Australian employers must be familiar with fixed term contract limitations

In the case (22 pages / 109 KB), a full Federal Court upheld that where employment comes to an end because of the expiry of a fixed term contract, it is not dismissal. 

The case revolved around repeated challenges by a former National Rugby Leage (NRL) referee who had been engaged under a series of consecutive fixed term contracts. The referee claimed that he had been dismissed when his fixed term contract was not renewed.

Jessica Park, employment risk and compliance specialist at Pinsent Masons, said: “Although this case vindicates the NRL’s use of fixed term contracts and may appear particularly helpful for employers who have engaged employees on fixed term contracts to be able to choose not to renew the contract beyond this specified period set out in the contract, caution is required.”

The former referee was engaged by the NRL under a series of consecutive fixed term contracts between March 2015 and November 2020, with each contract running for a stipulated term. His latest fixed term contract had an end date of 30 November 2020. In June 2020, the referee was informed he would not be offered a further contract.

The referee attributed the non-renewal of his contract by the NRL beyond November 2020 to his possession and exercise of workplace rights. He first filed a general protections application in the Fair Work Commission (FWC) under Part 3-1 of the Fair Work Act 2009 (Cth) (FW Act), alleging he had been dismissed in circumstances amounting to unlawful adverse action. However, Deputy President Cross of the FWC determined that the final contract expiring 30 November reflected a genuine agreement between the parties that the employment relationship would come to an end on that date and the application was dismissed.

The referee then filed a notice of appeal, against the decision of Deputy President Cross issued on 12 November 2021. However, a full bench of the FWC dismissed his appeal, finding that his employment had terminated upon the expiry of the term of his employment contract which constituted a genuine agreement, and not as a result of him being “dismissed” by the NRL.

The former referee then applied to the Federal Court of Australia for judicial review of the full bench decision alleging that the full bench made its decision based on a misunderstanding of the circumstances in which the FW Act recognises that a person has been “dismissed”.  Consequently, it was argued, this led to a jurisdictional error that the court should rectify by prerogative relief. The Federal Court at first instance dismissed the application, accepting that the full bench correctly applied itself into considering whether the referee was dismissed from his position as required under s386(1) because the termination of employment was not at the employer’s initiative; and that, in any event, s386(2)(a) would have precluded the referee from being found to have been “dismissed” because he was employed under an employment contract for a specified period of time.

Finally, the referee filed a notice of appeal arguing, amongst other things, that the FW Act did not apply to his “outer limits” contracts - contracts that contain an expiry date but also contain the option to terminate earlier than the expiry date. The full Federal Court dismissed the appeal, stating that it did not matter whether it was an “outer limits” contract, as s386(2)(a) applies to circumstances where the employment terminates at the end of a period of time, task or season as specified in the contract.

The court did not consider the recent limitations on the use of fixed term contracts set out in the FW Act, which came into effect on 6 December 2023. This is because the series of challenges made by the referee resulting in the latest decision concerned a fixed term contract with an end date of 30 November 2020, which was before the statutory limitations on the use of fixed term contracts came into force.

The effect of entering into a prohibited fixed term contract from 6 December 2023 is that the term of the contract providing the contract will terminate at the end of an identifiable period is taken to have no effect. In such a case, an employee would instead be considered a permanent employee capable of being “dismissed” as defined in the FW Act. 

Neil Napper, employment law and workplace relations expert at Pinsent Masons, said: “Employers using or considering using fixed term employment contracts should ensure they are familiar with the limitations on their use and record their use throughout the organisation including commencement date, expiry date and whether they have been varied since 6 December 2023. Employers should also check whether employees engaged on fixed term contracts are affected by the statutory limitations before making decisions about renewal or extension of contracts and seek legal advice if unsure about compliance with the rules.”