Often fixed term or "outer-limit" contracts contain provisions about renewal of the contract on expiry of the term. Whilst these provisions may offer a level of comfort for the employee, depending on their content, they can come back to haunt an employer if the employer wrongfully terminates the contract during the term.
In that event, the employee may not only be able to claim damages for lost remuneration for the remainder of the term, but also damages for loss of opportunity of the chance to renew the contract. The validity of this type of claim has been recognised by the High Court and the Federal Court, and most recently the Victorian Supreme Court. Of interest, the New South Wales Court of Appeal has not embraced these claims as enthusiastically.
When assessing such a claim, the Court will assess damages based on the "degree of probabilities or possibilities" of what would have happened if the contract had not been breached, in this instance in relation to the opportunity of the employment contract being renewed.
Care therefore needs to be taken when addressing the prospect of renewal of fixed term contracts, both in negotiations with an employee and in the terms of their employment contract.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
