In Australia, many executive contracts have a clause that allows an employer to terminate the contract without giving a reason (or without cause) simply by the giving of a prescribed period of notice or paying the equivalent amount in lieu of notice.
And a lot of employers with that type of contract clause in executive contracts think that this means there is no legal remedy for a terminated employee if they are unhappy about their termination.
That’s wrong.
This view is usually based on the correct assumption that most (but not all) of these types of employees won’t have access to the unfair dismissal regime under the Fair Work Act because they earn above the high-income threshold for eligibility, which from 1 July 2024 is $175,000.
But what about a general protections claim?
The high-income threshold doesn’t apply to general protections claims.
And here’s the thing – even though an employer may not have to give a reason for terminating a contract under this type of executive contract clause, that doesn’t mean there isn’t a reason for the termination.
In fact, common sense and experience says that there is always a reason or reasons for terminating someone’s employment.
Employers don’t just terminate someone’s employment for no reason.
And so, if a terminated employee brings an adverse action claim alleging that, for example, they exercised a workplace right and the termination of employment (which is adverse action) followed this in time (that is, there is a temporal connection), then that will be enough to engage s. 361 of the Fair Work Act.
Section 361 of the Fair Work Act creates a presumption of unlawful conduct and reverse onus of proof that requires the employer to prove what the reason or reasons for the termination were AND that the reason or reasons did not include a substantial and operative reason that is prohibited (eg. because the employee had exercised a workplace right).
And the employer cannot simply hide behind the contractual clause that allowed termination without giving a reason because doing so will leave the reverse onus of proof undischarged.
And discharging the reverse onus of proof created by s. 361 will ordinarily require the production of the decision-maker or decision-makers in court to give sworn testimony about their reasons and to be subject to cross-examination upon that evidence.
This is no small thing.
And I wager that any decision-maker who thinks it is has never been cross-examined by a skilled barrister.
