Fair Work: How do maximum term contracts work?

This worker was employed over eight separate contracts

Fair Work: How do maximum term contracts work?

In a recent case, the Fair Work Commission considered whether an applicant, who was employed over eight separate contracts, was dismissed by his employer, or whether the employment relationship had ended through the effluxion of time.

The applicant was employed by the respondent, a confectionary manufacturer, for two and a half years between July 2018 and December 2020. His employment was pursuant to eight maximum term contracts, each lasting between one and 12 months. Each contract’s expiry date was clearly articulated. Further, the third to eighth contracts provided that there was “no guarantee of future employment beyond the mentioned period”. The applicant’s employment was also governed by the respondent’s enterprise agreement, which provided that employees may be engaged for a “period, project, season or job”.

Over the two and a half year period, the applicant was offered additional employment contracts for several reasons, one of which was the unexpected increase in the volume of work in the production line on which the applicant worked. The respondent submitted that the peak season for this production line was from August to December, during which time all Easter products are produced.

In December 2020, the respondent decided that the applicant’s production line was to be reduced by two employees, given the peak season had now concluded. The respondent stated it notified the applicant that he would not be offered further employment past his current contract. The applicant’s employment subsequently ended with the expiry of his eighth contract on 31 December 2020.

However, the applicant submitted that his employment carried on “largely seamlessly over two and a half years” and that his contracts rolled over in a “perfunctory way”. He further asserted that if there were a “mutual expectation” that his employment would end after the eighth contract expired, there would have been no need for the respondent to notify the applicant of this. 

The Commission rejected each of the applicant’s submissions. It found that the terms of the applicant’s eighth contract were “clear and unambiguous”. The Commission further stated that the series of contracts were based on the respondent’s “operational requirements” and “represented a genuine agreement by the parties that the employment relationship would end upon expiry of each of the contracts”.

Accordingly, the Court held that the applicant’s employment ended by the effluxion of time upon the expiry of his eighth contract and that he was therefore not entitled to bring an unfair dismissal claim.

Key Takeaways:

  • Employers must ensure employment contracts contain clear terms to avoid confusion
  • When using several maximum term contracts, employers must ensure they do not create an expectation of an ongoing relationship with the employee
  • A worker employed under a maximum term contract is not entitled to bring an unfair dismissal claim where their employment ended due to the natural passing of time

Recent articles & video

How to develop tech and data skills in the workforce

Free Whitepaper: Hiring Remote Talent

A rising tide of financial stress is drowning Australia's workers

SEEK appoints new Special Advisor of Fair Hiring

Most Read Articles

Workforce Australia and other services implement ‘mutual obligation requirements’

CEO takes leave amid claims of bullying and workplace intimidation

Superannuation and HR: Your legal responsibilities as an employer