Australia: Did you renew the last maximum term contract? If not, be prepared to fight an unfair dismissal action

Last Updated: 1 February 2018
Article by Mike Baldwin

This is the unlikely outcome of the Full Bench decision in Navitas1, which saw the Full Bench throw out the presumed settled view as expressed in Lunn2. Instead, it found that the expiry of a maximum term contract at its nominal expiry date was not a dismissal, as the termination was not at the initiative of the employer. Lunn therefore was authority for the view that upon expiry of the contract, an employee was jurisdictionally barred from pursuing an unfair dismissal claim.

In debunking Lunn, this decision has turned this presumption on its head.

Facts

Mr Khayam was employed by Navitas on a series of maximum term contracts over a number of years. At the conclusion of the last contract, given concerns over his performance, a new contract was not entered into. Navitas allowed the maximum term contract to expire thinking that as per Lunn, this decision would not have a deleterious impact on the organisation.

In contrast, Khayam contended that his employment had been terminated at the initiative of the employer, rather than the effluxion of time and therefore, he was entitled to make an application for unfair dismissal. At first instance, a single commissioner in applying Lunn found for Navitas. On appeal the Full Bench found that it raised an arguable case of error concerning the application of Lunn to the unfair dismissal provision of the Workplace Relations Act 1996 and that its reasoning had not been applied to the relevant provisions of the Fair Work Act 2009 (Act).

In finding for Khayam, the Full Bench held that Lunn was incorrect and therefore not applicable to the Act. It held that the in determining whether there was a dismissal, the correct view was to examine the employment relationship, rather than the termination of the maximum term contract.

So, in deciding not to renew on the basis of the effluxion of time, this may be a termination of employment at the initiative of the employer. The impact being the employee can access the unfair dismissal jurisdiction.

In this case the Full Bench did not ultimately determine whether the employee's employment had been terminated at the initiative of the employer, preferring to remit the matter back to the Commissioner at first instance to determine that question.

Where does this leave employers?

Employers that utilise this type of instrument (local government, public sector and large resource project employers), are advised to undertake a complete review of their contracts. The likelihood of exposure could be quite high, not only with respect to unfair dismissal, but also redundancy, as the employer no longer requires the job be done by anyone and the termination is not due to the ordinary and customary turnover of labour.

In terms of the review, consideration should be given to converting the shorter maximum term contracts into the true fixed term contract, thereby preserving the statutory exclusion to the unfair dismissal jurisdiction. For contracts of a longer term nature, employers will need to have developed a risk management protocol for managing and ending these types of contractual arrangements, so as to lessen their exposure to unfair dismissal litigation.

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

Footnotes

1 Khayam v Navitas English Pty Ltd t/a Navitas English [2017] FWCFB 5162

2 Department of Justice v Lunn (2006) 158 IR 410

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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