The Industrial Relations Act 1996 (NSW) ("the Act") provides that non-award employees earning above the statutory maximum (as at 1 July 2003 - $85,400) are precluded from commencing an action for unfair dismissal in respect of the termination of their employment.

In many instances employees were circumventing this by relying upon section 106, which dealt with unfair contracts, and where no such monetary exclusion applied (prior to 24 June 2002), to essentially argue a claim for unfair dismissal.

The NSW Government in 1998 introduced a new section 109A in an effort to prevent employees circumventing the restrictions imposed on claims for unfair dismissal. Despite this stated intention, the recent decision of the Full Bench of the NSW Industrial Relations Commission in Beahan v Bush Boake Allen Australia Limited (2000) 47 AILR 5-245 has confirmed that notwithstanding these amendments, it remains possible for employees to bring an action under the unfair contracts provisions. The NSW Industrial Relations Commission held that:

“…s109A operates to exclude a contract of employment from the operation of s106 only where the unfair contracts claim is an unfair dismissal claim in disguise and where essentially it is of the nature of an unfair dismissal. Where a claim challenges the terms or operation of a contract of employment by genuine, not superficial or coloured, reasons related to the contract itself then, in our view, it is a claim properly within s106 and s109A has no operation in relation to it.”

Thus although an employee excluded by the criteria for unfair dismissal would not be able to challenge the unfairness of the termination in a claim based on section 106 (the unfair contracts provisions) they could assert that the terms of their contract were unfair eg. the terms of an employment contract may be unfair if they do not provide for an adequate period of notice or payment in lieu of, or no provision has been made for severance payments in the event of redundancy.

An advantage of relying upon section 106, as opposed to the unfair dismissal provisions, is that there is no limit on the amount of compensation that may be awarded where the terms of an employment contract are found to be unfair. Whether an individual is able to utilise section 106 will, however, depend upon the particular circumstances surrounding the termination of their employment.

The ability to rely upon S106, however, has since been restricted by legislative changes that came into effect on 24 June 2002. One of the most significant changes was to introduce a salary cap which means that employees whose remuneration package exceeds $200,000 cannot bring an unfair contracts claim. This limitation effectively means that employees options for disputing the fairness of their employment contract are further restricted and places the onus on such employees to ensure their employment agreement is fair before entering into it.

FURTHER INFORMATION 

This Information Outline is provided courtesy of Matthews Folbigg who are experienced in this area of law. They are located at Level 7 The Barrington, 10-14 Smith Street, Parramatta NSW 2124 or call them on (02) 9635-7966 if you would like more information on this legal topic, or you wish to obtain formal advice regarding your situation.

MatthewsFolbigg is a large commercial law firm based in Parramatta, New South Wales. The firm has Accredited Specialists in Business Law, Property, Immigration, Family Law and Personal Injury. MatthewsFolbigg has specialist groups advising clients in corporate structures, intellectual property, and information technology plus franchising, estate planning and insolvency work.