What if your employee suddenly walks out on you ?

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How would you manage an employee walking out without notice? This situation is frequent in Australia, more so in certain industries (hospitality, agriculture, construction). It is very hard for an employer to enforce the notice period set out in the employment contract. The Federal Circuit Court of Australia recently imposed a penalty of $2,550 on a former employee for failing to provide his employer with 2 weeks’ notice of termination as required under the relevant modern award (Jetgo decision).

This case related to a pilot whose employment contract contained an 8-week notice period. The applicable modern award stated that the employee was required to give 2 weeks’ notice. The employer paid for the employee to undertake training at the start of his employment and prior to giving him a promotion. Upon completing the training, the employee resigned without providing notice. He had been actively seeking and had obtained alternative employment before his resignation.

In determining the penalty to be imposed on the employee for breaching the modern award by failing to provide the required notice, the judge considered that:

  • the employee’s failure to provide notice was deliberate;
  • the penalty was to serve as reminder for employees that compliance with the law was not optional;
  • the breach attracted the need for deterrence in the penalty; and
  • by working his notice period, the employee could have transferred the benefit of the training to other employees and a successor could have been appointed to his position.

The penalty of $2,550 imposed by the court is 25% of the available maximum. The court required the penalty to be paid to the Commonwealth.

This is a potential avenue for employers with high staff turnover and regular walk outs. However if employers cannot recoup their costs and may not receive the benefit of the penalty, commencing proceedings for breach of an award may not be worth the effort.

Another option may be to insert a provision in employment contracts requiring employees who do not provide the required notice of termination to repay the employer wages for a period equivalent to the notice not given.

Don’t oversell your capabilities

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Over the years we have assisted many of our clients when responding to commercial tenders for the provision of goods or services. Care must be taken when responding to tenders to ensure compliance with the Australian Consumer Law (formerly Trade Practices Act 1974), which applies nationally to all Australian businesses.

Under Chapter 2 (General protections) of the Australian Consumer Law, certain standards of business conduct in the market have been laid out, including:

  1. a general ban on false, misleading and deceptive conduct in trade or commerce;
  2. a general ban on unconscionable conduct in trade or commerce and specific bans on unconscionable conduct in consumer and some business transactions; and
  3. a provision that makes unfair contract terms in consumer contracts void.

Suppliers of goods or services can be found liable if they make false, misleading or deceptive statements about their goods or services. A recent example can be found in the decision from the NSW Court of Appeal dated 3 September 2015. In this case, a technology manufacturer had made incorrect representations about the compatibility of its product with others used by the customer and the reseller had relied upon such representations in its tender to the customer. The manufacturer was found liable of misrepresentation regarding the technical capability of its product supplied as part of the tender process.

In addition to the above bans and protection, the Australian Consumer Law provides businesses with guaranteed rights. When a business purchases a good of a value of $40,000 or less, for use within the business, the law guarantees the product must be safe, durable, free from defects, fit for purpose, acceptable in appearance, match its description and match any sample or demonstration model.

For more information, visit www.consumerlaw.gov.au

Understanding commercial leases

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We are often engaged to advise tenants of commercial or retail leases. Here are some important points to keep in mind if you are thinking of entering into such lease.

What is it ? A lease is a legal agreement between a landlord and tenant for the use of the premises where the tenant intends to conduct their business. Once a lease is signed, the landlord and the tenant usually cannot end it without the other’s consent unless one party is in breach of its obligations.

What are the key elements ?

  • Start and end dates as well as any option granted to the tenant to extend the duration of the lease.
  • Description of the premises and use permitted under the lease.
  • Amount of rent payable as well as outgoings, bond, other security or guarantee.
  • Responsibility for repairs and maintenance of the property and equipment.
  • Core trading hours.

For how long ? Under the Retail Leases Act 1994, the minimum lease runs for five years, made up of the original term and any options. You can agree to a shorter lease period with the landlord within six months of starting the lease. Make sure the lease period is long enough for you to recover your investment, make a profit, and sell the business if you wish. A lease with fair terms and a long lease period is a valuable asset for both landlord and tenant. It helps improve the landlord’s investment in the property, and the tenant’s investment in the retail business.

For all activities ? Before signing the lease, you must check that the premises can be used for the business you want to run. You cannot use the shop for any other type of business without the landlord’s and council’s consent. If you are taking over a lease when buying a business, you should personally check with the council to make sure that approvals are in place, as well as receiving this assurance from the seller and the landlord.

KEY LEASE ACTIONS

  1. When you find a shop you want to rent: read the draft lease. Get advice.
  2. Seven days before you begin either a new lease or renew a lease: get a disclosure statement from the landlord.
  3. Seven days after you receive the landlord’s disclosure statement: give the landlord your disclosure statement, unless you have both agreed you will supply it later.
  4. Before you sign the lease: the landlord must tell you in writing whether they expect to do any works that may disrupt your business.
  5. After you sign the lease: you can waive the right to a five year lease term by giving a section 16 certificate in the first six months.
  6. You can end the lease in the first six months if the landlord did not give you a disclosure statement before you began the lease.
  7. If the landlord wants to move your shop due to building works, they must give you a relocation notice.

What happens at the end ? When the lease ends, the landlord can rent the shop to someone else. The landlord should give you a notice stating whether they plan to offer you a new lease or not. If the landlord does not issue a notice telling you whether there will be an offer of a new lease, write to them before the lease ends to ask for this notice. The landlord can allow you to stay in the shop after the lease ends. This is usually on a month-to-month basis, which either of you can end with one month’s notice. Unless you have a different arrangement with the landlord, by the end of the lease you must: remove all your property return the shop to the state required by the lease.

If the lease has an option to extend the duration, check your lease to see what you need to do to exercise the option and when it needs to be done. You must tell the landlord in writing before the end of the option period stated in the lease, whether you want to take up this option. If the option says that the lease is to be renewed or extended at the current market rent, ask the landlord in writing what the new rent will be. You have up to 21 days after they reply to exercise the option. If you miss these dates, you lose the right to the option.

If you decide to sell your business, you will usually want to transfer your lease to the buyer. You will need to secure the landlord’s prior approval to the assignment, which involves giving information to the landlord and to the new tenant in order to be released from the financial obligations of the lease. Check www.retail.nsw.gov.au for more information.