By Rhys Kingston Senior Associate | Australian Business Lawyers & Advisors

With the average Australian expected to work 16 different jobs in their lifetime, the reality is that no matter how thorough your recruitment processes may be, that latest hire isn’t going to be around forever. 

Whether it’s a resignation on day one, being poached by a competitor, or retirement after decades of service, all employment relationships will eventually come to an end.  

As any employment lawyer will tell you, while terminations may account for a small part of the ‘employment lifecycle’, they are responsible for the majority of legal disputes. 

For this reason, it is critical to consider the end of employment before it even begins and to ensure that your employment contracts are appropriately drafted to address various termination scenarios. 

This article looks at some of the termination related issues that should be considered when putting together an employment contract. 

 

Notice of Termination 

Under the National Employment Standards (NES), employers wanting to terminate a worker’s employment must provide them with a minimum period of notice (throughout which they can be required to continue working), or make a payment in lieu of said notice (essentially paying them what they would have earned had they worked throughout the notice period). The minimum period of notice ranges from one to five weeks, based on the employee’s length of service and, in some cases, their age. 

What many employers do not realise, however, is that the minimum period of notice set out in the NES acts as a minimum safety net that (and applies only to employer-initiated terminations). Modern awards and enterprise agreements may also contain terms dealing with notice periods, but these too operate as minimum safety nets. 

Where a contract doesn’t include an express notice period, courts will imply a requirement for ‘reasonable notice’ - a concept that takes into account various factors, such as the employee’s role, length of service, and seniority. Crucially, this implied notice period can far exceed the NES minimums. Courts may imply a requirement to provide employees with notice periods of three, six, or even twelve months, exposing employers to possibly significant, unexpected liabilities. 

While ‘reasonable notice’ claims by an employer are uncommon (the cost and effort of legal proceedings is likely to outweigh any benefit), the lack of a clear notice period can also cause uncertainty when it comes to employee-initiated terminations. Employees may assume they can resign and walk away immediately, leaving the business exposed. 

Clearly, the absence of express notice provisions can lead to significant legal and operational risks. Including clear, contractual notice periods—for both employer- and employee-initiated terminations—is a simple, effective way to provide certainty and protect your business. 

 

Gardening Leave 

In certain situations, an employer may wish to direct an employee not to attend work during their notice period. This is commonly referred to as gardening leave. During this period, the employee remains employed, is paid in full, and continues to be bound by their contract. 

Gardening leave is commonly used when an employee resigns to join a competitor. It can help protect the business by limiting access to sensitive information and delaying the employee’s ability to start work elsewhere. 

However, courts have found that without an express contractual provision, employers may not be entitled to place an employee on gardening leave. Whether or not the courts will find there is an inferred term allowing the employer to placer an employee on gardening leave will depend on the specific circumstances of the case. 

Additionally, if an employee receives non-monetary benefits (e.g. a company car, laptop, or phone), the employer may be required to continue providing these during gardening leave—unless the contract explicitly states otherwise. 

 

Policies and Procedures  

Many workplaces will have policies and procedures that relate to termination. These may include policies/procedures dealing with: 

  • redundancy processes (e.g. specific procedures including consultation and redeployment processes); 
  • poor performance (e.g. performance managements procedures including the use of performance improvement plans); and 
  • misconduct (e.g. disciplinary procedures). 

Employment contracts should include clauses requiring employees to comply with workplace policies as directed, while also clarifying that those policies do not form part of the employment contract. 

Without such a clause, there is a risk that the policies may be deemed contractual. This carries two significant consequences: 

1. the employer may be unable to amend policies and procedures without employee consent; and 

2. a failure to strictly follow policies/procedures during employment (and in particular, in any steps taken leading up to termination) could expose the employer to breach of contract claims. 

 

Post Employment Restraint Clauses 

Courts have long acknowledged that employers have legitimate reasons to restrict certain post-employment conduct. Common forms of restraint clauses include those that prohibit former employees from: 

  • using confidential information (e.g. customer lists, pricing, or business strategies); 
  • misrepresenting ongoing association with the business; 
  • soliciting clients, customers, or staff; or 
  • joining or starting a competing business. 

While the courts have accepted that there can be a legitimate basis for restraint clauses, they will generally only enforce them if there are legitimate business interests that require the protection of the restraint clause. 

For this reason, it is essential that any post-employment restraint clauses are drafted carefully, with consideration to the reasons behind the restraint, as well as the geographical scope and duration. 

As part of the 2025-2026 Federal Budget announcement, the Government announced plans to ban non-compete/restraint of trade clauses for employees paid less than the high-income threshold (currently $175,000 per year). 

While full details are yet to be revealed, post-employment restraints are likely to be a hot topic and subject to additional scrutiny in the coming months.