Maximum term, minimum clarity: the FWC’s first decisions since the fixed term prohibitions

In 2023, the Government’s Secure Jobs, Better Pay changes to the Fair Work Act (Act) introduced big changes for fixed and maximum term employment contracts. Essentially, employment contracts with an end date were mostly prohibited, with some limited exceptions. Last week, the Fair Work Commission released its first decisions considering the fixed term contract changes. The results are interesting.

Here's what we’ve learned.

Ong v Victorian Energy Safety Commission[1]

The first decision related to an application under the general protections provisions of the Act. Ms Ong alleged that her employer, the Victorian Energy Safety Commission (VESC), took adverse action against her when her employment was terminated. The FWC had to decide on a jurisdictional basis whether Ms Ong had been dismissed at all, or whether the employment came to an end at the conclusion of a fixed term employment contract. This is sometimes referred to as being at the ‘effluxion of time’.  

The employee argued that her employment contract contravened the new fixed term prohibitions in the Act, and as such, the clause which provided that her employment would end on a certain date should have no effect.

The Act contains some carve outs for when fixed or maximum term contracts are allowed, and the VESC successfully relied on one of those. These exceptions are complex, but in these particular circumstances the question was ultimately whether the third of Ms Ong’s fixed term contracts, for the role of Senior Human Resources Business Partner, required the same or substantially similar work to her earlier contracts for the role People Services (HR) Business Partner.

If the third fixed term contract was for substantially the same duties, the contract would have contravened the Act, the ‘maximum term’ clause would have had no effect, and the employer would have been the one who decided to end the employment rather than Father Time. In that scenario, Ms Ong would have been dismissed, and would have had the right to continue her adverse action claim.

After considering the VESC’s detailed evidence in which it compared the duties of each role line-by-line, Commissioner Lee decided that the third role could not be considered the same or substantially similar to Ms Ong’s earlier role. Therefore, the third contract fell within one of the allowed exceptions, and her contract came to an end at the conclusion of the third contract, not at the initiative of the employer. Ms Ong’s application was dismissed.

Louise McCue v Aboriginal Hostels Limited[2]

On the same day, Commissioner Riordan handed down a decision involving a Commonwealth Agency, Aboriginal Hostels Limited. If you want to read what the fixed term prohibitions mean for the Australian Public Sector, we previously wrote about it here. This one is required reading (it will be in the test).

Ms McCue was first employed on 23 March 2021 as an Assistant Hostel Manager on a non-ongoing (i.e. maximum term) contract to 28 October 2021. Her employment was extended to 21 September 2022, then again on 20 March 2023, noting the fixed term contract prohibitions in the Act were passed on 6 December 2022, and stated to commence from 6 December 2023. Ms McCue’s employment ended at the completion of this final contract on 19 September 2024. Following that, Ms McCue brought an unfair dismissal application against the Agency, alleging that her employment came to an end at the employer’s initiative, not by the effluxion of time.

Ms McCue gave evidence that in 2021 she was promised that she would be made permanent when she obtained Australian citizenship. The Agency argued that, if such a promise was made, it ceased to have effect when Ms McCue’s name expired from the merit list on 6 March 2023.

The Commission considered the decision of Alouani-Roby v National Rugby League Ltd[3], which found that ‘distinctions between employment relationships and employment contracts are artificial: the termination of an employment relationship and the termination of an employment contract are the same thing.’[4] Alouani-Roby has been thought to significantly limit the earlier authority of Navitas,[5] which has been relied upon by many Commission decisions involving back-to-back fixed (or maximum) term contracts. In that line of authority, an employer’s decision to not offer an additional employment contract could amount to a dismissal, being a termination of the employment at the employer’s initiative.

Commissioner Riordan found it significant that the Alouani-Roby decision related to a rugby league referee, being a seasonal employee who was always engaged on fixed term contracts. This was noted to be a different context to the present, where Ms McCue worked on a full-time basis during ordinary hours, seemingly without the ability to perform other work. While not entirely clear from the decision, this appeared to be a basis for the Commissioner not following that authority. 

The decision also found the fixed term prohibitions also applied to Ms McCue’s arrangement, despite the fact that her final contract commenced nine months before those provisions commenced. Commissioner Riordan noted that because the fixed term prohibitions were passed on 6 December 2022, they applied (despite being stated to commence on 6 December 2023). The decision also repeated the parties’ extensive submissions about the Act’s anti-avoidance provisions regarding fixed term contracts, although Commissioner Riordan did not squarely address whether those provisions applied to the Agency’s actions.  

The Commissioner found that the Agency had not refuted Ms McCue’s evidence that she was promised full-time employment once she obtained Australian citizenship. While the Agency submitted that it was prevented from the Public Service Act 1999 from engaging an employee on a permanent basis without a merit selection process, and Ms McCue had been unsuccessful in that process, Commissioner Riordan preferred Ms McCue’s evidence that the promises were made.

Ultimately, Ms McCue’s employment was found to have ended at the employer’s initiative, meaning she was dismissed. As such, her application for unfair dismissal can proceed to substantive hearing.

So, where are we now?

The fixed term contract provisions in the Act are complex for private sector employers, but even more so for public sector agencies. These decisions demonstrate that fixed or maximum term employment is likely to be a battleground in future dismissal cases, and the evidence and submissions before the Commission will prove critical.

For fixed or maximum term contracts entered between 6 December 2022 (when the Act was amended to insert the fixed term prohibitions) and 6 December 2023 (when the provisions commenced), there may now be some uncertainty as to how the Commission will consider those contracts in dismissal matters. Advice and evidence about how the provisions will apply to the particular circumstances may prove critical to employers hoping to succeed on a jurisdictional basis in defending these claims.