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Employment Law News, March/April 2011

The definition of a “small business” for the purposes of Unfair Dismissal provision in The Fair Work Act has changed as from 1 January 2011

From 1 January 2011 the definition of a “small business employer” is an employer of up to 15 people ‘by individual head count” irrespective of the hours worked by those employees. Previously the definition was the number of employees equating to the equivalent of 15 full-time employees. 

If you are a “small business” employer you are able to enjoy some leniency in unfair dismissal claims as long as you comply with the “Small Business Fair Dismissal Code” a copy of which is available at the website http://www.fwa.gov.au/index.cfm?pagename=resourcefactsunfair; together with other information about this critical area of employment law.

The recent case of Purcell –v- Tullet Prebon shows that an employee wishing to leave their employer and work for a competitor must comply with the terms of their employment contract or the employee will pay the price.

Mr. Purcell, a finance broker, entered into a two-year employment contract with Tullett Prebon. In breach of his employment contract, Mr. Purcell resigned and then commenced working for a competitor. Tullett Prebon sought an injunction to restrain Mr. Purcell from working for the competitor and put him on paid ‘garden leave'. Mr Purcell was notified he would be required to return to his employment at the end of the ‘garden leave' or this would amount to a breach of his contract and this would allow Tullett Prebon to terminate his contract, should they wish to. Mr Purcell did not return to work as directed and his employer terminated the contract and sued for liquidated damages.

Had the contract had been terminated by the employee's resignation?

While Mr Purcell had resigned, repudiating the contract, his employer, an innocent party, chose to continue the contract. The Court noted that repudiatory breach does not terminate a contract until the repudiation is accepted by the innocent party. As such, Mr Purcell had not terminated the contract by way of his resignation.

On what basis may an employer terminate the contract in these circumstances and seek damages?

Mr Purcell's refusal to resume the contract with the employer was a final repudiation. As such, the employer was entitled to terminate the contract and recover for liquidated damages because at the time of the breach the employer was ready, willing and able to perform the contract. The Court described the damages, calculated by a formula in the contract for pre-estimate of loss for premature termination, as damages for loss of employer's bargain.

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