This generally does not include where the employment comes to an end merely through the effluxion of time. Until recently, the leading authority on maximum term contracts and unfair dismissal was a decision involving an employee who had been employed on successive maximum term contracts over a period of seven years, with an on-going expectation of renewal.
The Australian Industrial Relations Commission found that an unfair dismissal claim could not be brought on the basis of the non-renewal of her contract, as the termination was simply due to the effluxion of time, and therefore was not at the initiative of the employer.
Save my name, email, and website in this browser for the next time I comment. Yes, add me to your mailing list. Tags: contract , Maximum term contract. No Comments. Fair Work Commission Full Bench has overturned the legal principle underpinning the widespread use of maximum term contracts. In what is a decision with potentially significant implications, the Fair Work Commission Full Bench has overturned the legal principle underpinning the widespread use of maximum term contracts.
These contracts are a common mode of employment in Australia given they provide employers with the security of a set expiry date and the flexibility to terminate earlier with notice. A maximum term employment contract, also known as an 'outer limit' contract, is an employment contract that includes a nominated expiry date, but that also provides the parties with the right to terminate the contract with notice during the term.
This was because the termination of employment was not at the initiative of the employer. The employee's employment simply ended at the pre-agreed time. This meant that there was no jurisdiction for an employee to bring dismissal-based claims, such as an unfair dismissal application under the Fair Work Act FW Act , based on the contract's expiry.
This had been affirmed by the Fair Work Commission and its predecessors, in cases such as Department of Justice v Lunn IR Lunn as a legitimate employment strategy. In Navitas , the employee had been employed on a series of maximum term contracts between April and May At the expiration of the last contract, Navitas did not offer the employee a further contract because of concerns with his performance. At first instance, the Commission considered itself bound by the Lunn principle and concluded that there had been no dismissal at the initiative of the employer.
Key takeaways Engaging employees on a fixed term or maximum term contract can be a good strategy to minimise the risk of a claim when the contract ends. In some cases, there may be legitimate business reasons why an employee is placed on successive time limited contracts, for example, due to uncertainty arising from customer volatility or where the employee is replacing other employees who are absent on leave.
Whatever the reason, each contract should be carefully drafted so that the employment relationship ends when the contract ends, there is no guarantee of further employment, and the employee understands and agrees to this arrangement. But the more times a contract is renewed, the greater the risk of the strategy being found to be a contrivance or administrative convenience, particularly if the employee is engaged to do the same job in contract after contract.
The passage of time might also lead a well-intentioned manager into saying or doing something that amounts to a representation to the employee about ongoing employment. Either way, this could mean that, when the final contract is not renewed, it is a dismissal by the employer or perhaps even unlawful adverse action thereby exposing the employer to liability.
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