In a recent case, an employee alleged that she had been unfairly dismissed when her fixed term contract expired, and no agreement had been reached concerning a contract extension/renewal.

Background

The employee had been hired on a fixed term contract which was due to expire in August 2023. Towards the end of her employment, the employee raised several concerns surrounding “isolation, safety and lack of support” to the extent that she claimed it left her with “no choice but to resign”. The employee also requested a pay increase because she had been offered another higher-paid role, which was rejected by the employer.

The employer started a discussion about the possibility of extending the employee’s fixed term contract in mid-August 2023, which the employee criticised. The employer’s first offer of a contract extension (“First Offer”) was initially rejected by the employee who noted to the employer “My contract ends on 31 August 2023. Would you prefer that I finish then, or stay in the role while you secure a new team leader?”

While much of the substance of her narrative was contested, the Fair Work Commission (the “Commission”) accepted that towards the contract’s end, the employer offered several more contract extensions and the employee herself proposed to stay until early September 2023 to facilitate onboarding for new employees (which was rejected by the employer). However, no agreement was reached. Consequently, the employee’s fixed term employment ended on 31 August 2023.

So, was the employee unfairly dismissed?

Dismissal, as defined by the Fair Work Act 2009 (Cth), occurs if the person’s employment “has been terminated on the employer’s initiative” or if the person resigned “but was forced to because of conduct, or a course of conduct, engaged in by his or her employer”.

In this case, the employee claimed that the employer’s failure to successfully negotiate a contract extension meant that she was forced to resign. However, the Commission found that she had not been dismissed, due to the following reasons:

• The employer found that the employee’s language used in her rejection of the First Offer was that of a resignation and therefore, the employee had provided notice of her resignation.
• The employer’s actions did not amount to an unfair dismissal since there was no “dismissal” in the first place. The employee’s rejection of the First Offer had the effect of simply leaving the fixed term contract running and its expiry date unvaried. The further unsuccessful attempts at negotiating a contract extension also had the same effect.
• The circumstances involved an exception to the definition of a “dismissal”, which meant that the employee’s “contract of employment for a specified period of time” would automatically terminate at the end of its contracted period.
• The Commission also found that the employee was not “forced” to resign due to various factual circumstances. For example, the Commission noted that that the employee’s complaints concerning her health and safety did not have a sufficient casual connection with her resignation, the employee had asked for a pay increase because she had been offered another role, and the employee had suggested that she stay on when she rejected the First Offer.

What can employers take away from this case?

While the Commission ultimately found in the employer’s favour, employers should keep in mind that while fixed term contracts have clear, unique advantages (including the definite end of a contractual relationship without requiring any sort of dismissal), employees may still be considered “dismissed” in limited circumstances (for example, if a “substantial purpose” behind their employment on a fixed term contract is so that employers can avoid their obligations concerning unfair dismissal).

Further, as of December 2023, new requirements surrounding fixed term contracts have commenced, which now restricts employers from offering such contracts to employees under specific circumstances. PCS has discussed what these recent changes mean here.