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Drafting fixed term employment contracts

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Does anybody really know what time it is?

Fixed term employment contracts are useful for employers who need to manage a workforce when personnel requirements are uncertain or may change, for example, when needed to trial a project, where a position is dependent on funding, or when needed for a specific period such as a parental leave position.

Fixed term employment contracts are useful for employers who need to manage a workforce when personnel requirements are uncertain or may change, for example, when needed to trial a project, where a position is dependent on funding, or when needed for a specific period such as a parental leave position.

Fixed term employment contracts should contain terms which make it clear to both parties that employment is only for a specified period. The terms should also include the start and end date and that the employment will not be ongoing (i.e. that the employment will be terminated on the end date). Essentially, there should be no doubt that the employment will come to an end and when it will come to an end before the parties enter the contract.

A failure to clearly state these terms in contracts may give risk to lead to undesirable consequences regardless of the intention of the employer for a fixed term employment contract.

For example, in KF v Act for Kids [2016] FWC 5052, the Employee lodged an unfair dismissal application following the termination of her employment in April 2016. The Employer raised a jurisdictional objection on the grounds that as the Employee was employed for a 12 month fixed term, her employment came to an end as a result of the effluxion of time rather than by any action of the employer.

In support of its objection, the Employer relied upon a clause of the contract which stated: “Your employment will be full-time from 30 March 2015 to 1 April 2016” and argued that the Employee accepted employment for a fixed term period, coming to an end on 1 April 2016. It also submitted that the position was advertised to be a 12 month period and the Employee was advised in the interview process that the position was only for 12 months.

The Employee successfully argued that the contract did not state that her employment was to end on 1 April 2016 or that it would end on a specific date. Rather, she submitted that it simply stated that her employment was on a full-time basis from 30 March 2015 to 1 April 2016 and thereafter could be on a part-time or casual basis.

The Fair Work Commission (FWC) examined the contract and noted that the clause together with other clauses created ambiguity. The contract contained other clauses including that the Employee’s remuneration was to be reviewed annually and a termination clause which provided for notice periods as per the National Employment Standards (NES). Commissioner Hunt commented “clear words are necessary” and that whilst the Employer may have desired the employment to be for a fixed term, “the execution of that desire was poor.”

Commissioner Hunt dismissed the Employer’s jurisdictional objection and held that the FWC had jurisdiction to determine the Employee’s unfair dismissal application.

 

Tips for employers

This case demonstrates that it is essential that contracts are correctly drafted. For fixed term contracts this would include referring to the employment as “fixed term”, stating when the contract is to begin and end, and specifically including that the contract is to terminate on the end date.

 

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

 

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