Employee unfairly dismissed despite contract of employment terminating at the end of its term Employee unfairly dismissed despite contract of employment terminating at the end of its term


Employee unfairly dismissed despite contract of employment terminating at the end of its term

23 March 2018 | Employer's Liability

A full bench of the Fair Work Commission has held that it is possible for employees whose employment ends at the end of a maximum term contract to pursue unfair dismissal proceedings. This decision creates uncertainty for employers who have previously believed that they were protected from unfair dismissal claims if the employment ends at the end of a specified term.

In Issue

  • Whether an employee whose employment ended at the conclusion of a fixed term or maximum term was unfairly dismissed.

The Background

Mr Saeid Khayam was employed by Navitas English Pty Ltd (Navitas) to perform teaching services. He was initially employed on a casual basis (for about seven years) and then entered into two time-limited contracts (each for about one year).

One month prior to the expiry of the last of these contracts, Navitas informed Mr Khayam that it would not offer him a further contract based on its assessment of his performance and disciplinary record.

Mr Khayam brought an Unfair Dismissal Application in which he alleged that Navitas unfairly dismissed him.

Navitas contended that he had not been dismissed and that his contract of employment terminated, simply through the effluxion of time.  

The Decision at Trial

The Commissioner agreed with Navitas and dismissed Mr Khayam’s application.

Mr Khayam appealed to a full bench of the Fair Work Commission.

The Issues on Appeal   

The key issue on appeal was whether there had been a dismissal at the initiative of Navitas taking into account the provisions of s.386 (2)(b)(ii) of the Fair Work Act 2009 (Cth) (FW Act) which provides that a person has not been dismissed if that person’s employment was for a specified period of time and the employment has ended at the end of that period.

The Decision on Appeal   

The majority of the full bench of the Commission (Full Bench) considered that it was possible for a person to be unfairly dismissed even if their employment has ended at the end of a contract of employment which specifies that the employment will automatically terminate upon a specified end date.

The Full Bench emphasized that an analysis of whether there has been a termination at the initiative of the employer is to be conducted by reference to the employment relationship, not by reference to the termination of the contract of employment. It stated that:

This distinction was 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.

The Full Bench explained that in some cases it will be necessary to look beyond the terms of the contract of employment to determine whether there has been a termination at the initiative if the employer. These circumstances include the following:

  1. Legal considerations which may invalidate the contract such as:
    1. misrepresentation or misleading conduct by the employer;
    2. the employee having entered into the contract as a result of a serious mistake about its contents or subject matter;
    3. unconscionable conduct related to the making of the contract;
    4. the employee entering into the contract under duress or coercion;
    5. the employee lacking legal capacity to enter into the contract;
    6. the contract being a sham;
  2. The contract itself may be illegal;
  3. The contract may have been varied, replaced or abandoned;
  4. The contract may not reflect the reality or the totality of the employment relationship;
  5. During the term of the contract the employer may have engaged in conduct or made representations which prevent it from relying on the terms of the contract; and
  6. The terms of the contract may be inconsistent with the terms of an award or enterprise agreement (which prohibit or regulate fixed term agreements).

The Full Bench therefore upheld the appeal and referred the matter back to the Commissioner in the first instance to re-determine the matter.

Implications for you

Employers should no longer assume that they will not be exposed to unfair dismissal claims where the employment relationship ends at the end of a maximum term or fixed term contract. The totality of the employment relationship and circumstances such as those listed above will need to be carefully considered in assessing whether a decision not to offer a new contract of employment to an employee may result in an unfair dismissal claim.

Saeid Khayam v Navitas English Pty Ltd t/a Navitas English [2017] FWCFB 5162 (8 December 2017)