In a significant employment law win, Hall Payne has secured over $130,000 in compensation for an engineer. In the case of Daigle v SCT Operations [2022] NSWDC 364, the employer made the worker redundant after failing to pay the final instalment of his 2019 bonus. The Court determined this to be a breach of his employment contract and awarded substantial damages for reasonable notice.
Background
In June 2004, the worker started employment with SCT, a geotechnical consultancy and instrumentation company, as an engineering geologist.
In 2005, the worker was promoted to senior engineering geologist and senior strata control engineer.
In 2006, the worker started participating in SCT's Income Allocation Scheme. Under this scheme, he would receive a bonus once he had met his costs bar (ie. the costs associated with his employment including his base salary ('Performance Bonus')). The Performance Bonus was calculated according to how many points the worker had accrued. If the worker met his costs bar, the Performance Bonus was paid out in four instalments the following financial year.
In 2019, the worker exceeded his costs bar for the 2018-2019 financial year and was entitled to a substantial Performance Bonus.
In December 2018, the worker started to become unwell and, in February 2020, was diagnosed with a chronic illness. Throughout the 2019-2020 financial year, the worker had to take considerable sick leave due to his illness and treatment. As a result, he did not meet his costs bar for the 2019-2020 financial year.
In June 2020, SCT did not pay the worker the fourth instalment of his 2018-2019 Performance Bonus ('Fourth Bonus Instalment').
When the worker queried SCT's failure to pay the Fourth Bonus Instalment, SCT told him that the Performance Bonus was discretionary and would not be paid because he did not meet his costs bar for the 2019-2020 financial year. SCT said that they would use the Fourth Bonus Instalment to meet the worker's shortfall for the 2019-2020 financial year.
The worker engaged Hall Payne Lawyers to seek payment of the unpaid bonus.
Proceedings lodged in the Local Court
When SCT continued to argue that the Performance Bonus was discretionary, Hall Payne lodged proceedings in the Local Court seeking payment of the Fourth Bonus Instalment.
Employer makes worker redundant
Shortly after Court proceedings were lodged, SCT made the worker redundant.
The worker was paid 12 weeks' redundancy pay and 5 weeks' notice in accordance with s.117 of the Fair Work Act 2009 (Cth) ('FW Act').
After some consideration, the worker decided not to pursue a general protections claim and, on our advice, amended his statement of claim to include a claim for 99 weeks' reasonable notice (24 months minus the 5 weeks' notice already paid). This notice claim was, in our view, available given the absence of a notice provision in the employment contract. The worker also made an application to transfer the proceedings to the District Court of NSW as the worker's claim now exceeded $100,000 (the jurisdictional limit of the Local Court).
Matter heard in the District Court of NSW
In August 2022, Hall Payne represented the worker in the hearing before the District Court.
The worker alleged that SCT had breached the following terms of his employment contract:
- the Performance Bonus term, which was partly written and partly oral; and
- the implied term of reasonable notice.
Tough case
SCT vigorously defended the claim. This included opposing the worker's application to transfer the proceedings to the District Court even though the amended claim exceeded the jurisdictional limit of the Local Court. They also filed a cross-claim for unpaid vehicle expenses.
With respect to our client's claims, SCT argued that:
- the Performance Bonus was discretionary, and the worker had no contractual entitlement to the Fourth Bonus Instalment; and
- the worker was not entitled to reasonable notice because s.117 of the FW Act displaced any entitlement to reasonable notice at common law.
The question of whether our client was entitled to reasonable notice was the subject of considerable argument as there is no superior Court authority on the issue.
SCT sought to rely on a line of South Australian case law, which found that s.117 of the FW Act had displaced any implied term of reasonable notice at common law.
Our client was determined, however, to right the injustice he had suffered.
The District Court's decision - a win for the worker
The Court split the case into three decisions:
- one to determine jurisdiction;
- one to determine the substantive claims; and
- one to determine costs.
On 19 August 2022, the Court handed down its decision on the substantive claims. Our client won his claim to reasonable notice and the Fourth Bonus Instalment!
Performance bonus
The Court held that SCT's unilateral alteration of the Performance Bonus term amounted to a breach of employment contract.
The Court found that the worker had already 'earnt' the Fourth Bonus Instalment in accordance with the Performance Bonus term, and by withholding the Fourth Bonus Instalment, SCT sought to vary the Performance Bonus Term to enable it to withhold the bonus in the event the worker didn't meet the costs bar in the following financial year. A variation to the employment contract was not available as it will only be permitted with the worker's agreement.
Reasonable notice
The Court accepted the worker's argument that s.117 of the FW Act provides the minimum period of notice and does not displace the common law term of reasonable notice, which may be implied by law when there is no express notice term in the employment contract. The Court concluded that section 117 of the FW Act is intended to protect employees rather than provide employers with a 'fail safe' should their contracts not set out express notice periods.
The Court considered the worker's:
- long period of service;
- age;
- specialised qualifications;
- skillset and experience;
- exemplary work history;
- failure to obtain any alternative employment since termination; and
- the availability of comparable senior engineering geologist and senior strata control engineer jobs in the Sydney region,
to determine that the period of reasonable notice was 8 months' pay minus the 5 weeks' notice already paid and any income earnt since termination.
The Court rejected SCT's argument that the worker's 12 weeks' redundancy pay should also be deducted from the award of reasonable notice.
Conclusion
The Court found that the worker was entitled to damages as follows:
- Fourth Bonus Instalment in the sum of $94,452.00;
- Payment in lieu of reasonable notice in the sum of $63,782.50;
- Minus the amount the worker had spent in excess of the permitted car allowance, in the sum of $31,408.00;
- Balance: $132,555.58 (including interest).
The decision of the District Court serves as a reminder to employers that the terms of any bonus scheme as part of your employment contract may be contractual and enforceable at law. Further, employers cannot rely on the FW Act to fill gaps in an employment contract, such as the absence of a termination notice clause.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.