Employment Agreements - Part 3

The next installment of Employment Agreements - when things go wrong ....

The last time we saw Farmer Freddy, he had been talking to his lawyer about Judy's claim for unjustifiable dismissal. Judy is seeking reinstatement, lost wages and compensation for her humiliation.

Remember, Freddy employed Judy and Bill to help out around the farm for a while. He had thought that Judy was a casual, not a permanent, employee, so when Freddy's son Jack wanted to come back to work, Freddy had told Judy she was no longer required. Bill, incensed at Freddy's treatment of Judy, had walked off the job, saying he wasn't coming back until after the weekend.

Freddy's lawyer had advised him to let Bill have the weekend to cool down and that any other action would probably be unjustified.

But Freddy does not like that advice. "It's my farm," he says to himself. "Judy and Bill shouldn't get their knickers in a knot over this: It's my call who does the work. Bill needs to pull his socks up or leave. He's not going to nab this tiger by the tail!"

And so, in high dudgeon, Freddy knocks on Bill and Judy's door to give Bill an ultimatum: "Come back to work or leave. And that includes the house." (As part of the original deal, Bill and Judy got to live in a house on Freddy's farm.)

At almost the same instant, Bill and Freddy ring their lawyers.

What will the lawyers say?

Freddy's lawyer advises him that if he goes to apologise immediately and asks Bill and Judy to stay, they may choose not to take claims against him. Otherwise, Freddy will probably have to deal with separate claims for Bill and Judy.

We looked at the strength of Judy's claims last time. What are the issues Freddy may face with Bill?

First of all, Freddy has to allow Bill and Judy 14 days to vacate the house (because it is part of a service tenancy, the usual 30-day notice periods do not apply). Freddy cannot force Bill and Judy to move out immediately.

Second, regarding his employment, Bill can rightly claim that he has been unjustifiably dismissed. Freddy did not follow any procedure, nor does he have a good reason at law to end the relationship.

Bill can ask for reinstatement, compensation for hurt and humiliation, lost wages (at least the period of the fixed term and possibly more, as the fixed term agreement was never put in writing), benefits (for example, the value of the tenancy in the house) and legal fees.

Remember, the average award for hurt and humiliation is $7,500. Even if Bill gets reinstatement, which is the primary remedy, he may still be awarded compensation. To avoid being ordered to reinstate Bill, Freddy will have to show the Employment Relations Authority that reinstatement is not practicable. He will need to show that his trust and confidence in Bill has deteriorated to such an extent that he cannot work with Bill. In this scenario, this will be very hard to do.

Listening to his lawyer the first time? Cost: Some humiliation.
Not taking his lawyer's advice? Cost: $30,000-$60,000.
Not having reinstatement awarded? Cost: Priceless.


The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.
If you would like further information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser.
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