Breach of Employment Contract

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Breach of employment contract

Employment contracts define the relationship between employer and employee. Employment contracts differ fro, other types of contracts in that they are supported and regulated by national legislation that outline a worker’s minimum employment entitlements. These entitlements form the basis of the “Employment Safety Net”, commonly referred to as the National Employment Standards (NES), contained in Part 2-2 of the Fair Work Act 2009 (Cth) (the Fair Work Act).1

Employment contracts must be adhered to by both employers and employees. Issues that cmmonly result in a breach of an employment contract include:

  • An employee being terminated without reasonable notice;
  • An employee being terminated without notice for misconduct and there were no reasonable grounds to do so;
  • A fixed-term employment contract being terminated before the end of the term;
  • Non-compliance with the NES; and
  • Failure by the employee to comply with specific terms under the employment contract;

At Gibbs Wright Litigation Lawyers, our Employment Team assists our clients with effective dispute resolution strategies to ensure their rights are sufficiently protected. Employment Law in the Australian legal context is more than just contract disputes – at Gibbs Wright, we can assist with a range of employment disputes, including litigation and legal action before the Fair Work Commission.

Our employment lawyers can assist both employers and employees alike in a wide range of employment-related matters, including establishing and defending a brech of contract claim. Get in touch with our team today if you are:

  • An employee, and you think that your employer has breached your employment contract; or
  • An employer facing a dispute regarding a breach of contract claim (e.g. a wrongful dismissal claim) by an employee.

Note: There are legal differences between a claim for unfair dismissal (provided for under legislation) and a claim for wrongful dismissal (breach of contract), especially in relation to limitation periods. If you believe you have been unfairly dismissed, please contact us immediately as you will generally only have 21 days from the date the dismissal takes effect to lodge a claim (noting exceptions may apply).2

Costs

Under Australian law, ‘costs’ usually refers more specifically to legal costs incurred in bringing or fighting a claim. In most litigation matters, the successful party in a claim will generally be able to recover a portion of their legal fees incurred in bringing or defending the claim matter. In employment matters, the procedure for claiming costs differs depending on a number of circumstances, including whether your employment matter is resolved through taking action in state or federal courts or through the Fair Work Commission. Further information about each of these options is outlined below.

Costs for claims brough through the Fair Work Commission

The Fair Work Commission has the discretion to order costs against another party if it is satisfied that a party unreasonably caused the costs to be incurred.

The Fair Work Commission's discretion in awarding a costs order

If you have a strong claim for unfair dismissal and you are successful in your claim, or if a poor claim was made against you and you successfully defend it, you may be able to have part or most of your legal costs paid for by the other party, or alternatively by the other party’s lawyer or paid agent. 

The Fair Work Commissioner has discretion in whether or not to order costs in a particular matter, and each separate matter is determined on a case-to-case basis. If you are an employee who has made an unsubstantiated claim against your previous employer, or if you are an employer who is found to have unreasonably defended a a claim against you by a previous employee, you may be liable to pay the other party’s costs.

It is important to note that whether you are an employer or an employee, the Fair Work Commission can only make an order for costs if you or your lawyer make an application for costs under the Fair Work Act

Court Proceedings

For matters brough in the state or federal courts, the general principle with respect to costs is that ‘costs follow the event.’ This means that the unsuccessful party will usually be ordered to pay a portion of the successful party’s reasonable legal costs incurred in bringing or defending the matter. This concept applies to plaintiffs and defendants alike. In other words, a plaintiff who brings an unsubstantiated or frivolous claim may be equally liable to pay the defendant’s costs of defending the proceeding as a defendant would be for paying the plaintiff’s costs in bringing a proceeding where the defendant is found to have done the wrong thing and an order is made against him or her.

Related Matters

Adverse Action

If you are an employee who has been dismissed, demoted, had a salary cut, been discriminated against, or have had another related thing happen to you in in regard to your employment that amounts to a breach of a workplace right, you may be entitled to damages. Adverse action is when a person engages in, threatens to engage in, or otherwise organises any form of conduct that has an adverse effect on another party. For more information, see our Adverse Action article.

Unfair Dismissal

If you have been dismissed and you feel that the dismissal was unreasonable or excessively harsh, you may be entitled to compensation. For more information, see our Unfair Dismissal in Australia article.

Frequently Asked Questions

An employment contract will exist immediately upon an employer and an employee agreeing to enter an employment relationship.

It is important to note that an employment contract between an employer and an employee can exist irrespective of whether it is in writing or not.

Unfair dismissal and wrongful dismissal are terms that are commonly used interchangeably, but they are not the same thing. In brief terms, unfair dismissal is a right of action that an employee may have under the Fair Work Act where the dismissal is said to have been excessively harsh, unjust or unreasonable, whereas a wrongful dismissal claim is a breach of contract claim where an employer has terminated an employee’s employment contract, and the termination breaches a term of the employment contract.

If you believe you have been unfairly dismissed, please see our Unfair Dismissal in Australia article for more information on unfair dismissals.

Employment contracts may include both express and implied terms.

Express terms are those terms that have been expressly agreed upon between the employer and the employee. Although express terms are most commonly terms that have been specifically incorporated into written employment contracts, express terms may also be agreed upon verbally to form part of a verbal contract. Where no written contract exists, it is particularly important for both the employer and the employee to clarify and clearly outline the agreed upon express terms.

Implied terms are terms that the employer and employee may not necessarily have expressly discussed, written down or agreed to, but they are nonetheless implied to form part of the employment contract, whether by practice, common law or statute. For example, employment contracts may imply a term requiring the employer to act in good faith throughout the entire term of the employment, whether or not this has specifically been set out in the employment contract or agreed upon verbally prior to commencement of the employment. Another common implied term is when an employment contract does not include a termination clause. In these cases, the law will automatically rely on an implied  \term that the employment contract can be terminated with ‘reasonable’ notice. It is important to note that where an employment contract has been made in writing, there will generally be less scope for additional terms to be implied.

Written contracts will occasionally contain an ‘entire contract’ clause, which will commonly state words to the effect that the written terms outlined in the contract forms the entire agreement between the parties. Irrespective of the incorporation of such ‘entire contract’ clauses, either party to the contract may still be able to rely on additional implied terms where it is just and reasonable for such terms to also form part of the agreement.

A breach of an employment contract occurs when either the employer or the employee fails to honour the terms of the employment contract. Where such a breach occurs, the innocent party may be entitled to sue in common law for any damage suffered as a result of the breach. The aim will generally be to attempt to restore the affected party to the position they would have been in but for the breach (i.e. had the breach not occurred).

In cases involving more serious breaches, the innocent party may be entitled to terminate the contract without notice, in addition to suing for any loss incurred.

Employees may be able to seek a range of different types of compensation for loss caused by a breach of an employment contract or wrongful dismissal. Common forms of compensation include compensation for:

  • Lost wages and other remuneration;
  • Injuries suffered due to the wrongful termination of an employment contract (including personal injury by way of a psychiatric injury); and
  • Loss of opportunity, such as the opportunity to obtain alternative employment or eligibility for bonus schemes.

Some of the common forms of employment contract breaches by the employer giving rise to employee compensation claims include:

  • Dismissal of an employee without adherence to the notice period in the employment contract;
  • Termination of an employee’s fixed term employment contract before the end of the contract term;
  • Dismissal of an employee on the basis of severe misconduct, poor performance or redundancy, without reasonable or justifiable grounds; or
  • An employer compelling an employee to resign without just cause.

An employer may seek compensation for financial loss or damages incurred due to the breach of the employment contract by an employee, such as the employee:

  • Misusing an employer’s confidential information;
  • Contravening the terms of a valid restraint of trade clause within the employment contract.

An employer may further seek an injunction (a type of court order) restraining the employee from doing a particular thing (e.g. disclosing confidential trade information to competitors).

It is important to note that restraints of trade clauses are unenforceable unless they protect an employer’s legitimate interests in its client relationships or confidential information, and such clause may not go any further than what is reasonably necessary to protect that legitimate interests. As such, the inclusion of a restraint of trade clause in an employment contract may not automatically give rise to a compensation claim in the event of breach of that terms.

Contact Gibbs Wright Litigation Lawyers

Contact Gibbs Wright Litigation Lawyers about your employment dispute for a free and confidential consultation to discuss your legal rights and options.

[1] Fair Work Act 2009 (Cth) Pt 2-2.

[2] Fair Work Act 2009 (Cth) s 366(1)(a).

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The content of this publication is intended as general commentary only and may not be suitable or applicable to your personal circumstances. It is not intended to replace independent legal advice. You can contact us at our Brisbane Office for a free consultation on a range of litigation matters on (07) 3088 6364.

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