When ending an employment relationship, the path is often tricky, risky and lengthy. The decision on how to proceed with termination of an employee in breach of their employment contract or their inadvertence to fulfil their obligations under the employment contract, tend to reflect toward the principles of repudiation of contract.

When an employer repudiates a contract, they are often subject to unfair dismissal claims by employees for remedies and/or damages for breach of contract. Repudiation can also be referred to as constructive dismissal.

Repudiation arises when a party under a contract (written or verbal) engages in conduct that portrays a failure or reluctance to be bound by the terms of the employment contract. Repudiation by an employer:

• entitles an employee to terminate an employment contract without notice and causes end to the employment relationship

• entitles an employee to seek legal remedies including compensation (as available)

• ceases contractual obligations enforced on the employee  

• signifies a dismissal under the unfair dismissal and general protections provisions of the Fair Work Act 2009 (Cth) (FW Act). 

The principle of repudiation was established in a full bench decision of the Fair Work Commission in Gelagotis v Esso Australia Pty Ltd (2018)[[1]] (Gelagotis):

“The test for repudiation is whether the conduct of the employee is such as to convey to a reasonable person, in the position of the employer, renunciation either of the contract as a whole or of a fundamental obligation under it. The issue turns upon objective acts and omissions and not on uncommunicated intention.”

It is significant for employers to observe and fulfill the terms under their employment contracts with their employees. If an employer no longer wishes to be bound under a contract, best practice suggests attempting to reach a mutual agreement with the employee to amend the employment contract.

There are always risks in doing so and BG Legal & Advisory’s employment lawyers are readily able to assist employers concerned with any claims for repudiation under contract or any such employment related issues. 

[1] Gelagotis v Esso Australia Pty Ltd [2018] FWCFB 6092 at [119]

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*