Thursday, 5 August 2021

Employee on successive contracts not entitled to unfair dismissal claim

Relevant facts

An employee of Mondelez Australia Pty Ltd (Mondelez) was employed over a period of 2.5 years and during this time, worked in a variety of departments and roles across the business. In doing so, the employee was employed on eight consecutive maximum term contracts, with one contract for a maximum term period of 12 months.

The first and the second contracts between Mondelez and the employee stated that the employee’s contract was “temporary for the maximum period” and was offered “on the basis that there can be no guarantee of further employment beyond that period.”

The third to eighth contracts each extended the employee’s “temporary employment” for a further maximum period and stated that there was no guarantee of future employment. Relevantly, the third to eighth contracts stated that “all other terms and conditions of employment remain as per your temporary employment contract.” The expiry date was articulated in each of the contracts, including the eighth (and final) contract.

When his employment ceased at the end of the Eighth Contract, the employee alleged that he had been unfairly dismissed on the basis that the Eighth Contract was a “rehash of what went before” and he could reasonably have expected to be offered a further period employment because he held a reasonable expectation that his employment was at that stage in effect “ongoing”.

In response, Mondelez argued that the employee’s employment ended through the effluxion of time on the expiry of the employee’s maximum term contract or because it was a contract for a specified period of time and the employment terminated at the end of that period.  Mondelez also argued that there were clear operational reasons for each of the maximum term contracts and that it had clearly communicated all of these reasons to the employee, as well as articulating that the employment relationship would end on the expiry date in the respective contract. As a result, Mondelez submitted the employee was not dismissed from his employment.

Genuine operational requirements

In considering the arrangement between the employee and Mondelez, the Commission looked closely at the genuine operational and business needs of Mondelez during the period when the employee was engaged. This included the unpredictable and seasonal nature of their work as well as changes to Mondelez’s operations when a new line of products was introduced which had previously been located in New Zealand. Mondelez also experienced increased staff absences during 2020 which were “significantly larger than usual” due to COVID-19 and also implemented policies to address the potential spread of COVID-19.

The Commission noted that whilst the eight maximum term contracts were generally for a greater period than is ordinarily the case, they were based on genuine operational reasons applicable at the relevant time, which was supported by the employee’s changing nature of the departments and shifts.

Further, the Commission was satisfied that the expiry date of each contract was clearly articulated in all eight contracts and that the employee had read and understood that the contracts operated for a fixed period of time, would expire on the date specified and that there was no guarantee of employment after expiration. This was despite the employee indicating that representations had been made to him in effect that his employment would be ongoing, which was not accepted by the Commission.

Ultimately, the Commission held that as the employment relationship had ended by the effluxion of time, the employee had not been dismissed, and therefore was not entitled to any unfair dismissal remedy (he was seeking reinstatement).

Lessons for employers

This decision highlights the need to closely consider maximum term employment arrangements. Whether successive maximum term engagements are legitimate will be determined by  the reality of each contract and the circumstances surrounding their creation. Maximum term contracts cannot be utilised to simply avoid unfair dismissal claims and employers should consider the use of maximum term contracts carefully, including the legitimate reasons for the use of such contract and why it is the most appropriate agreement for their business’ needs.

Employers should consider reviewing their current employment contracts and practices particularly with reference to employees on maximum term contracts.

If you need assistance in reviewing your employment contracts, HR Legal can assist.

Michael Nasr v Mondelez Australia Pty Ltd [2021] FWC 2802 (1 July 2021)


This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.