Did You Renew the Last ‘Maximum Term Contract’ – If Not, Be Prepared to Fight an Unfair Dismissal Action
Mike Baldwin, Special Counsel, Kott Gunning Lawyers
A recent decision of a the Fair Work Commission (see Khayam v Navitas English Pty Ltd t/a Navitas English FWCFB 5162), has thrown the orthodox thinking that upon expiry of a maximum term contract, an employee was jurisdictionally barred from pursuing an unfair dismissal.
Instead, it found that the expiry of a maximum term contract at its nominal expiry date was not a dismissal, as the termination was not at the initiative of the employer.
Mr Khayam was employed by Navitas on a series of maximum term contracts over a number of years. At the conclusion of the last contract, given concerns over his performance, a new contract was not entered into. Navitas allowed the maximum term contract to expire thinking that this decision would not have a deleterious impact on the organisation.
In contrast, Khayam contended that his employment had been terminated at the initiative of the employer, rather than the effluxion of time and therefore, he was entitled to make an application for unfair dismissal. At first instance, a single commissioner in applying Lunn found for Navitas. On appeal the Full Bench found that it raised an arguable case of error concerning the application of Lunn to the unfair dismissal provision of the Workplace Relations Act 1996 and that its reasoning had not been applied to the relevant provisions of the Fair Work Act 2009 (Act).
In finding for Khayam, the Full Bench held that the correct view was to examine the employment relationship, rather than the termination of the maximum term contract.
So, not renewing on the basis of the effluxion of time, is now seen as a termination of employment at the initiative of the employer. Meaning, the employee can access the unfair dismissal jurisdiction.
Where does this leave employers?
Employers that utilise this type of instrument, are advised to undertake a complete review of their contracts as the likelihood of exposure could be quite high.
Consideration should be given to converting the shorter maximum term contracts into a fixed term, thereby preserving the statutory exclusion to the unfair dismissal jurisdiction. For contracts of a longer term nature, employers will need to have developed a risk management protocol for managing and ending these types of contractual arrangements, so as to lessen their exposure to unfair dismissal litigation.
The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.