Clause for concern? The implied term of reasonable notice confirmed

An implied term of reasonable notice on termination has been recognised in Australian employment law for some time. It provides a default ‘reasonable’ notice period that an employer must give to an employee, unless replaced by an express term regarding notice of termination in an employment contract, or rendered unnecessary by legislation or an industrial instrument that provides a notice period.

There has been some debate over whether the implied term of reasonable notice remains necessary in circumstances where the minimum termination notice periods in section 117 of the Fair Work Act 2009 (Cth) apply. The Federal Court of Australia has found in favour of the position that the minimum notice periods in legislation do not displace the requirement that, without express agreement of a specific period, an employer must provide notice on termination that is reasonable in the circumstances.

The recent decision of Cropper v Energy Action Australia Pty Ltd (No 2)[1] (Cropper) has confirmed the availability of the implied term of reasonable notice for employees without an applicable written contract. In that case, the employer paid the minimum notice period in the Fair Work Act, but was found to have breached the contract, and must now pay damages because the statutory length of notice wasn’t sufficiently ‘reasonable’.

When does the implied term of reasonable notice apply?

An implied term of reasonable notice on termination applies where there is no express term in an employee’s contract that deals with termination. This is a risk when engaging a ‘contractor’ who may later be found to have been a misclassified employee. It might also occur when:

• an employee does not have a written employment contract;
• an employee has an employment contract that does not deal with notice on termination; or
• an employee has an employment contract that is ‘stale’ or inapplicable to the role they were performing when terminated

Cropper v Energy Action Australia Pty Ltd (No 2)[2]

Mr Cropper was engaged by Energy Action (Australia) Pty Ltd (Energy Action) as an independent contractor in 2005. His engagement was ultimately terminated in 2020. Mr Cropper did not have a written contract, and his role at Energy Action changed substantially in his 15 years of service. On termination, Mr Cropper was provided with five weeks’ notice on termination, along with redundancy and long service leave entitlements.

Mr Cropper brought a claim alleging that he was an employee rather than a contractor, and that Energy Australia had breached his employment contract and the Fair Work Act, alleging among other things that Energy Action failed to provide him with reasonable notice of his termination.

Justice Snaden found that Mr Cropper was a permanent (i.e. non-casual) employee entitled to reasonable notice on termination. His Honour found that the minimum notice periods in the Fair Work Act did not confer a right of termination, but instead presumed the existence of a termination notice period elsewhere such as in the employment contract. Where no such period is expressly agreed, there must be an implied term of reasonable notice.

In the circumstances, His Honour found that the applicable reasonable notice period was three months. This considered the fact that Mr Cropper was a tertiary educated professional nearing 70 years of age who had worked at Energy Australia for 14 years, earning a salary in the vicinity of $130,000.

what does this mean for employers?

Cropper identifies a substantial risk in dismissing individuals with employment contracts that do not address notice on termination effectively, or who have no written employment contract. Terms of ‘reasonable notice’ implied by the court regularly exceed the minimum notice periods in the NES. For example, the Courts have awarded:

• a period of nine months' reasonable notice to a 54 year old woman with 19 years of service[3];
• a period of ten months’ reasonable notice to a 49 year old woman with 24 years of service to her employer[4];
• a period of 24 months’ reasonable notice for a 45 year old woman with five years of service[5].
  

[1][2] [2025] FCA 663

[3] McAlister v Yara Australia Pty Ltd [2021] FCCA 1409

[4] Ma v Expeditors International Pty Ltd [2014] NSWSC 859

[5] Shea v TRUenergy Services Pty Ltd (No 6) [2014] FCA 271