Expiring employment contracts still considered to be a dismissal by an employer

August 27, 2018

The full bench of the Fair Work Commission recently found that an employer’s decision not to renew an employee’s contract or offer a further contract may be considered a dismissal under the Fair Work Act 2009 (Cth) (the Act).

The issue arose when Navitas decided not to renew an outer-limit contract of a worker, Mr Khayam. Navitas had offered Mr Khayam a number of successive contracts over four years. Upon expiry of his last contract, Navitas informed Mr Khayam that it would not offer a further contract due to concerns about his performance. Mr Khayam subsequently filed an unfair dismissal application.

At the first instance, the Fair Work Commission had to decide whether the termination had occurred by expiration of contract or at initiative of Navitas. Section 386(1)(a) of the Act states that only a termination at the initiative of the employer will trigger the provision for unfair dismissal. Commissioner Hunt decided that, under Department of Justice v Lunn, outer limit contracts terminated through the expiry of the contract is not considered a termination of employment under the initiative of the employer. Mr Khayam filed an appeal following the decision.

Despite the precedent in Department of Justice v Lunn, the Full Bench of the Fair Work Commission endorsed the proposition that an employer’s decision not to renew an outer limit contract in situations where there have been successive contracts may be considered a dismissal. The full bench further decided that termination requires a careful analysis of the entire employment relationship, not just the contract.

To sum it up, employers are now exposed to the risk that employees on term contracts may be eligible to bring unfair dismissal claims, particularly in circumstances where they have been offered a series of successive term contracts. Before you end an employee’s successive term contract, consider contacting our office to see if you may be at risk of an unfair dismissal claim.

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