Effective use of maximum term contracts

In 2017 the Full Bench of the Fair Work Commission in the Khayam v Navitas English Pty Ltd decision ruled that, despite the expiry of a fixed term contract, there is still a possibility the employment relationship would continue because the contract did not reflect the overall reality of the agreement between the parties. 

However, the recent decision of the Fair Work Commission confirms it is possible to employ a worker on a series of successive maximum term contracts and avoid an unfair dismissal claim when the final contract is not renewed. 

As a general rule it remains risky for an employer to adopt this employment strategy unless there are genuine operational reasons to do so, it is made very clear and the parties have genuinely agreed that the employment relationship will come to an end on the expiry date of the final maximum term contract. 

In Nasr v Mondelez Australia Pty Ltd [2021] FWC 2802, the Fair Work Commission found that a worker engaged by Mondelez on eight end-to-end short-term contracts over 2.5 years has no right to pursue an unfair dismissal claim.

Deputy President Young accepted the employer's contention that the worker's final maximum-term contract expired as a result of the effluxion of time and therefore it never dismissed him.
Each of the contracts "clearly articulated" an expiry date, the first and second contracts "expressly stated" that he had been taken on as a "temporary for the maximum period” specified in the contract and "on the basis that there can be no guarantee of further employment beyond that period".

The Fair Work Commission found that;

  • The series of contracts were based on the operational requirements and business needs of the employer, and represented a genuine agreement by the parties that the employment relationship would end upon the expiry of each of the contracts;
  • The terms of each contract were clear and unambiguous, and clearly stated the time for the end of employment; 
  • The applicant had meetings with his manager between each contract, during which it was explained to him why contracts were for a particular length, and that there was no guarantee of employment beyond the contract; and 
  • Upon the expiry of the eighth contract, the employment relationship ended by agreement of the parties, not at the employer’s initiative.

Disclaimer: This summary is a guide only and is not legal advice. For further information on employment contracts call NECA Legal (WA) Pty Ltd on (08) 6241 6129 or email necalegalwa@ecawa.org.au.