A breach of employment contract occurs when an employer fails to keep to the terms of an employment contract. Where such a breach occurs, an employee may be entitled to sue for the damage suffered as a result of the breach. Employment contracts may be created orally, in writing, or be partly oral and partly written. Employment contracts can also include terms found in other documents, including awards, agreements, and job descriptions.

The usual remedy for breach of contract is the awarding of damages. In rare cases you can seek an injunction to stop a termination of employment that is a breach of your employment contract, or to reinstate you if you have been suspended from work. We can advise you about your rights under your employment contract and what you can do if your employer breaches the contract.

Nikolich v Goldman Sachs

Nikolich v Goldman Sachs [2006] FCA 784 and [2007] FCAFC 120

Mr Nikolich was a financial advisor with Goldman Sachs who brought a claim for breach of contract in relation to his supervisor’s bullying and harassment, alleging that it breached the workplace bullying and harassment policy.

The Court held that the company policy, sent to the employee at the same time as the letter of appointment, formed part of the employment contract with Mr Nikolich.

In making its decision, the Court referred to a number of factors that indicate a company policy as being contractually binding rather than being merely aspirational:

  • promissory language, such as “comply” and “abide”;
  • obligatory language, such as “duty” and “ensure”; and
  • a specific reference to obligations, rather than a general reference to obligations.

The Court also considered it highly relevant that the employee was required to sign off on the document to stipulate that he had read and understood the policy.

The Court awarded Mr Nikolich over half a million dollars in compensation.

Heugh v Central Petroleum Ltd

Heugh v Central Petroleum Ltd [No 5] [2014] WASC 311 

Mr Heugh was the former chief executive of the ASX listed Central Petroleum Ltd.

The company's board and Mr Heugh had disagreed on the performance capabilities of another employee to take on business building responsibilities. The board ultimately issued a resolution that the employee be allowed to undertake the responsibilities. Subsequently Mr Heugh directed the employee not to undertake the additional responsibilities and issued the employee with a written warning.

Mr Heugh’s employment contract contained a clause requiring him to be given written notice of any serious breach of contract and an opportunity to rectify the breach.

The board directed Mr Heugh to retract the employee’s written warning, apologise and follow the board’s previous resolution. Mr Heugh undertook these steps rectifying his initial non-compliance with the board’s previous resolution, however the board terminated his employment.

The Court awarded Mr Heugh nearly $1.6 million dollars in damages for breach of an express term of his employment contract.

Why senior execs should take a closer look at their contracts