Accidental Termination of Employment Contracts

All businesses change over time, including health practices.

Change can mean an alteration to the roles and responsibilities of staff at all levels of management, including
executive directors and senior practising staff. Considerations need to be made regarding the effect that staff
changes will make on existing employee contracts. Employment contracts need to be flexible and can be
changed to meet expectations and/or circumstances of employer and employee.

However, significant changes to an employee’s remuneration, status or responsibilities could amount to a
repudiation of an employee’s contract, resulting in a potential claim for damages by the employee. The recent
case of Fishlock v Campaign Palace Pty Ltd (2013) NSWSC 531 (“Fishlock v Campaign Palace) provides an
example of necessary considerations when altering roles and responsibilities within the workplace.

In this particular case, the redistribution of an employee’s responsibilities was seen to indicate that the employer no longer wished to be bound by the employment contract, resulting in rejection of the contract.

Case History

Mr Fishlock commenced employment with Campaign Palace in 2003 as Chairman Executive Creative Director.
In this position, he also held the title of National Chairman Executive Creative Director, with responsibility for the Sydney and Melbourne offices, therefore overseeing the company’s creative direction nationwide.
In 2010, the company position of Creative Director in Sydney became vacant. Campaign Palace Management
considered a Mr Collins for the Sydney position; however Mr Collins indicated that he would only accept an
employment contract with Campaign Palace if he was appointed their National Creative Director. A series of
discussions between the applicant and senior management at Campaign Palace followed, resulting in Mr Collins being offered a contract for the newly created position of National Chief Creative Officer; Mr Collins was therefore appointed to lead all creative direction within the company at the national level.

Lack of communication

Mr Fishlock was not made aware of Mr Collin’s position until it was announced to the general public.
Subsequent discussions between Mr Fishlock and the management team at Campaign Palace did not go well.
Mr Fishlock argued that the creation of the position for Mr Collins indicated that Campaign Palace wished to
break Mr Fishlock’s employment contract.

Repudiation of contract

A reduction in an employee’s remuneration, status or responsibility may result in the repudiation of an
employment contract. This occurs when the conduct of one of the parties, express or implied, signifies a refusal to perform or fulfil the terms of the contract.

In the case of Fishlock v Campaign Palace, evidence submitted by Mr Fishlock showed that the scope of his
position demanded him to direct and control creative management of Campaign Palace at national level. The
creation of Mr Collin’s position as National Chief Creative Officer therefore indicated that some of the
responsibilities formerly undertaken by Mr Fishlock would be transferred to Mr Collins.

The court found that the creation of Mr Collin’s position signalled to Mr Fishlock that they no longer wished to regard him in the national creative position he had been employed to do, as stated in his employment contract. This resulted in repudiation of the contract between Mr Fishlock and Campaign Palace and Mr Fishlock had no alternative but to accept the repudiation and claim damages from Campaign Palace.

Employers’ consideration for employees

Distributing and re-distributing roles and responsibilities within the workplace requires planning and serious
deliberation.

Employers should consider not only changes to employees’ remuneration and/or titles, but also employees’
perceived status within the business, including their roles and responsibilities that fall within the scope of their
employment contracts.

An important aspect of the case of Fishlock v Campaign Palace is that Mr Fishlock had not been made aware of the creation of an additional creative direction position, or the affect this would have on his position within the company. This limited the negotiations that could have occurred between the parties, and when discussions did occur they ultimately broke down.

When deciding to redistribute employee roles and responsibilities within the workplace, employers should take time to consider and carefully discuss all proposed changes to those employees whose positions will be affected.

For further information or advice in relation to any issues connected to the above please contact
us at info@clinlegal.com.au

This article was written by Rebecca Hyde, Workplace Compliance Advisor at ClinLegal in Adelaide. Rebecca holds a Bachelor of Laws and Legal Practice (Hons) and a Bachelor of Behavioural Science (Psychology).

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