Successive Fixed Term Employment Contracts – What You Need to Know

Employment may be offered to employees on the basis that it is for a fixed term (i.e. 12 months) or until a specified date. When the agreed date in the contract is reached, the contract will expire.

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However, in circumstances where an employee has been engaged pursuant to a series of fixed term employment contracts, a court may find that the use of such successive, short-term contracts is a ‘sham arrangement’ and that a ‘continuing’ employment relationship exists. When this occurs, and the fixed term contract expires, it may be open to the employee to make a claim for unfair dismissal.

To determine if a ‘sham’ arrangement exists, a court will consider the ‘substantial purpose’ of the fixed term period. If the employer can establish that the employee was engaged for a fixed term for a legitimate reason, they will have a strong defence to a claim that the contract is a sham arrangement. Examples include a maternity leave position, a short term position for a specific task, or a role dependent on funding, operational requirements or industry practices.

Where a series of contracts are entered into merely for administrative convenience or not in accordance with the terms of an applicable award or enterprise agreement, a court may conclude that a continuing employment relationship exists.

In relation to the education industry, the Educational Services Teachers Award 2010 (Award) provides conditions under which a teacher may be hired on a fixed term basis.

Under the Award, an employee may be employed for a fixed period of time for a period of at least 4 weeks but no more than 12 months on either a full-time or part-time basis to:

a) undertake a specified project for which funding has been made available;

b) undertake a specified task which has a limited period of operation; or

c) replace an employee who is on leave, performing other duties temporarily or whose employment has terminated after the commencement of the school year. Provided that where the replacement arrangement extends beyond 12 months, the fixed term employment may be extended for up to a further 12 months.

Enterprise agreements may also place conditions on fixed term contacts (for example limiting how many fixed term contracts may be used).

Risks of getting it wrong

Where an employee is engaged pursuant to a series of fixed term contracts, it may be open for the employee to make claim for unfair dismissal.

This occurred in the matter of Saeid Khayam v Navitas English Pty Ltd t/a Navitas English [2017] FWCFB 5162 (Navitas) where a teacher, Mr Khayam, had been employed on a series of fixed term contracts between 2012 to 2016.

At the expiration of the last contract, Navitas did not offer Mr Khayam another contract due to performance concerns. Mr Khayam subsequently filed an unfair dismissal claim, asserting that his dismissal was harsh, unjust or unreasonable.

Historically, employees engaged on a series of fixed term contracts were not eligible to make an unfair dismissal claim because the contract ended due to the ‘effluxion of time’, rather at the employer’s initiative.

However, in Navitas, the Full Bench found that Mr Khayam could bring a claim.

When assessing if the termination was at the employer’s initiative, the Court found the following factors to be relevant:

  1. the totality of the employment relationship (not merely the terms of the contract);
  2. whether the contract was varied, replaced or abandoned by a separate agreement;
  3. whether the contract was limited to the terms of a written document, or was simply a series of fixed-term contracts operating for administrative convenience;
  4. whether the employer made representations or engaged in conduct that would prevent the employer from relying upon the terms of the contract;
  5. whether the terms of the contract are inconsistent with the terms of an award or enterprise agreement.

Considerations

Since the decision in Navitas, employers can no longer assume that they are protected from unfair dismissal claims simply because the contract has reached the end date.

Careful consideration must be given to terminating fixed term contracts, especially when the employee has been engaged pursuant to a successive term contracts.

Employers should also review all existing fixed term contracts to ensure that the contract is appropriate for the role, and meets its broader legal obligations under any applicable award or agreement.

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If you require assistance with reviewing your employment contracts or any other legal issue at your school, please contact the Lynch Meyer Lawyers team on the Free Legal Hotline for Schools.