What you need to know
- Several employment sectors have a long history of employing staff on rolling fixed term contracts – eg. public sector and higher education. This employment practice may soon be open to challenge.
- Presently, when fixed term contracts expire, even after a series of them, employees cannot access unfair dismissal laws.
- This position is up for reconsideration by a Full Bench of the Fair Work Commission.
What you need to do
- Employers need to closely monitor this potential change.
- If the argument succeeds in the FWC, it will be important to review employment practices so as to avoid unexpected exposure to unfair dismissal actions with all the uncertainty and cost that would bring.
What's happened?
A recent decision of the Full Bench of the Fair Work Commission says there is to be a reconsideration of whether allowing a fixed term contract to expire, where it is the last in a series of back-to-back fixed term contracts, might be challenged under unfair dismissal laws.
The decision in question is Khayam v Navitas [2017] FWCFB 4092 (16 August 2017).
If the appeal succeeds, the longstanding understanding that there is no access to unfair dismissal laws in such a case will no longer apply.
Why has this not been an issue until now?
The Fair Work Act 2009 provides that a person has been dismissed for the purposes of the unfair dismissal provisions if that person's employment has been terminated at the employer's initiative.
At least up until now, the expiry of the last of one or more back-to-back fixed term contracts has been understood not to involve the termination of employment at the initiative of the employer. Rather, the termination would come about by effluxion of time – that is, because the agreed term has run out and the contract has simply expired.
The legislative provisions have altered a little since federal unfair dismissal laws commenced in 1994.
A Full Bench of the Australian Industrial Relations Commission dealt with these issues under the predecessor legislation in Department of Justice v Lunn (2006) 158 IR 410. The Full Bench in that case said that, assuming sham arrangements are not involved, when a contract is described as an "outer limits" contract, it terminates through the effluxion of time, and there is no termination of employment at the initiative of the employer. It did not matter that there might have been successive or back-to-back contracts of this kind.
Potential reconsideration
The Full Bench of the Fair Work Commission in the Khayam decision has granted leave to appeal on the ground that a decision not to renew a fixed term (or outer limit) contract in these circumstances might be regarded as a dismissal at the initiative of the employer. It will consider whether the true situation is that there is continuous employment straddling successive contracts and that the practical reason for termination of the employment is the decision of the employer not to renew after the expiry of a particular contract.
If the argument succeeds, the earlier ruling in Lunn, decided under the Workplace Relations Act 1996, would no longer be followed on this issue under the Fair Work Act.
The matter is yet to be set down for hearing.
Significance for higher education and public sector employers
This is an important matter and likely to have widespread significance for employers if the argument being advanced in the appeal succeeds.
There are many sectors of employment where back-to-back, fixed term or outer limit contracts are routinely used: eg. in federal, state and local government agencies, in the university and wider education sector, in the private sector both generally and in the case of employment under outsourced contracts.
If a decision not to renew one of those contracts following its expiry is now to be regarded as involving a dismissal at the initiative of the employer, a much wider range of employees will be brought within the range of the unfair dismissal laws. However, there would inevitably be a grey area as it is unlikely that the expiry of all such contracts could be attacked in this way. Current easy to apply distinctions are likely to be replaced by contestable rules about whether in fact there is ongoing employment which has been terminated independent of the expiry of a particular contract.
All of this may drive employers towards either accepting permanent employment or, alternatively, being more adventurous in exploring non-traditional arrangements. These changes may involve uncertainty, cost and administrative inconvenience.
Employers need to be alert on this matter. If the status quo alters, it will be important that you quickly review employment practices to ensure that you are not unknowingly exposed to unfair dismissal remedies in circumstances where prior decisions had ruled that such remedies out.
Making the case: Insights from Geoff Giudice
The scope of the federal unfair dismissal provisions has been controversial ever since the provisions were introduced in 1994. There have been numerous attempts, a number successful, to widen or narrow the jurisdiction and major reforms in 1996, 2005 and 2009. Throughout that period of nearly 25 years the expiry of a fixed term contract has never been a dismissal under the legislation. It seems unlikely that the Fair Work Commission would alter the position, but clearly that is now a real possibility, at least where there is a succession of fixed term contracts.
|
