So-called outer limits contracts of employment

Fixed term contracts of employment
The Explanatory Memorandum that accompanied the Fair Work Bill 2008 provides inter alia as follows.
“Sub clause 386(2) sets out circumstances in which a person is taken not to have been dismissed. These are where:
• the person was employed 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, task or season; or

Paragraph 386(2)(a) reflects the common law position that termination in these circumstances would not be a dismissal. The fact that an employment contract may allow for earlier termination would not alter the application of this provision as the employment has terminated at the end of the period, task or season. However, if a person engaged on this sort of contract is terminated prior to the end time specified in the contract, they may seek an unfair dismissal remedy if they satisfy the other requirements.” Explanatory Memorandum, Fair Work Bill 2008 (Cth) paras 1531-2, page 224.” ……
Mr Kyriopoulos relies on the decision in Andersen v. Umbakumba Community Council (Andersen) 13 in support of the submission that where an unqualified right to terminate an employment contract exists the contract is not one for a specified period. He submits the decision was cited with approval in Downes v The Uniting Church in Australia Property Trust (Q.) t/a Wesley Mission Brisbane (Downes),14 which also determined that an outer limits contract will not become a contract for a specified period of time by virtue of ending due to the effluxion of time. Therefore, Mr Kyriopoulos was not employed under a contract for a specified period of time, and the RACV’s jurisdictional objection should be dismissed……………….
Mr Kyriopoulos relies on the decision in Andersen. In that matter the Applicant was employed by the Respondent employer under a written contract, which provided for a maximum period of employment of 2 years. The contract also gave either party an unqualified right to bring the employment to an end, based on 2 weeks’ notice. It also gave the employer the additional right to terminate without notice on payment of 2 weeks’ salary. The Applicant was subsequently terminated within the two-year period. The submissions provided on behalf of Mr Kyriopoulos refer, in particular, to the following extract from the decision:
“In the present case cl 3 and Sch 1 of the employment agreement clearly state both a commencement date for the employment and a cessation date, but in light of the right on either party to the contract arising under cl 21(c) to bring the employment to end on two weeks’ notice, and the right of the employer under cl 21(d) to bring the employment to an end without notice on payment of 2 weeks salary, the cessation date merely records the outer limit of the period beyond which the contract of employment will not run (unless a new agreement is entered into pursuant to cl 29). Within the period stated in Sch 1 the period of the contract of employment is indeterminate. At any point during the two-year period identified by the commencement and cessation dates neither side could know with any certainty when the period of the contract of employment might come to an end.
It is significant that the rights to terminate the contract of employment arising under cl 21(c) and 21(d) are not conditioned on a breach of any term of the contract. The rights are unqualified. Different considerations may apply where a contract of employment for a period of time fixed by clearly stated dates of commencement and cessation contains a term which permits either side to terminate the contract on breach by the other side. In such a case, it is possible that the contract would be characterised as contract of employment for a specified period of time notwithstanding the possibility that on breach of its term by one side or the other it may soon come to an end. In this case, however, the unqualified rights to terminate without reason under cl 21(c) and cl 21(d) make it clear, in my opinion, that the contract cannot be so characterised.”
19
Therefore, his Honour von Doussa J determined the preliminary issue of whether the Applicant was engaged under a contract of employment for a specified period of time by declaring that he was not so engaged, and so was not excluded by the exception in the then Industrial Relations Regulations from pursuing an unfair dismissal claim.
It follows that this decision is authority for the proposition that where both parties to a contract of employment have rights to terminate that contract, which are not conditional on a breach of any term, then the period of the contract can be described as indeterminate. The cessation or end date merely records the outer limit of the period beyond which the contract will not run. However, the contract is not one for a specified period of time, and can be contrasted with a contract of employment for a specified time period, in which the time of commencement and time of completion are unambiguously identified.
The RACV relies, in turn, on the decision in Lunn, which concerned what was agreed by the parties to be an “outer limits” contract in that it specified an end date, but also provided for a broad or unconditional right of termination during its term. The Full Bench stated in that decision:
“When a contract for a specified period or an “outer limit” contract reaches the nominated end date, the contract terminates through the effluxion of time and there is no termination of employment at the initiative the employer.” 20
In that matter the Applicant was told three weeks prior to the end date of the contract that she was no longer required to attend at work, but would be paid all of her entitlements up to the end date. The Commission accordingly turned to consider whether this involved termination at the initiative of the employer. It concluded:
“Even on her own version of the conversation on 24 March 2005, Ms Lunn was simply informed that her contract would not be renewed upon its expiry and that she was not required to perform work between that day and the day on which her contract expired, 15 April 2005. She was not given any “payment in lieu of notice” or advised that any payment characterised in that way would be made. Indeed, it is not disputed that the Department continued to pay Ms Lunn her wages in the ordinary course during the period between 24 March 2005 and 15 April 2005. Similarly, it was not disputed that if Ms Lunn had so wished, she could have continued performing work finalising her files and that the Department would have made an office available for her for that purpose. The notice given by the Department was no more and no less than notice that Ms Lunn would not be offered a new contract when the Final Contract came to an end through the effluxion of time. The conversation of 24 March 2005 did not involve the Department in breaching a fundamental term of the Final Contract such as to amount to a repudiation of the Final Contract. It follows that the conversation on 24 March 2005 did not amount to a termination of the Final Contract at the initiative of the employer.” 21
The Full Bench accordingly concluded that Ms Lunn’s employment was not terminated at the initiative of the employer and, therefore, the Commission had no jurisdiction in relation to her application for relief against termination of employment. It concluded instead that the contract terminated through the effluxion of time. It continued to express the view that the mere fact of the existence of a series of “outer limits” contracts does not necessarily permit a finding that those contracts constitute a sham arrangement, and written contracts should be taken to be binding according to their terms, unless one of the well-established categories of exception under the general law is established.
The decision in Lunn was considered by Commissioner Deegan in Mark Drummond v Canberra Institute of Technology, 22 which also involved a series of outer limits contracts. She concluded:
“[42] On the basis of the Full Bench decision in Department of Justice v Lunn (relying on the High Court decision in Victoria v the Commonwealth) it is clear that under the legislative scheme in existence at the time of that decision, when a contract for a specified period or an ‘outer limit’ contract reaches the nominated end date, the contract terminates through the effluxion of time and there is no termination of employment at the initiative of the employer.”
Commissioner Deegan continued to consider whether the decision in Lunn remains “good law” under the existing legislative framework. In this context she had regard to the extract from the Explanatory Memorandum which accompanied the Fair Work Bill 2008, and is also relied on by the RACV. She concluded:
“[51] In my view the intention of the legislature is clear. Paragraph 1532 of the Explanatory Memorandum, in dealing with the new provisions relating to contracts for a specified term, notes that “(t)he fact that an employment contract may allow for earlier termination would not alter the application of this provision as the employment has terminated at the end of the period, task or season”. An employment contract which allowed for an earlier termination would encompass a contract for a fixed term. The intention of the legislature appears to be to retain the common law position that a contract which ends with the effluxion of time does not terminate at the initiative of the employer. The only change to the operation of the relevant provisions that is intended is to provide that an employee employed under a contract for a specified period of time, whose employment is terminated other than at the expiration of that contract, may make an application under the unfair dismissal provisions of the legislation.
[52] The applicant was employed under a fixed term contract which expired on 30 September 2009. The applicant’s employment terminated with the expiration of that contract. In these circumstances there is no jurisdiction for an application to be made pursuant to s.386 of the Act as there is no termination of employment at the initiative of the employer.” 23
An appeal against that decision was dismissed by a Full Bench which found “that Commissioner Deegan did not err when she concluded that Dr Drummond was not dismissed from his employment at the initiative of CIT, but that his contract expired by the ordinary passing of time.” 24
The decision of Senior Deputy President Richards in Downes has also been referred to. In that matter the Senior Deputy President considered whether other provisions in the contract, such as annual performance reviews, long service leave entitlements, and an initial probationary period, meant the contract should not be considered to be for a specified period. He concluded:
“[26] I suggest this, albeit tentatively, because the Explanatory Memorandum, states that notwithstanding the existence of a provision allowing for early termination of the contract in any terms (broad or narrow), the contract nonetheless is a contract for a fixed period if the agreement ends by the effluxion of time.” 25
He continued to state at [31]:
“[31] The Explanatory Memorandum, for its purposes, makes it clear that s.383(2)(a) of the Act is not affected by whether or not an employment contract may allow for an earlier termination (and on whatever terms). Such a contract, notwithstanding a provision providing for early termination, does not alter the fact that when a contract comes to an end by the effluxion of time (referrable to a term in the contract) it is characterised as a contract for a specified period (according to the Explanatory Memorandum).” 26
He also had regard to the fact there had been some performance issues raised about the employee, but concluded “whether or not the employer had concerns about the performance of the contract over the life of the contract is also irrelevant to a finding that the employment came to an end by reason of the effluxion of time (as provided for by a term of the contract).” 27
However, the evidence in that matter also made clear that the employee was told her contract of employment, which ended on 30 June 2013, would not be extended or renewed, and her last day at work would be 30 May 2013. She was also paid out for the balance of her contract until its end date of 30 June 2013. The Senior Deputy President concluded:
“[47] The contract of employment therefore did not conclude by the effluxion of time, or at the end of the time specified in the contract. That is, the Applicant was not notified that her contract would cease on the specified date and that she remained subject to the contract until that time. Instead, the Applicant’s employment or engagement concluded at an earlier time, and because of the unilateral intervention of the employer. This intervention must be characterised as a dismissal.
[48] The Explanatory Memorandum cited above makes clear that where an employee engaged on a contract for a specified period is dismissed prior to the end of the time specified in the contract, that employee may seek an unfair dismissal remedy (subject to the jurisdictional requirements being met). This must be the case because the employment or engagement did not cease on the date specified in the contract (but at an earlier time).” 28
He again concluded:
“[49] Therefore, though the Applicant was a party to a contract for a specified period (and otherwise not able to make an application for an unfair dismissal remedy), by dismissing the Applicant prior to the end date of the contract, the availability of the jurisdiction under Part 3-2 of the Act was enlivened (which is consistent with the Explanatory Memorandum).” 29
Mr Kyriopoulos also referred in his submissions to the decision of Vice President Hatcher in Jerome (Ronghua) Jin v Sydney Trains (Sydney Trains). 30 In that matter Sydney Trains also contended that the Applicant had not been dismissed because his employment ended upon his fixed term contract of employment expiring as a result of the effluxion of time. The Vice President noted at the outset that the applicability of Andersen to the proper interpretation of s.386(2)(a) has arguably been called into question as a result of paragraph [1532] of the Explanatory Memorandum to the Fair Work Bill 2008 (Cth). The particular extract has been cited already and states:
“1532 … The fact that an employment contract may allow for earlier termination would not alter the application of this provision as the employment has terminated at the end of the period, task or season.” 31
VP Hatcher indicated that this explanation suggested that provisions in a contract of employment, which enable it to be terminated prior to its outer limit end date, did not necessarily mean the exception in s.386(2)(a) no longer applies, and that therefore the distinction found to exist in Andersen might no longer apply. However, he also noted that this point was not pressed by the Respondent and therefore he did not propose to consider the issue any further.
Sydney Trains also relied on the decision in Lunn as authority for the proposition that where an outer limit contract reaches its nominated end date, there is no termination of employment at the initiative of the employer. Vice President Hatcher continued to note that Lunn has been seen to be applicable to s.386(1)(a) in a number of “first instance decisions” 32 and referred, in particular, to the decision of Commissioner Deegan in Mark Drummond v Canberra Institute of Technology.33 However, he continued to state, “[i]n my view, there are good grounds for reconsideration as to whether Lunn should continue to be regarded as giving correct guidance concerning the interpretation and application of s.386(1)(a).”34
However, he concluded:
“[81] However Lunn is a Full Bench authority which has become well entrenched in the Commission’s jurisprudence under the FW Act. I do not think it is appropriate that I determine this matter in disregard of it. Any reconsideration of Lunn should take place at the Full Bench level. Therefore I will apply Lunn to determine the outcome of this case.” 35
He accordingly concluded that the Applicant was not terminated at the initiative of the employer, but rather as a result of the expiry of his final contract of employment. Therefore, he was not dismissed at the initiative of the employer. However, Vice President Hatcher also continued to indicate:
“[80] In my view, the question of whether a person’s employment has been terminated at the initiative of the employer requires an analysis of what, as a matter of practical reality, brought about the end of the employment relationship. In the case of an employment relationship which is constructed of a series of “outer limit” fixed-term engagements not encompassed by s.386(2)(a) (again assuming Andersen remains applicable), where such engagements are utilised by the employer on an essentially unilateral basis as an administrative mechanism, I consider that it may be open to find that the decision of the employer to bring the employment relationship to an end by not offering any further engagements constitutes a termination of employment at the initiative of the employer under s.386(1)(a). That is an approach which is in substance the same as in Mohazab and D’Lima. I consider that in the situation described an approach which confines the analysis to the circumstances of the termination of the final employment contract is far too narrow and is likely to lead to a result that is at odds with practical reality.” 36
Conclusion
………… In conclusion, even though the term of Mr Kyriopoulos’ employment contract was close to its end date, the facts and evidence indicate his employment was terminated prior to this date because of issues to do with his work performance. Therefore, he was terminated at the initiative of his employer, and he can be said to have been “dismissed” under s.386(1)(a). The RACV’s jurisdictional objection to the application is therefore dismissed….

Kyriopoulos v RACV (2016) FWC 8717 delivered 5 December 2016 per Gregory C