A contract worker’s unfair dismissal claim was denied despite his eight successive contracts. A legal expert highlights the key takeaways for HR.
The Fair Work Commission (FWC) has recently held that a worker who was employed under eight separate successive contracts spanning over two and a half years was not continuously employed, and therefore not entitled to remedy for unfair dismissal. This is just one example of many in which confusion arises over the difference between an employee and a long-term contractor.
Fixed-term contracts are common in many workplaces, especially those that rely on government funding or offer project based support to clients.
Employers have to treat successive fixed-term contracts with caution, as where renewal of these contracts becomes a mere formality, or where a reasonable expectation of ongoing work develops, there is a risk that the successive contracts would be considered continuous employment, entitling a worker to make post-employment claims.
This recent FWC decision provides some reassurance for employers relying on successive fixed-term contracts (colloquially known as a rolling contract) spanning over a long period of time, provided:
- The decision not to renew them is due to genuine operational needs of the organisation; and
- The parties were sufficiently clear about the nature of their arrangement.
The history of the rolling contract
The contract worker was employed by Mondelez from 2 July 2018 to 31 December 2020. During that time, his employment comprised eight separate fixed-term contracts, each with a length ranging from one month to 12 months at a time.
When his eighth and final contract ended, he was not offered a renewal. He then put in an official claim to the FWC stating the termination of his employment was an unfair dismissal, and seeking reinstatement of his employment with Mondelez.
He argued his employment had continued seamlessly over the previous two and a half years, with the contracts rolling over in a ‘perfunctory way’.
The contract worker also submitted that the area manager at Mondelez had, on a number of occasions, made verbal representations to him that he would continue to be employed after 31 December 2020, when the eighth contract expired.
He also submitted that the fact that he’d been issued with a separation certificate, which indicated he had been employed for two and a half years, was further proof that his employment had been continuous.
Ultimately, FWC deputy president Young preferred the evidence submitted by Mondelez which stated that no such representations or promises had ever been made to the contract worker regarding further employment.
Further, Young accepted that at each renewal of his contracts, it was emphasised to him that his position was temporary, that the contracts would not be subject to automatic renewal, and that in the absence of the need for temporary employment, he would not be offered a further contract.
In light of this, the separation certificate provided was not determinative, Young found.
Was contract renewal a ‘perfunctory’ matter?
In assessing the reality of the contract worker and Mondelez’s employment relationship, Young held that each of the eight contracts was clearly worded as to only cover a fixed period of employment in a temporary position, and that the worker had signed and understood each of the eight contracts.
Young accepted that the worker’s employment was temporary, in each of the eight cases of contract renewal, in response to a genuine operational need for temporary workers at Mondelez.
This decision was further evidenced by the fact that the worker was deployed across multiple departments in varying roles (night shift, day shift) as the need arose.
The worker submitted that Mondelez had breached his enterprise agreement, which defined fixed-term contracts under clause 17 as being for ‘a period, project, season or job’, as his contractual arrangement was of ‘repeated extensions’ without ‘integration with a given project’.
He said fixed-term contracts under his enterprise agreement could only refer to a singular engagement.
Young rejected this interpretation stating that nothing in the enterprise agreement was consistent with limiting contractual employment to single engagements. In any case, each of the contracts offered would constitute a separate ‘period’ in terms of clause 17.
The court held that if it was really the intention of the parties for the contract worker to be permanently employed, then this would have been reflected in the agreements. Instead, his contracts unambiguously stated that his was a temporary position.
Ultimately, the decision not to renew the final contract was made because the business no longer had a need for temporary employment, and had a lack of work in other departments. This termination was due to the ‘effluxion of time’, and was not a termination at the employer’s initiative.
Therefore, the contract worker was not dismissed for the purposes of his unfair dismissal claim.
A Mondelez spokesperson told HRM, “We’re pleased that the matter has been resolved and provided clarity for all.”
What’s the HR takeaway?
This case provides some reassurance to employers that despite the length of employment under fixed-term contracts, the FWC will always look to the reality of the employment relationship.
So long as the worker was clearly engaged temporarily, in response to a genuine operational need, the FWC will likely uphold the temporary nature of their contract.
Employers who rely on temporary workers under fixed-term contracts will need to ensure their contracts clearly, and unambiguously reflect the temporary nature of the engagement. In this respect, standard form agreements should be treated with caution, as they may not adequately protect employers who do not wish to employ workers more permanently.
Each and every contract renewal should be discussed with the worker to ensure they understand the temporary nature of the position, and communications to workers should be consistent in this respect.
Employers are also encouraged to take contemporaneous notes of discussions with workers.
This case provides guidance on minimising exposure from unfair dismissal claims. Other authorities need to be considered regarding other entitlements such as the ordinary and customary turnover of labour exemption to redundancy, which you can read about in our previous HRM article here.
Fay Calderone is a partner at Hall and Wilcox law firm.
Want to learn more about the legal landscape, such as how to manage a contract worker? AHRI’s short course, Introduction to HR Law, is a great place to start.