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Implied terms in employment contracts: Court of Appeal finds employment contract should not to be interpreted subject to Jewish law

The Supreme Court of New South Wales – Court of Appeal (Court of Appeal) overturned the earlier Supreme Court decision in In the matter of South Head & District Synagogue (Sydney) (Administrators appointed) [2017] NSWSC 823 (see earlier case note: Supreme Court decides employment contract dispute based on Jewish law).

The case concerned a Chief Rabbi who had been employed with South Head & District Synagogue (Sydney) Ltd (the Company), which subsequently went into voluntary administration. The administrators then purported to terminate the Chief Rabbi’s employment on the grounds of redundancy. However, there was no provision on how the Rabbi’s employment contract could be terminated in the contract. During the proceedings, the administrators abandoned the argument that the employment contract could be terminated for “redundancy” and instead claimed the contract was subject to an implied term that termination was valid with reasonable notice. The Chief Rabbi argued the contract was subject to Halacha under Jewish law and he was employed with a life tenure (Hazakah). Life tenure was only terminable if a judge of the Din Torah justified the termination under the usages, practices and traditions of Judaism.

The Supreme Court in 2017 found the purpose and terms of the contract suggested that life tenure was intended to be a contractual term “by implication if not by incorporation”. If life tenure was not a contractual term, this would be “antithetical to the Orthodox Jewish life to which the company, the Rabbi and the congregation all subscribed”.

Consequently, the Supreme Court held the termination was void.

The administrators appealed the decision. They argued firstly that reference to “the congregation” in the contract did not mean the Company. If the reference was to the Company, the administrators argued it did not incorporate Hazakah into the Rabbi’s terms of employment. This was on the basis that the clause in question did not reference the principles of Hazakah and there was no certainty or clarity as to whether Hazakah was meant to be incorporated.

Alternatively, the administrators argued that if Hazakah was a term, it was void for ousting the jurisdiction of the court by requiring termination to be determined by a Beth Din.

The administrators also argued Hazakah could not be implied as either necessary or by custom.

Decision

The Court of Appeal overturned the Supreme Court’s decision. It was found by the Court of Appeal that while a specific provision of another system of law may be incorporated into a contract, it was necessary for there to be certainty over what was being incorporated.

The Court held that in ordinary language, the meaning of congregation was a “community of people worshipping at a particular synagogue or church”. The language and wording of the clause in question was held to be “in the nature of a recital” and was meant to record the position between the Rabbi and his congregation in a way that did not give rise to legal obligations.

The Court of Appeal disagreed with the Court’s decision at first instance that it was “inconceivable” for Hazakah to not be a binding, contractual term. The Court of Appeal noted the clause in question made no reference to Hazakah or to any contractual or financial relationship between the Rabbi and the Company.

It was found by the Court of Appeal that Hazakah could not be an implied term to the contract. It could not be implied by the express words of the contract or by “contracts between a Rabbi and his congregation as a matter of Australian law”. The application of Hazakah would impose an onerous and unusual financial obligation. Imposing such a burden was not appropriate where it was not necessary to give the contract business efficacy, and where there was no evidence that the term was custom in contracts between a Rabbi and his community.

Key issues for employers

This case demonstrates the importance of using express terms in employment contracts. This assists in making it clear to both employers and employees what their obligations are. If employers wish to incorporate another system of law into a contract, it is essential that the contract is clear and the provisions to be incorporated are identified with certainty.

Employers should also be aware of any common practices within the industry. Such practices may affect the contractual terms of an employee.

Read the full decision here

* PCC Employment Lawyers are a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training. They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.

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