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Maximum term contracts hire an employee for a specific role and specific season or period of time. They often come with an end date agreed upon by both parties. There are various benefits to employers when using a maximum term contract. However, employers may not be able to rely on those benefits when an employee enters into successive maximum term contracts. Recently, the Fair Work Commission declared that an individual on successive maximum-term contracts was not entitled to an unfair dismissal claim. 

To help understand your obligations as an employer, this article will discuss:

  • the decision of Michael Nasr v Mondelez Australia Pty Ltd [2021] FWC 2802;
  • whether employees on maximum term contracts can submit unfair dismissal claims; and 
  • what employers can learn from this decision.

Michael Nasr v Mondelez Australia Pty Ltd [2021]

Nasr was employed at Mondelez for over 2.5 years under 8 successive maximum-term contracts. The last contract was for 12 months, following his employment ending. The contracts did not guarantee further employment and provided an expiry date. Nasr lodged an unfair dismissal claim due to having a reasonable expectation of ongoing or permanent employment. 

Mondelez stated there was no dismissal. Instead, the contract had reached its end date. The Fair Work Commission agreed with Mondelez, believing Nasr had no legal argument to proceed with his unfair dismissal claim. The Commission held that each contract had a clearly stated expiry date, and Nasr read and understood this. 

Therefore, it is evident that Mondelez protected themselves against an unfair dismissal claim regarding Nasr’s maximum-term contract. Furthermore, the contractual clause relating to an expiry date and no guarantee of further employment protected them. 

However, are all employees under maximum-term contracts unable to file an unfair dismissal claim?

Unfair Dismissal Claims Under a Maximum Term Contract

Based on the above decision, it is easy to assume the Fair Work Commission would feel similar for every maximum term contract. However, Saeid Khayam v Navitas English Pty Ltd t/a Navitas English [2017] says differently. 

The critical question for unfair dismissal claims was whether the termination was at the employer’s initiative. So, did the employer take steps to end their worker’s employment contract, or did the contract automatically end on a specific date? 

In making that determination, the Commission will generally consider these factors:

  • Has the employment relationship ended? Is there no expectation of more work?
  • Did the employer substantially contribute to the termination if the employee did not agree to the termination?
  • Was the employer a major force in the termination? This is regardless of whether both parties agreed to terminate.

Additionally, there are other factors that the Commission may consider, including whether:

  • the parties fully understood the contract;
  • both parties agreed to all the terms in the contract; and
  • the contract abides by the relevant Award or agreement. 

In the case of Navitas, his employment contract included a notice of termination. So, it was not a contract for a specified period. Additionally, Navitas warned Khayam in advance that he would not be offering another contract due to performance issues. Ultimately, these factors contributed to Khayam having a case for an unfair dismissal claim. 

What Employers Can Learn From This Decision

Both these decisions recognise the importance of drafting the maximum term contract. However, there are factors that employers need to consider:

  1. Specify the expiry date of the contract. Clearly state whether there is potential for future employment. 
  2. Ensure that both parties comprehend the terms of the contract. It is a good idea to keep records of any discussions had between you and the employee.
  3. Avoid being a driving force for ending the contract. Instead, allow the contract to expire and do not give any misrepresentations of future employment. 

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Key Takeaways

Ultimately, it is not impossible to escape unfair dismissal claims from employees under a maximum term contract. However, there are ways to avoid them. Importantly, have clear conversations with your employees. Likewise, be sure to draft maximum term contracts with precise termination dates. Further, circumstances where you take initiative to end an employee’s maximum term contract may open the doors to an unfair dismissal claim.

If you need assistance drafting your maximum term contracts, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is a maximum term contract?

Maximum-term contracts allow for employment for a specified period of time, with the contract ending by a certain date. It is best for a project or seasonal work. 

Can employees on maximum term contracts file unfair dismissal claims?

Unfair dismissal claims require employees to have worked for at least 12 months in a small business or 6 months in a large business and be employed in the private sector. In addition, for employees on a maximum term contract to file, the contract must have ended on the employer’s initiative.

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