Australia: If a fixed term employment contract expires, do all issues go away?

Last Updated: 8 February 2016
Article by Lisa Qiu

Many organisations employ people on a fixed term contract to cover a position for a certain period of time. The contract will make it clear that the position will only be for a certain amount of time, at the end of which the contract will expire.

You might think that any issues that arise with the employee during the fixed term will go away once the contract expires, so that you don't need to deal with them by ignoring them until the contract expires.

A recent decision of the Federal Circuit Court has confirmed that this is not the case. In the case of Crawford v Steadmark Pty Ltd, Ms Crawford was employed as a Store Manager for Steadmark, which operated lingerie stores under the brands Simone Perele and Betty McDowell. Her contract was for a fixed period of six months, but with provision for extension.

During Ms Crawford's employment, her performance as Store Manager was strong and there appeared to be no reason for her employer to have concerns about her performance. Ms Crawford reported directly to Ms Vanessa Galina, the National Retail Manager, and also reported to Mr Michael Rosenfeld, the Managing Director.

About a month before Ms Crawford's contract was due to expire, she attended a work function with Mr Rosenfeld and other staff members. Ms Crawford stated that Mr Rosenfeld sat down next to her, rubbed his leg against hers, and asked Ms Crawford to meet with him to discuss her plans for the business. After he repeated this request a few times, Ms Crawford said that she said to him "Michael, I will never meet with you, except with Vanessa and at the office to discuss my future" and then turned her back on him.

The next day, Ms Crawford called Mr Rosenfeld, to provide the store's figures for the day. Mr Rosenfeld allegedly said "Thanks very much for that, now that you have ruined my night,", and referred to her with an offensive epithet. Ms Crawford was upset, and emailed Ms Galina to let her know that due to Mr Rosenfeld's inappropriate behaviour, she would not be attending a work function that night. Ms Galina responded about two hours later, saying that she wasn't entirely sure what had happened, and that they would discuss tomorrow. Ms Galina never followed up the email with Ms Crawford, and never discussed the email as promised, despite Ms Crawford following up the email over the next three weeks.

A few days before the contract was to expire, Ms Galina emailed Ms Crawford to set up a meeting for the day before the contract was due to expire. Ms Crawford was absent from work on the day the meeting was to be held. The following day, the contract expired. The day after the contract expired, Ms Galina sent Ms Crawford a letter stating that her employment would not be renewed because of Ms Crawford's "unsuitability" for the position (no reasons given).

Ms Crawford brought a claim for adverse action, alleging that the reason her employment was terminated was not because of performance reasons, but because she had complained about Mr Rosenfeld. Mr Rosenfeld disputed Ms Crawford's claims. Ms Galina denied that Ms Crawford told her about exactly what had happened, and also said that the decision not to extend Ms Crawford's employment had nothing to do with the complaint, and everything to do with Ms Crawford's poor performance, which they now attributed to low sales figures and poor interactions with other staff.

The Court found that the decision not to (re)employ Ms Crawford was adverse action, and that Ms Crawford's complaint about Mr Rosenfeld was one of the reasons why she wasn't (re)employed. The Court therefore found that Ms Crawford had made out her adverse action claim, and was entitled to up to six months' pay as compensation.

So what are the lessons to be learnt from Ms Crawford's case? Firstly, if you have an employee on a fixed term contract which is due to expire or lapse, you should speak to the employee and either confirm that the contract will expire, or discuss extending it. Whatever you choose to do, make sure you do it before the contract expires. If you notify the employee even one day after the contract expired, like Ms Galina did in this case, then you open yourself up to arguments that a new contract was formed, or that the old contract was extended.

Secondly, if an employee raises an issue during the course of their employment, you should acknowledge and deal with it properly, rather than thinking the issue will go away upon the expiration of the contract. If you fail to do this, there could be arguments that you decided not to extend the contract because of the complaint. If there are good grounds for termination, dealing with those properly and at the right time will be much better than them appearing to be an afterthought to cover ulterior motives.

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.

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Lisa Qiu
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