Unfair dismissal of fixed term contracts

The actions of an employer which pays out an employee employed on a fixed term employment contract in circumstances where as a mater if law the employment comes to an end before the expiration of the fixed term will constitute a dismissal for the purposes of the unfair dismissal regime of the Fair Work Act.

“[6] Part 3-2, Unfair Dismissal, of the Act contains the statutory scheme concerning access to remedies for unfair dismissal. Section 385 provides that a person has been “unfairly dismissed” if the Commission is satisfied as to four specified matters, the first of which is that “the person has been dismissed”. Section 386 defines when a person has been dismissed as follows:

“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;…”

[7] A contract for a specified period may terminate by the passing of time at the end of the period rather than by termination at the initiative of the employer. 1 In order to be a contract for a specified period of time, the dates of commencement and completion of the contract must be unambiguous. Further if the contract gives either party an unqualified right to terminate the contract on notice or with payment in lieu of notice, it will not be a contract for a specified period of time. As Von Doussa J explained in Andersen v Umbakumba Community Council2:

“In the expression, “specified” is the past participle of the verb “to specify”. The ordinary meaning in the English language of “to specify” is to mention, speak of, or name (something) definitely or explicitly; to set down or state categorically or particularly; to relate in detail: Shorter Oxford English Dictionary, 3 edition. In the context of Art 2, par 2(a) of the Termination of Employment Convention “specified” identifies a period of time or a task the scope and parameters of which are stated definitely. A “specified period of time” is a period of time that has certainty about it. A contract of employment for a specified period of time would be one where the time of commencement and the time of completion are unambiguously identified by a term of the contract, either by the contract stating definite dates, or by stating the time or criterion by which one or other end of the period of time is fixed, and by stating the duration of the contract of employment. As the period of time is defined in this way, it is apt to refer to a contract of employment for a specified period of time as a contract of employment for a fixed term, although this is not the description used in the Regulation.

A contract of employment to run throughout a nominated number of days, weeks or years would be a contract of employment for a specified period of time. If the terms of the contract of employment, instead of identifying in this manner the period of time during which it is to run, provides that it is to run until some future event, the timing of the happening of which is uncertain when the contract is made, the contract will be for an indeterminate period of time.”

[8] His Honour went on in that case to conclude that:

“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 an end on two weeks notice, and the right of the employer under cl 21(d) to bring the employment to end without notice on payment of two weeks salary, the cessation date merely records the outer limit of a 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 (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 sooner come to an end. In this case, however, the unqualified rights to terminate without reason under cl 21(c) and (d) make it clear, in my opinion, that the contract cannot be so characterised.” 3

[9] In Khayam v Navitas English Pty Ltd 4 a Full Bench of the Commission comprehensively considered the operation of s. 386(2)(a) of the Act in the context of termination of employment at the end of a series of time limited contracts. Notwithstanding that the present case involves only one contract, the Full Bench in Navitas made a number of observations and findings which are relevant to the matters I am required to determine which are set out at paragraph [75] of that decision as follows:

“[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).”……………………………….

 

Did the Applicant’s employment terminate at the end of the period specified in the contract?

[49] In order to establish the exclusion from dismissal in s. 386(2) of the Act it is necessary that the person was employed under a contract of employment for a specified period and that the employment has terminated at the end of the period. These are two separate limbs each of which must be found to exist before the exclusion from the unfair dismissal provisions operates. While there may be debate about the effect of a provision which allows for a contract for a specified period to be terminated before the expiration of the period, there is no debate about the effect of an actual termination of employment before the specified period.

[50] Consistent with the principles established in the majority Decision of the Full Bench in Navitas an analysis of whether there has been a termination at the initiative of the employer is conducted by reference to termination of the employment relationship not by termination of the contract of employment. In the present case, it is clear from the evidence that the employment relationship between the Applicant and the Respondent was terminated on 6 December 2018. The letter to the Applicant dated 6 December 2018 clearly states that this is his final day. The contract payout calculation tendered by the Respondent indicates that salary and leave entitlements were calculated up to 18 February 2019 but that Fringe Benefit amounts were deducted for the current fortnight only.

[51] This may be a technicality. However, it is an important technicality because it determines whether a person can access a remedy for unfair dismissal. If the Respondent had informed the Applicant that his employment would not continue past 18 January and directed him to remain at home on gardening leave or similar while allowing him to pursue alternative employment, the requirements in both limbs of s. 386(2)(a) would have been met and the Applicant would not have been dismissed. However, on the facts in this case the Applicant was dismissed at the employer’s initiative because his employment was terminated by the employer prior to the date specified in his contract, and therefore the Applicant’s employment was not terminated at the end of the specified period. Accordingly, the second limb of s.386(2)(a) has not been met and I find that the Applicant was dismissed.

[52] It is therefore necessary to consider whether the Applicant’s dismissal was unfair.”

Cook v Seventh-day Adventist Aged Care (South Queensland) Ltd trading as Adventist Retirement Plus 2020) 28 January 2020 per Asbury DP