Maximum Term Contract leaves referee on the Bench

A General Protections claim before the Fair Work Commission (“FWC”) has been “stopped in its tracks” before it even started. The FWC held that a National Rugby League (“NRL”) referee was not dismissed, but rather, his “maximum-term” 12-month contract expired. It is for this reason that the FWC had no jurisdiction over the matter as the dismissal was not at the initiative of the NRL.

The Decision

FWC Deputy President Bryce Cross held that the NRL engaged the referee “under a series of maximum term contracts based on” its “genuine operational requirements“, and that the contracts’ terms reflected the genuine agreement of the parties that the employment relationship would end when each contract expired.

The referee’s contention that there were vitiating factors of the contract being contrary to public policy and the employer’s conduct or representations provided a proper legal foundation to prevent it relying on its terms, were ultimately rejected by the FWC.

The referee stated that he, “had no choice in the dismissal“. However, given the nature of his engagement with the NRL and the express terms of his latest contract, the contract had simply expired. Therefore, there was no jurisdiction for the FWC and the case was dismissed. Notwithstanding the decision in this matter, there are many cases in this area of law that do provide a basis for an unfair dismissal or general protections claim and it is important to get the arrangements correct before the employment commences, before the contract expires, and before the renewal of the contract (if any).

Relevant Case Law

However, the 2017 decision of Justice v Lunn, it has generally been accepted that an employer does not face unfair dismissal exposure when a maximum term contract is not renewed, as the cessation of employment has not been at the initiative of the employer, but rather simply at the expiration of the contract.

Therefore, generally, employers who had allowed an employee’s employment to end upon the expiry of a maximum term contract were not considered to have dismissed an employee and were not exposed to the risk of a claim being brought by an employee against them.

The decision of Khayam v Navitas English Pty Ltd also had significant implications on how maximum term employment contracts interact with unfair dismissal and general protections provisions of the Fair Work Act 2009 (Cth).

The FWC has held that a four-step assessment process should be conducted to determine whether there has been a termination at the initiative of the employer and an employee is able to bring a claim after their maximum contract term has expired:

  1. Where the employment relationship is made up of a sequence of time-limited (ie fixed term or maximum term) contracts of employment, the critical question is whether the parties genuinely agreed that their employment relationship would come to an end upon the expiry date, not just the employment contract.
  1. Where the parties agreed that their ‘time-limited’ contract will expire on a certain date, but have not agreed on the termination of their employment relationship, the termination of employment upon reaching the expiry date may still be a termination of the employment relationship at the initiative of the employer (in which case a claim can be pursued).
  1. Where the terms of the time-limited contract reflect a genuine agreement that the employment relationship will not continue after a specified date and it comes to an end on that date, then, absent a vitiating or other factor, the employment relationship is terminated by agreement and not at the initiative of the employer.
  1. Such factors include where:
  • the contract was entered into by the employee as a result of a misrepresentation by the employer, misleading or unconscionable conduct by the employer, or under duress or coercion;
  • the contract was a sham contract, illegal or contrary to public policy;
  • the contract was varied or replaced and the time limit no longer applied;
  • the contract was entered into for administrative convenience only;
  • the employer made representations to the employee that their employment would continue, subject to conduct and performance, notwithstanding the expiry date of the contract; and/or
  • the terms of the contract were inconsistent with the terms of an applicable award or enterprise agreement.

The Takeaway

If you are an employer who engages maximum term employees and you do not intend on renewing their contract, you will need to ask yourself whether your contracts, engagement and dismissal of employees may be subject to a claim before the FWC.

We recognise that is a particularly difficult area of the law to navigate for our clients, as always, if you have any further questions about maximum term contacts, please do not hesitate to contact Nick Stevens, Luke Maroney or Daphne Klianis.

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