Home' Executive Employment Contracts : Issue 1 Contents 13
► the structure of the package, including options such as employee share
schemes and other benefits; and
► quality financial and taxation advice.
An executive (like other employees) will be expected to comply with policies
that the employer has in place from time to time.
There are differing views about incorporating policies into an executive’s
employment contract and the legal implications of doing so, so you should
think carefully before deciding whether or not to incorporate policies into an
executive’s employment contract.
Whether or not a policy is incorporated into the executive’s employment
contract, the case law suggests that the courts and tribunals will expect
reciprocity from an employer – if an employee is required to comply with a
policy, including the mandatory aspects of that content, this is something that
may also be enforced against the employer.
While there have been many cases on this point, the potential for the
employer’s breach of policy to be repudiation of the employment contract
has recently been considered in Romero v Farstad Shipping (Indian Pacific)
Pty Ltd  FCAFC 177. In that case the Full Federal Court found the
failure to conduct an investigation in accordance with the employer’s
discrimination policy was a breach of contract by the employer. A single
judge of the Federal Court will now determine what damages should be
awarded and whether the breach constituted a repudiation of the entire
This should also be considered carefully, having particular regard to the
content of the employer’s policies and the obligations that they may impose
under the executive’s contract of employment.
In many respects the termination provisions of an executive employment
contract are the most critical provisions, particularly if the employment
relationship has broken down and the parties are looking to enforce their
legal rights, rather than continue the employment relationship.
An executive’s employment may be terminated by giving notice in
accordance with an express notice provision in an employment contract,
which must not be less than the minimum requirements under the relevant
legislation (the legislation will operate to override the contractual provision if
it does not meet the minimum requirements).
If there is no express contractual provision, the common law implied
term of “reasonable notice” will apply. Learn more about what constitutes
“reasonable notice” in Part 4.
In order to minimise the risk of a “reasonable notice” claim, and to provide
certainty for the employer and the executive on termination of the executive’s
employment, you should include an express notice of termination provision
in the executive’s employment contract. In drafting that provision, you should
consider the appropriate length of notice period in light of, amongst other
things, the nature and seniority of the position to be held by the executive.
Termination provisions of the employment contract should also provide a
right for the employer to summarily terminate the executive’s employment
without notice (or payment in lieu) on grounds of serious misconduct. This
would commonly include wilful or significant breach of the terms of the
employment contract, dishonesty, fraud and wilfully engaging in conduct that
brings the company/employer into disrepute.
Where an executive’s employment is terminated by reason of redundancy
of the executive’s position, the executive will be entitled to a severance
payment in accordance with the relevant legislation in addition to notice,
unless the employment contract provides for severance otherwise (which
must not be less than the minimum requirements under the relevant
Traditionally, executives would get a notice period greater than the statutory
minimum period, partly to ensure business continuity and protection, but
also as compensation for the fact that the executive’s position could be
terminated, including for redundancy, without further payment.
Given the introduction of severance benefits by the Fair Work Act, where
an executive’s notice exceeds the statutory minimum, you should consider
incorporating an offset term in the employment contract to provide that any
redundancy payment required to be paid by law may be offset against a
payment in lieu of notice.
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