Administrators lack faith: when termination of an employee can go wrong for an Administrator

The recent decision of South Head & District Synagogue (Sydney)(Administrators appointed) [2017] NSWSC 823 is a wake up call to Administrators and how they handle employees, particularly employees whose contracts contain particular religious belief systems or individuals who hold an office. 

In this decision, His Honour Judge Brereton granted injunctive relief to a Rabbi preventing his wrongful termination from taking effect. The injunction was granted on the basis that the termination had been not in accordance with the provisions of his employment contract. The Judge also ordered the Rabbi’s reinstatement to his role. The sting in the tail for the Administrators, who sought to defend their position of termination, was that they were also ordered to pay the other party’s costs.

So how did this happen?

Well, in brief, the Rabbi was appointed to a synagogue. The membership of the synagogue had declined and the Board of the Synagogue decided to call in Administrators to deal with the synagogue’s financial position. The Rabbi in question had been paid, over successive years sums between $600,000 and $900,000 in remuneration. Understandably, when the Administrators were appointed, they examined the books and records and decided that the Synagogue could not continue to pay the Rabbi the annual earnings he had received in years gone by.

In these circumstances, the Rabbi was terminated. It was alleged, also as an aside, that his termination was due to misconduct.

The fly in the ointment was the Rabbi’s contract of employment. It explicitly stated that the orthodox law of Halacha applied to the contract and this meant that:

1. The Rabbi was entitled to life tenure; and
2. The Rabbi could only be dismissed if the dismissal took placed in accordance with a judgment pursuant to a Din Torah.

Whilst the Administrators sought declaratory relief that the orthodox Jewish law did not apply, the Judge ultimately found that it did, because its reference was sufficiently certain. In addition, he decided that the Rabbi could not be removed because he held a tenured position. This tenured position belonged to the Rabbi even if he was not remunerated.

Key points for insolvency practitioners

1. Ensure that the reason for termination and the method of termination complies with the terms of the employment agreement;
2. Consider whether the individual in question, such as a Rabbi, holds tenure, and therefore can be properly terminated as an ordinary employee.
3. If in doubt, get legal advice.

Key points for religious organisations

1. Ensure that if you have a certain method of termination according to your faith or religious beliefs, this should be expressly included in the employment agreement.
2. Ensure that any individuals who you intend to be tenured are expressly stated to be so.
3. Uncertainty is death.
4. If in doubt, get legal advice.

If you have queries regarding whether you can terminate an individual or need help with the drafting of an employment contract, then contact Adam Foster at Lewis Holdway Lawyers on (03) 9629 9629.