copyright  |  disclaimer  |  privacy policy  |  print ready

« back

What is “a contract of employment for a specified period of time”?

Excerpt from this article first published in Human Resources Magazine, Issue 163 - 14 October 2008

In the recent case of Peters v City of Sterling the Australian Industrial Relations Commission had occasion to consider the meaning of the phrase ‘a contract of employment for a specified period of time’.

Mr Peters was employed by the Council as Manager of Human Resources under a contract of employment expressed to be for a fixed period between 22 November 2004 until 21 November 2009. On 9 November 2007, the Council terminated Mr Peter’s contract. Mr Peter’s then commenced proceedings alleging his dismissal was harsh, unjust or unreasonable. The Council objected to the Commission determining Mr Peters’ application on the basis that the Workplace Relations Act prevented Mr Peters from bringing an unfair dismissal application against them in circumstances where the contract under which he was engaged was “for a specified period of time”.

The Commission considered its earlier decisions in the matter and identified the following general principles to apply to determine whether the contract was ‘for a specified period of time’:

• A specified period of time is a period of employment that has certainty as to its commencement and time of completion.

• A contract, which provides that after a specified period of time it may be reviewed and extended by consent, may still be a contract for a specified period.

• Where a contract provides for termination during its life on grounds that are analogous to the common law right to terminate an agreement for misconduct or other breach, such may still be a contract for a fixed period.

• Where a contract provides a broad or unconditional right of termination during its terms, the period of the contract is indeterminate and thus not for a specified period of time.

• The terms of the contract are to be objectively construed and in the absence of ambiguity their plain meaning is to be applied unless such would result in absurdity or clear injustice.

• A series of fixed term contracts may give rise to an understanding that the employment is in fact ongoing and not genuinely fixed term in nature.

• The whole of the contract is to be taken into account and provisions that are inconsistent with an intention to provide a fixed term (such as references of long service or entitlements beyond the stated period) may create ambiguity and need to be taken into account.

The Commission then went on to consider those principles and the following relevant parts of the contract:

• The term was expressed to be for 5 years, commencing on 22 November 2004 and expiring on 21 November 2009.

• The contract could be extended by mutual agreement between the parties.

• The contract would expire on conclusion of the fixed term without either party giving notice.

• The contract could be terminated during its term by either party committing an act of default. Such acts included willful or grave misconduct, serious and persistent breach of the contract, continuing incapacity, failure to achieve performance criteria.

• The termination provisions did not allow a broad or unconditional right of termination during its term.

Based on the above principles and the relevant parts of the contract, the Commission found the contract was ‘for a specified period of time’ and accordingly, dismissed Mr Peters’ application.

HR Tip

Contracts for a specified period of time can provide protection to employers against unfair dismissal claims however, in drafting those contracts the principles identified in this case should be considered. The inclusion of a general right to terminate without cause (including the inclusion of a probationary period) can deprive the employer of the protection from unfair dismissal. Employers should also be aware that a series of rolling fixed term contracts may also deprive the contract of necessary character of being a contract for a specified period of time.

While fixed term contracts may be beneficial in protecting an employer from an unfair dismissal claim, it can also have the obvious downside that a termination should only occur in accordance with the provisions of the contract. A failure to comply with those conditions could result in the employer being responsible for paying out the remaining term of the contract.

Beth-Marie Kitchener

Solicitor