Home - Fixed-term contracts need clarity about what happens when the term ends

UpdatesAug 03, 2016

Fixed-term contracts need clarity about what happens when the term ends

Is it fair to simply part ways at the end of a fixed-term employment contract? If it isn’t, why would you hire someone on such a contract.

By Charles Power

Is it fair to simply part ways at the end of a fixed-term employment contract? If it isn’t, why would you hire someone on such a contract.

A person employed under a contract of employment for a specified period of time whose employment has terminated at the end of the period cannot make an unfair dismissal claim under the Fair Work Act 2009 (Cth) (FW Act).

If you are subject to an unfair dismissal claim and you believe the claim is barred by reason of the above exemption, you can ask the Fair Work Commission (FWC) to dismiss the claim. In this jurisdictional objection, the onus will be on you to show that a reasonable person, in the circumstances, having read the contract, would have considered that he or she had entered into a fixed term contract.

Clear words are necessary to satisfy this test. Where there is ambiguity, a principle of contractual interpretation would normally require the adoption of the meaning that is least favourable to the party who drafted the contract, which will in most cases be you. In other words … if in doubt, you lose!

In Fraser v Act for Kids (2016), an employer argued an unfair dismissal claim could not proceed because the claimant was employed under a contract of employment for a specified period of time and the employment had ended because that period had expired.

Relevant terms

The written contract included the following relevant terms:

Your employment will be full-time from 30 March 2015 to 1 April 2016.

“Your ongoing employment is subject to the continued Government funding of the role… Should this funding cease prior to the expected end date of 31 December 2017 your employment will be terminated at the time the funding ceases.

A probation period will apply for the first six months of your employment. During this time we will assess your progress and performance in the position.

During the probation period you or the employer may end your employment by providing notice in accordance with the table in the Termination of Employment clause below.

This table replicated the FW Act’s NES provisions. The contract then went on to provide:

If you wish to terminate your employment you are required to provide the employer with prior notice in accordance with the table above. In exceptional circumstances Act for Kids reserves the right to terminate an employee without notice.

Employee’s claim

The employee claimed the phrase “Your employment will be full-time from 30 March 2015 to 1 April 2016” meant that her employment during the period 30 March 2015 and 1 April 2016 would be full-time and that her employment beyond 1 April 2016 could be part-time or casual.

The FWC agreed the phrase was ambiguous and could mean the employee’s full-time employment will be to 1 April 2016.

The FWC also noted other terms in the contract that were inconsistent with fixed-term employment, including the termination clause entitling early termination by both the employer an employee, and a remuneration clause stating, “Your remuneration will be reviewed annually, and may be increased at the employer’s discretion.”

Furthermore, the additional paragraph commencing, “Your ongoing employment is subject to … prior to the expected end date of 31 December 2017… ” provided for additional ambiguity and uncertainty as to whether the term was for a fixed period ending on 1 April 2016.

The FWC ruled the ambiguity should be resolved in favour of the applicant and determined that the unfair dismissal claim should not be barred.

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