Fixed term contracts no longer as effective in preventing unfair dismissal applications

Unfortunately for employers, the concept of an employee’s employment coming to an end by the “effluxion of time” is no longer a jurisdictional protection against unfair dismissal claims. Up until the handing down of this decision by the Full Bench of the Fair Work Commission in December last year, employers were always able to argue that an employee, who finished up his or her employment on the last day of their fixed term contract, was jurisdictionally prevented from bringing an unfair dismissal application because they did not meet the requirement that the dismissal was “at the initiative of the employer”. Rather, it was argued, that the dismissal came about by the “effluxion of time” in accordance with the operation of the terms of the employee’s fixed term contract.

The Full Bench in this case overturned the previous case law that stated an employee had no access to unfair dismissal laws when their employment ended by the “effluxion of time”.

So what protection from unfair dismissal does an employer have for an employee on a fixed term contract? Answer: very limited.

For an employer to be able to rely upon a fixed term contract as a defence to an unfair dismissal claim, the contract must be a “contract for a specified period”. This is a fixed term contract with a key feature: it must not have a clause that provides an unqualified right for either party to terminate the contract during the term. In other words, except for limited circumstances such as serious misconduct, there is no right for either party under the contract to terminate it on notice before the end date of the contract. Such a contract therefore forces the employer to guarantee employment for the term of the contract – we recommend staying away.

In our view, rather than guaranteeing an employee a period of employment for a particular fixed term period, it is better for an employer to continue using fixed-term contracts that permit termination on notice, but to ensure that any termination of the employment either during the term, or at the end of the contract, is for a genuine reason and effected in a procedurally fair manner.  

Khayam v Navitas English Pty Ltd [2017] FWCFB 5162 

If you would like to know more about this case, please contact National Workplace Lawyers on (02) 9233 3989.

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.