Under the Fair Work Act 2009 (Cth) (FW Act), a person must have been dismissed in order to access the unfair dismissal jurisdiction (and assuming the other eligibility requirements are met). A dismissal will occur if the worker’s employment with their employer is terminated at the employer’s initiative.
But the FW Act states a person will not be dismissed if the person was employed under an employment contract for a specified period of time, and the employment has been terminated at the end of the period.
Termination at the initiative of the employer is a reference to a dismissal that is brought about by an employer and which is not agreed to by the employee.
If the employee hasn’t left voluntarily, the question is whether an action on the part of the employer was the principal contributing factor which results, directly or consequentially, in the termination of the employment.
Non-renewal of a fixed-term contract
In the recent Full Bench decision Khayam v Navitas (2017), the Fair Work Commission (FWC) had to determine whether a person engaged under a series of fixed-term contracts had been dismissed within the meaning of the FW Act and was therefore able to access the unfair dismissal regime.
At the end of the term of the last of those contracts, the employer decided not to offer the employee a further contract due to concerns it had regarding his performance.
The FWC ruled that in order for the employment to be for a “specified period of time”, the contract must reflect that the employment relationship ceases at the end of the specified period, not just when the contract finishes.
Otherwise, when an employment relationship is constituted by a sequence of fixed-term contracts, then the termination that occurs at the end of the term of the last of those contracts may be said to be in relation to the contract only (i.e. not the employment relationship).
In these circumstances, the termination may be said to be at the initiative of the employer and an employee will be able to access the FW Act unfair dismissal scheme.
Where a fixed-term contract reflects a genuine agreement on the part of the employer and employee that the employment relationship will not continue after a specified date, when the cessation of the employment relationship comes on that date it will not be at the initiative of the employer.
However, the situation may be different in the following circumstances:
- where the contract is a sham i.e. the parties didn’t intend to give legal effect to its apparent terms or had the purpose of preventing access to the FW Act unfair dismissal scheme;
- where, during the term of the employment relationship, the employer engaged in conduct or made representations to the employee that the employment would continue subject to conduct and performance notwithstanding a contractual time limit on the employment; and
- the terms of the fixed-term contract are inconsistent with the terms of an award or enterprise agreement given effect by the FW Act, which prohibit or regulate fixed-term employment. In which case, the terms of the award or agreement would prevail over the contract.
Unambiguously employed for a specified period of time
A contract of employment for a specified period of time must have the following unambiguously identified by a term of the contract:
- time of commencement, either by the contract stating a definite date or the time or criterion by which it is to be fixed;
- time of completion, either by the contract stating a definite date or the time or criterion by which it is to be fixed; and
- duration of the contract of employment.
An employment contract will not be for a specified period of time if the terms of the contract provide:
- that it is to run for an indeterminate period of time; or
- there are unqualified rights to terminate the contract of employment early (as opposed to a right to terminate early that is conditional on there being a breach of any term of the contract); or
- it is the second or subsequent contract in a series of specified period contracts that is entered into merely for administrative convenience, and there is no break in the continuity of contracts (except for a period of leave).
In the Navitas case, the employment contract provided for an unqualified right for either party to terminate the contract on four weeks’ written notice or for Navitas to terminate on the provision of four weeks’ pay in lieu of notice.
Therefore, it was not a contract of employment for a specified period, or a fixed-term contract.
Are you now thinking about your contracts – especially the fixed-term ones – and becoming concerned?
The Employment Law Practical Handbook chapter on contracts (one of more than 70 in the Handbook) outlines exactly how to determine what type of contract is operating between you and your contractor/employee.
It explains that the issue of what kind of contract is operating is not resolved by asking the parties their thoughts on the nature of the relationship, but by asking what a reasonable person would think was intended, having regard to the following:
- what the parties said or wrote would be the agreed terms of the contract at the time of making the contract;
- the circumstances known to both parties at the time the contract was made, how and why they came to deal with each other, and their respective status and relationship with one another; and
- the subject matter of the agreement.
The chapter also discussed fixed-term contracts and includes a checklist to help you determine the validity of your contract and what the courts will be looking for in a contract of this nature.
It is so important to get these details right at the start to avoid potential court battles at the contract’s conclusion.