Maximum term contracts and unfair dismissal

The following extract from a recent Fair Work Commission unfair dismissal case deals with the issue of so-called maximum term employment contracts and their relationship with the concept of dismissals under the Fair Work Act.

“Consideration

Section 386(1)(a) – Termination at the initiative of the employer

[40] It is uncontested that Mr Nasr was employed on a series of eight maximum term contracts. It is also uncontested that Mr Nasr’s employment ended concurrently with the expiry of the Eighth Contract. At issue, in the first instance, is whether the expiry of Mr Nasr’s maximum term contract constitutes a termination on the employer’s initiative for the purposes of section 386(1)(a) of the Act. It is common ground between the parties that that question is to be determined with reference to the Full Bench decision in Khayam v Navitas English Pty Ltd t/a Navitas English 85 (Navitas) and the principles set out in that decision.86

Navitas

[41] In Navitas the Full Bench said:

“that the mere fact that an employer has decided not to offer a new contract of employment at the end of a time-limited contract which represents a genuine agreement by the parties that the employment relationship should come to an end not later than a specified date will not by itself constitute a termination at the initiative of the employer.” 87

[42] The Full Bench then set out the following principles which apply to the interpretation of section 386(1)(a) of the Act: 88

“[75] Having regard to these propositions and the court decisions to which we have earlier referred, 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).”

[43] I refer to each of the above principles as Principle 1-5, in the order and in accordance with the numbering in which they are referred to above.

………………………………………………Consideration

[47] I reject the submission that the Applicant’s employment carried on “largely seamlessly over 2 and a half years” and that the Contracts rolled over in a “perfunctory way.” I also reject the submission that the Eighth Contract was simply a “rehash of what went before” and that Mr Nasr quite reasonably could have thought that he would be offered a further period of employment or that by early December 2020 Mr Nasr would have had a reasonably held expectation that his employment was by then in reality, on-going. I also reject the submission that the period of employment reflected on the employment separation certificate “obviously” evidences that Mr Nasr’s employment was continuous. Rather, for the following reasons, I find that Mr Nasr was engaged on a series of maximum term contracts which were based on the operational requirements of Mondelez and that represented a genuine agreement by the parties that the employment relationship would come to an end upon the expiry of each of the Contracts, including the Eighth Contract.

[48] Firstly, I have found, and it is not contested, that the terms of the Eighth Contract were clear and unambiguous and clearly stated that it would end on 31 December 2020. Secondly, Mr Nasr agreed that he read each of the Contracts, including the Eighth Contract, and understood that employment under each of the Contracts, including the Eighth Contract, was for a maximum period of time. Thirdly, Mr Nasr also agreed that he understood that there was no guarantee of employment after the expiry date in the Contracts. I accept the Respondent’s submission that in these circumstances the Applicant knowingly accepted the terms of the Contracts and the fact that it was the “best deal on offer” is irrelevant to the legitimacy of the terms of the Contracts. Fourthly, I have accepted the evidence of Mr Shahzad that he met with Mr Nasr in relation to the Sixth to Eighth Contract and explained the reasons for the duration of the Contracts and reiterated that Mr Nasr’s employment would cease at the expiration date of the contract. This is also consistent with Mr Nasr’s evidence under cross examination that he understood that each of the Contracts was for a maximum period of time and would expire on the date specified in the Contracts and further, that he understood that there was no guarantee of employment after the expiry date in the Contracts. Mr Nasr also gave evidence under cross examination that he asked Mr Shahzad “many times” 106 two weeks before the Contracts finished when his contract would be renewed.107 He was therefore aware that the employment relationship was not on-going and would cease in the absence of an offer of further employment. He cannot therefore have had an expectation of on-going employment. Fifthly, I have found that between April 2020 and September 2020 prior to the expiry of each of the applicable Contracts Mr Shahzad met with Mr Nasr and explained the reasons for the further offer of employment. I have accepted Mr Shahzad’s evidence that this was a standard process followed at the Scoresby plant. Sixthly, although Mr Shahzad’s evidence under cross examination was that in his experience the maximum period employees are usually engaged under a maximum term contract is 15 months,108 his evidence was also that the period of engagement was dependant on volume and demand requirements.109 Further, I have accepted the evidence of Mr Khan and Mr Shahzad as to the reasons for the offering of each of the Contracts, as set out in paragraphs [20] to [24] above. Accordingly, I find that notwithstanding the length of time that Mr Nasr was employed under the Contracts being a greater period than is ordinarily the case, he was offered employed under the various Contracts based on genuine operational reasons applicable at the relevant time. Additionally, I consider that this is so is supported by the changing nature of the departments and shifts in which Mr Nasr performed work. In that context I note that under the First and Second Contract Mr Nasr was engaged to work in the MOGUL department, under the Third to Sixth Contract Mr Nasr was engaged to work night shift in the GFES department, whilst under the Seventh and Eighth Contract he worked day shift in that department.

[49] I also reject the submission that if there was a “mutual expectation” that the Eighth Contract would end the employment relationship upon expiry it would not have been necessary to advise the Applicant of this two weeks prior. 110 Firstly, as set out above, the terms of the Eighth Contract were clear and unambiguous and clearly stated that it would end on 31 December 2020. Secondly, Mr Nasr agreed that he read each of the Contracts, including the Eighth Contract, and understood that each of the Contracts, including the Eighth Contract, was for a maximum period of time. Thirdly, Mr Nasr also agreed that he understood that there was no guarantee of employment after the expiry date in the Contracts. Fourthly, Mr Nasr’s evidence was that he asked Mr Shahzad two weeks prior to the expiry of his maximum term contract about renewal. I consider he therefore understood and expected that the employment relationship would end in the absence of a further offer of employment. Fifthly, I have found that between April 2020 and September 2020 prior to the expiry of each of the applicable Contracts Mr Shahzad met with Mr Nasr and explained the reasons for the further offer of employment. I have accepted Mr Shahzad’s evidence that this was a standard process followed at the Scoresby plant. Further, I consider there nothing inconsistent with employment under a maximum term contract and reminding an employee that their employment will end under the terms of that contract on the expiry date. Indeed, I consider it appropriate and to reflect best practice. Accordingly, in light of the above matters I find that there was a mutual expectation that upon the expiry of the Eighth Contract the employment relationship between the parties would end and that meeting with Mr Nasr two weeks prior to expiry to remind him of this was consistent with the standard process at the Scoresby plant.

[50] As to Mr Nasr’s submission that he protested upon being told that his employment would end at the expiry of the Eighth Contract and that the Respondent organised for labour hire work at the factory as a substitute for direct employment, I accept that Mr Nasr queried why his contract was not renewed when he considered that others had had their contracts renewed. However, I do not consider this amounts to Mr Nasr “protesting” the end of his employment. In any event, even if such a query could be considered a protest, in light of the matters set out in points 1 – 5 in paragraph [48] above, I consider nothing turns on this. Mr Nasr was fully aware that his employment would end on the expiry of the Eighth Contract unless he was offered further employment. As to the assertion that the Respondent organised for labour hire work in substitution for direct employment, I have found that Mr Nasr’s evidence of the events of 16-18 December 2020 is unreliable and not to be preferred. 111 Accordingly, I do not consider that this accurately reflects what occurred. Further, I am unable to see why Mondelez would engage Mr Nasr through a labour hire provider rather than offer him a further limited term contract, as it had done on a number of occasions, if there was sufficient work to retain him in employment. Accordingly, I reject that submission.

[51] Finally, I have earlier found at paragraph [28] and [36] that the statements alleged to have been made by Mr Shahzad to Mr Nasr did not occur.  Accordingly, I reject the submission that in later exchanges regarding the Contracts Mondelez made oral assurances to Mr Nasr that gave the impression that by about 2020 his employment with Mondelez was permanent. 112

…………………………………Consideration

[57] For the following reasons, I find that there are no vitiating factors as identified by the Full Bench in Principle 5 of the Navitas decision applicable to the Applicant’s circumstances.

[58] Firstly, I reject the submission that the Contracts were for administrative convenience and were simply “rolled out”. As set out in paragraph [48] above, I have found that the Contracts were offered for genuine operational reasons based on business considerations. Further, I consider this is supported by the changing nature of the departments and shifts in which Mr Nasr performed work. In that context I note that under the First and Second Contract Mr Nasr was engaged to work in the MOGUL department, under the Third to Sixth Contract Mr Nasr was engaged to work night shift in the GFES department, whilst under the Seventh and Eighth Contract he worked day shift in that department. Secondly, I have also already found that the representations asserted to be made to Mr Nasr did not occur and therefore also reject the submission that any representation was made to the Mr Nasr that his employment would be on-going notwithstanding the express terms of the Contracts.

[59] As to the terms of clause 17 of the 2016 Agreement and the 2018 Agreement, I accept that those clauses refer to employment for “a period, project, season or job”. However, I find nothing in the plain reading of the clause to support a conclusion that it precludes more than one engagement. Firstly, I consider that Mr Nasr was employed for “a period” under each of the Contracts. The expiry date was clearly articulated in each of the Contracts. 125 The First and the Second Contract expressly stated that Mr Nasr’s employment was “temporary for the maximum period” specified in the contract and was offered “on the basis that there can be no guarantee of further employment beyond that period.”126 The Third to the Eighth Contract each provided that it extends Mr Nasr’s “temporary employment” for the maximum period specified in the contract and also that the “contract is being extended on the basis that there is no guarantee of future employment beyond the mentioned period.”127 Accordingly, I do not consider that on a plain reading the use of the indefinite article “a” in clause 17, when read in the context of the Agreements as a whole, limits engagement of Mondelez Contractors to a singular engagement. Secondly, there is no express language in clause 17 that limits engagement of an employee under it to a singular occurrence. Had that been the intention of the parties I consider it would have been clearly articulated. Further, for the avoidance of doubt, I also do not consider that there is anything in clause 17, or the Agreement more broadly, that such a limitation ought be implied. Thirdly, I also find no support in the language of the clause, or the Agreements more broadly, that if repeated engagements are permitted they are limited to seasonal engagements. Certain matters to do with seasonal engagement are dealt with in the remainder of clause 17 and there is nothing in those provisions which in my view indicates, either expressly or impliedly, that such a limitation exists. Further, I find no support for this contention in clause 22(j)(ii) of the Agreements. Clause 22 of the Agreements deals with personal leave. Clause 22(j)(ii) of the Agreements provides as follows:

“22. Personal Leave

  1. j) Payment of Personal Leave on Termination

  1. Temporary employees (Mondelez Contractors), who leave the business of their own accord (either during a period of employment or where they advise the Company they do not wish to return to Mondelez again), will be paid out any unused personal leave. Where a Mondelez contract employee is advised by Mondelez that Mondelez will not be offering the employee another contract or are not offered another contract within 6 months of completion of their last contract, the employee will be eligible to ask that the accumulated personal leave is paid out. Existing Mondelez Contractors employed as at 20 October 2016 may choose either to have their personal leave balance carried over to their next engagement (i.e. the employee’s balance at the termination of employment will appear on the employee’s balance on commencement of a new period of employment) or to have their personal leave paid out. Once a Mondelez contractor decides to pay out his or her personal leave balance, such an employee will no longer have the option to carry over personal leave from one engagement to another. Notification must be provided in writing to the company confirming an employee’s decision to have their personal leave paid out. Mondelez Contractors who are first employed by the company after 20 October 2016 will not have the option to carry over personal leave.” (Commission’s emphasis added)

[60] Accordingly, in light of the provisions emphasised above, rather than supporting the Applicant’s contentions, I consider that the clause 22(j)(ii) of the Agreements evidences that Mondelez Contractors may be offered more than one period of engagement. Further, I do not consider that there is anything in the plain reading of the clause that limits its application to seasonal employees.

[61] I also reject the contention that the Contracts are inconsistent clause 17 of the Agreements as they provide for termination prior to their expiry. Clause 12 of the Agreements deals with notice of termination and provides as follows:

“12. Notice Period of Termination

Employees are required to provide two weeks’ notice of termination. Notice periods will be assessed case by case.”

[62] The relevant provisions of clause 17 of the Agreements are set out in paragraph [16] above.

[63] Firstly, I am unable to identify anything in the express language of either of these clauses, nor the Agreements more generally, that supports the proposition that employment under clause 17 on a maximum term contract is not for “a period” if the relevant contract allows for termination during the contract’s term. Secondly, the Applicant makes no submissions in support of this contention or the basis upon which it is said to arise. Thirdly, I consider such a contention to be inconsistent with the recognition under clause 22(j)(ii) above, that a Mondelez Contractor may leave of their own accord “during a period of employment.” For completeness, should it be contended that such an interpretation is to be given to clause 17 in reliance upon the interpretation given to the phrase “specified period of time” in section 386(2)(a) of the Act, I also reject that contention. Firstly, the language in the Agreements is not consistent with the language in section 386(2)(a). Secondly, I consider very clear language would be required before the provisions of clause 17 could be subject to the construction given to section 386(2)(a) and no such language is included in the Agreements.

Disposition

[64] I find that Mr Nasr was engaged under a series of maximum term contracts based on the genuine operational requirements of Mondelez. I find that the terms of the Eighth Contract reflected the genuine agreement of the parties that the employment relationship would end upon the expiry of that contract. I find that there are no vitiating factors as identified by the Full Bench in Navitas applicable to Mr Nasr’s circumstances. Accordingly, I find that the employment relationship between the parties ended by the effluxion of time upon the expiry of the Eighth Contract. I therefore find that Mr Nasr’s employment was not terminated on the initiative of the employer. Mr Nasr was therefore not dismissed pursuant to section 386(1)(a) of the Act and his application for relief from unfair dismissal under section 394 of the Act must therefore be dismissed.

[65] Given my findings above, it is not necessary that I address the Respondent’s submissions in the alternative.

[66] The application is dismissed.”

Nasr v Mondelez Australia Pty Ltd (2021) FWC 2802 delivered 1 July 2021 per Young DP