Theories of termination of the contract of employment: the Scylla and Charybidis.

Abstract

The principles governing the termination of a contract of employment are problematic. Decisions both in Australia and England continue to reveal an unresolved dilemma between the 'automatic' and 'elective' theories of termination, the outcome of which can have important practical consequences. It is argued that the courts are not consistent in their application of these theories, and that each lacks coherence. For example, neither properly accommodates the principle that a readiness and willingness to work provides consideration for wages. Accordingly, the general rule that a wrongfully dismissed employee is only entitled to damages representing the value of wages not earned during the contractual notice period needs to be reconsidered. This article proposes that an exclusive reliance on either theory will be misconceived. It is further argued that terms of the contract end according to different rules depending on their nature, and that these rules recognise a role for public policy.