when summary dismissal at common law may be justified.
A ‘summary dismissal’ is an instant dismissal of an employee that does not require the payment of notice. It can occur in response to a serious breach or repudiation of an employment contract by the employee. The breach of the employment contract must be fundamentally inconsistent with the continuation of the employment contract. The nature of such a breach will be judged objectively and as a question of fact in the specific circumstances at hand.
It is important to note that the common law will not lightly infer that an employee has repudiated an employment contract.
A well-known case on the operation of summary dismissal at common law is that of Rankin v Marine Power International Pty Ltd [2001] VSC 150.
Mr Rankin was working as a director of the company and in the position of General Manager, Business Development Asia at the time of termination of employment. Mr Rankin was managing a major project in China on behalf of the company. Mr Rankin’s employment was terminated with notice following multi-million dollar blows outs to the cost of the project.
The employer justified the termination due to failure of the employee to comply with instructions from the employer in regards to managing the capital works, the failure of the employee to inform his supervisors in a timely manner about the increased costs of construction and the failure of the employee to apply for a revised budget when the cost increase became clear.
Despite this notice of termination, the employee was invited to attend a company opening. The employee had been specifically instructed to not bring his wife to the opening but the employee disobeyed this instruction and brought his wife. In response to this additional breach, the employer summarily dismissed the employee without notice.
The Supreme Court of Victoria accepted that the employee had breached his employment contract, that he had failed to abide by company instructions and that he had been negligent in the performance of his duties. Yet despite these findings, the court refused to accept that the employee’s misconduct was sufficiently severe to justify summary dismissal.
In this way, the employer was ordered to pay to the employee the amount of $169,612.35, representing damages for failing to provide proper notice and accrued long service leave entitlements.
An employee that seeks to bring a claim relating to termination of employment can do so through a number of different jurisdictions. Such jurisdictions include the common law (as discussed here). Moreover, employees could make claims under the Fair Work Act 2009 (such as unfair dismissal claims). In some cases, employees could also make claims through anti-discrimination legislation.
A claim under the Fair Work Act 2009would be different to a common law claim made by an employee for breach of contract. Having said this, the Fair Work Regulations 2009 provide guidance about the meaning of ‘serious misconduct’ at clause 1.07. This guidance could also be useful for assessing the legitimacy of a decision to dismiss summarily under the common law.
Clause 1.07 states that ‘serious misconduct’ must include both wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment and conduct that causes serious and imminent risk to the health or safety of a person or the reputation, viability or profitability of the employer’s business.
For further advice about matters relating to summary dismissal, please see our article.
For tailored advice about whether a particular set of circumstances may justify summary dismissal, please contact the Workplace Advice Line on 1300 55 66 77.
Clinton is the Publications Manager at Ai Group. He is responsible for a number of key services including Annotated Modern Awards, Workplace Relations Handbooks and the management of Ai Group’s HR and Health & Safety Resource Centres. Clinton has a Masters in Employment Relations and previously held advisory roles with the Workplace Authority and Fair Work Ombudsman.
