Employment ending by time not employer actions

This portion of an unfair dismissal case decision deals with the legal implications in the fair work system of the distinction between a dismissal and a contract ending with the effluxion of time.

 

“The legislative framework

 

[17] The Commission can order a remedy for unfair dismissal if the Applicant was protected from unfair dismissal at the time of being dismissed, and the Applicant was unfairly dismissed.12  Both limbs of s.390 of the Act must be satisfied; both referring to the Applicant being dismissed. Further, s.385 (a) of the Act provides that a person is unfairly dismissed if the Commission is satisfied that the person has been dismissed. Therefore, a threshold issue to determine is whether Mr Wibowo was dismissed from his employment. Section 12 of the Act defines dismissed with a reference to s.386 of the Act. Relevantly, s.386 of the Act provides:

 

“386  Meaning of dismissed

 

(1)          A person has been dismissed if:

 

(a)          the person’s employment with his or her employer has been terminated on the employer’s initiative; or

 

(b)          the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.

 

(2)          However, a person has not been dismissed if:

 

(a)          the person was employed under a contract of employment for a specified period of time, for a specified task, or for the duration of a specified season, and the employment has terminated at the end of the period, on completion of the task, or at the end of the season; or

 

(b)          the person was an employee:

 

(i)            to whom a training arrangement applied; and

 

(ii)           whose employment was for a specified period of time or was, for any reason, limited to the duration of the training arrangement;

 

and the employment has terminated at the end of the training arrangement; or

 

(c)           the person was demoted in employment but:

 

(i)            the demotion does not involve a significant reduction in his or her remuneration or duties; and

 

(ii)           he or she remains employed with the employer that effected the demotion.

 

(3)          Subsection (2) does not apply to a person employed under a contract of a kind referred to in paragraph (2)(a) if a substantial purpose of the employment of the person under a contract of that kind is, or was at the time of the person’s employment, to avoid the employer’s obligations under this Part.”

 

[18] A person is dismissed if the employment has been terminated at the initiative of the employer,13 unless the person was employed under a contract of employment for a specified time ……and the employment was terminated at the end of the period.14 Mr Wibowo contends that he was dismissed pursuant to s.386(1)(a), and that the second fixed term contract was either not captured by s.386(2)(a) or in the alternative is excluded by s.386(3). The Respondent submits that s.386(2)(a) applies to the outer limit contract expressed as a fixed term contract and agreed to by Mr Wibowo, and the employment relationship ended by way of effluxion of time. Both ss.386 (2) (a) and (3) are relevant to these proceedings.

 

Consideration

 

[19]       The leading authority on fixed term and outer limit contracts, and relevant to this matter, is Alouani-Roby v National Rugby League.15 The Federal Court judgement of Justice Rapper found the Full Bench of this Commission did not err on the question before it and determined that “Mr Alouani-Roby’s employment was not terminated on the NRL’s initiative but rather by reason of Mr Alouani-Roby’s fixed term Contract expiring.”16 Justice Rapper carefully summarised the legal principles to be taken into account, and where relevant, distinguishing authorities. Importantly, it was affirmed that there is no prohibition of maximum term contracts but that maximum term contracts are appropriate in particular fields or industries. Further, that “s.386(2)(a) applies to outer limit contracts which allow for early termination but only applies where the employee’s employment has been terminated at the end of the specified period of time.”17

 

[20]       The Full Bench of this Commission determined on appeal that Mr Alouani-Roby was engaged under a series of maximum term contracts of employment and the terms of the final contract reflected a genuine agreement between the parties that the employment relationship would come to an end at the end of the contract period; the employment ended with the effluxion of time upon the expiry of the contract and that he was not dismissed within the meaning of s.386(1)(a) of the Act.

 

[21]       Mr Wibowo’s contract of employment specified a period of time but with an unqualified right to terminate the employment with notice. For this reason, like Mr Alouani-Roby, Mr Wibowo’s contract of employment is not a contract for a specified period of time but an outer limit or maximum term contract of employment. As in Khayam v Navitas18 and Alouani-Roby19 maximum term or outer limit contracts are captured by s.386(2)(a) of the Act.

 

[22]       Mr Wibowo was subject to two maximum term contracts. Both contracts were tendered in evidence, both parties agreed to the terms and clearly understood the end date to be 31 December 2023. On 31 December 2023, Mr Wibowo’s employment terminated on the outer limit date of the contract of employment. The Full Bench in Alouani-Roby20 affirmed that termination at the initiative of the employer is a reference to the employment relationship and not a reference to the contract of employment in s.386(1)(a) as was held by the majority in Khayam v Navitas and the Full Bench further referenced the relevant principles at [75] in Khayam v Navitas.

 

[23]       The majority in Khayam v Navitas21 held:

 

“[75] we consider that s 386(1)(a) should be interpreted and applied as follows:

 

(1)          The analysis of whether there has been a termination at the initiative of the employer for the purpose of s 386(1)(a) is to be conducted by reference to termination of the employment relationship, not by reference to the termination of the contract of employment operative immediately before the cessation of the employment. This distinction is important in the case of an employment relationship made up of a sequence of time-limited contracts of employment, where the termination has occurred at the end of the term of the last of those contracts. In that situation, the analysis may, depending on the facts, require consideration of the circumstances of the entire employment relationship, not merely the terms of the final employment contract.

 

(2)          As stated in Mohazab, the expression “termination at the initiative of the employer” is a reference to a termination that is brought about by an employer and which is not agreed to by the employee. In circumstances where the employment relationship is not left voluntarily by the employee, the focus of the inquiry 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.

 

(3)          In Mahony v White the Full Court stated that a termination of employment may be done at the initiative of the employer even though it was not done by the employer. In circumstances where the parties to a time-limited contract have agreed that their contract will expire on a specified date but have not agreed on the termination of their employment relationship, it may be the case that the termination of employment is effected by the expiry of the contract, but that does not exclude the possibility that the termination of employment relationship occurred at the initiative of the employer – that is, as a result of some decision or act on the part of the employer that brought about that outcome.

 

(4)          Where the terms of an operative time-limited contract reflect a genuine agreement on the part of the employer and employee that the employment relationship will not continue after a specified date and the employment relationship comes to an end on the specified date, then, absent a vitiating or other factor of the type to which we refer in (5) below, the employment relationship will have been terminated by reason of the agreement between the parties and there will be no termination at the initiative of the employer. Further, in those circumstances a decision by the employer not to offer any further contract of employment will not be relevant to the question of whether there was a termination of employment at the initiative of the employment. The decision not to offer further employment is separate and distinct from the earlier agreement between the parties to end the employment relationship on a particular date (Griffin/Fisher). However if the time-limited contract does not in truth represent an agreement that the employment relationship will end at a particular time (as, for example, in D’Lima), the decision not to offer a further contract will be one of the factual matters to be considered in determining 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.

 

(5)          In some cases it will be necessary to go further than just examining the terms of any contract in which the parties have ostensibly agreed to terminate the employment relationship at a particular time. It is not necessary or appropriate that we attempt to identify exhaustively all relevant matters, but the authorities to which we have earlier referred indicate that the following are likely to be relevant and may in some cases be determinative:

 

(a)          The time-limited contract itself may be vitiated by one of the recognised categories by which the law excuses parties from performance of a contract. The categories potentially relevant in an employment context include the following:

 

  • the employee entered into the contract as a result of misrepresentation or misleading conduct by the employer;

 

  • the employee entered into the contract as a result of a serious mistake about its contents or subject matter;

 

  • there has been unconscionable conduct associated with the making of the contract, which may relevantly include that the employer took advantage of a disability affecting the employee such as lack of education, lack of information, lack of independent advice or illiteracy;

 

  • the employment contract was entered into by the employee under duress or coercion (which might include the types of coercion prohibited in ss 343(1)(a), 348 and 355) resulting from illegitimate pressure on the part of the employer;

 

  • the employee lacked the legal capacity to make the contract; or

 

  • the contract was a sham in the sense that it was not intended by the parties to give legal effect to its apparent terms or in the broader sense dealt with in Pt 3-1 Div 6 of the FW Act. If any of the above applies there will be no legally effective time-limit on the employment (Fisher).

 

(b)          The time-limited employment contract may be illegal or contrary to public policy (for example, it contains relevantly objectionable terms as defined in s 12 of the FW Act or has the purpose of frustrating the policy or operation of the FW Act or preventing access to the Commission’s unfair dismissal jurisdiction). Whether the employment was constituted by successive short term contracts or the use of time-limited contracts was appropriate in the relevant field of employment may be some of the considerations relevant to an examination of the employer’s purpose for entering into such contracts (D’Lima/Fisher).

 

(c)           The contract may have been varied, replaced or abandoned by way of a separate agreement, whether in writing and/or orally, such that its ostensible time limit no longer applies (Fisher).

 

(d)          The employment contract may not be limited to the terms of a written document and may, for example, be one of a series of standard-form contracts which operated for administrative convenience and did not represent the reality or the totality of the terms of the employment relationship (Fisher/D’Lima).

 

(e)          During the term of the employment relationship the employer may have engaged in conduct or made representations (for example, representing to the employee that the employment will continue subject to conduct and performance notwithstanding a contractual time limit on the employment) which provide a proper legal foundation to prevent the employer from relying upon the terms of the contract as the means by which the employment relationship has been terminated (Fisher).

 

(f)           The terms of the contract time-limiting the employment may be 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 will prevail over the contract (Fisher).”

 

[24]       In relation to the above principles, Mr Wibowo’s contract of employment and the employment relationship concluded on 31 December 2023, consistent with the express and agreed terms of the second maximum term contract which also extended the first maximum term contract for a clear and unambiguous term. Mr Wibowo’s employment commenced on 21 February 2022, and the first contract was extended verbally with the agreement committed to writing on the Monday immediately following the end of the first contract. The uncontested evidence of the Respondent was that Mr Wibowo was engaged to perform work on a project, which required further work leading to the extension. There was no evidence of an offer or suggestion communicated to Mr Wibowo that an ongoing employment relationship would continue; rather the specified time was in express terms. I accept the uncontested evidence of Mr Lo and Ms Askew regarding the proper purpose of the fixed term contracts and the events leading to its end with the effluxion of time does not support the contention that its purpose is to avoid unfair dismissal obligations under the Act. Additionally none of the actions of the Respondent could be seen to constitute action to bring the employment to an end, rather it ended per the agreement of the parties as reflected in the maximum term contract. Further the various contentions of Mr Wibowo lacked any evidence in support of ongoing employment and an outer limit contract that expires does not warrant consultation or severance payment. The Respondent’s action to remind Mr Wibowo of the pending ending date cannot be construed as termination at the initiative of the employer.

 

[25]       In relation to principle two, while Mr Wibowo was displeased that the Respondent did not extend the maximum term contract for a further period. The contract clearly sets out the agreed terms, that is that the period of the employment relationship comes to an end on 31 December 2023, unless terminated at the initiative of the employer with notice prior to its end date.

 

[26]       No factual circumstances exist, taking into account principle three, where the termination can be construed at the initiative of the employer, even though it was not done by the employer.

 

[27]       The contract of employment reflects a genuine agreement based on the factual realities of the workplace; no evidence was brought to conclude otherwise.  In fact, Mr Lo confirmed in writing to Mr Wibowo after at least two verbal discussions of the absence of any decision to extend the contract, despite the preference of both Mr Wibowo and Mr Lo to do so. Mr Lo was not the decision maker, and this was evident to Mr Wibowo. Unless there are vitiating circumstances, the decision by the employer not to offer a further contract is not a termination of the employment relationship at the initiative of the employer.

 

[28]       Principle five concerns the vitiating factors that may be relevant in law to excuse the parties from performance of the contract. While not necessarily exhaustive, the factors identified in subsection (5) (a) – (f) are not relevant to this matter, there being no evidence to find the contract was not intended to apply or ought not to apply in respect to the end date.

 

[29]       Further to Mr Wibowo’s submissions that the Respondent’s conduct enlivened s.386(3), both contracts agreed and signed by the parties were outer limit contracts and the uncontested evidence by the Respondent reasoning the adoption of the outer limit/ fixed term contracts does not support the contention that the purpose was to avoid the employer’s obligations under the unfair dismissal provisions. The engagement of information technology professionals for the purpose of meeting technical projects according to set milestones and subject to budgetary constraints as evidenced in this matter was not unreasonable.

 

[30]       Accordingly, I adopt the well accepted principles22 as outlined by the Full Bench of Alouani-Roby v National Rugby League23 including the principles in Khayam v Navitas24 upheld by Justice Rapper.25  Based on the authorities and the evidence before me, Mr Wibowo was not dismissed pursuant to s.386(1).

 

Conclusion

 

[31] I find that Mr Wibowo was engaged on a maximum term contract with an end date of 31 December 2023 that was genuinely agreed containing written express terms. The termination of employment is not a termination at the initiative of the employer but rather a maximum term contract that ended with the effluxion of time. Mr Wibowo was not dismissed pursuant to s.386(1)(a); s.386(2)(a) applies and s.386(3) does not. Consequently, Mr Wibowo’s application is dismissed and an Order26 to that effect will be issued concurrently with this decision.  “

Wibowo v Equifax Australasia Group Services Pty Limited  [2024] FWC 1591 delivered 18 June 2024 per Yilmaz C