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Full Bench decides against established authority in ruling a termination refers to the cessation of the employment relationship and not the employment contract

In a recent case, Khayam v Navitas English Pty Ltd t/a Navitas English, the Fair Work Commission Full Bench found the Commissioner at first instance did not consider all relevant circumstances and the appeal was upheld.

Mr Khayam was employed by Navitas in 2005 as a casual employee. In April 2012, he was offered employment as a “fixed-term teacher” until 30 June 2013. The letter allowed either party to terminate the contract prior to 30 June 2013 by providing 4 weeks’ written notice. Mr Khayam accepted the offer.

When the contract ended, Mr Khayam accepted an offer of employment with terms similar to the previous fixed-term contract. This contract was to expire on 30 June 2014. Mr Khayam was offered and accepted a third “fixed-term” employment contract from 1 July 2014 to 30 June 2016. Similarly to the other 2 contracts, this contract allowed either party to terminate the contract by providing 4 weeks’ written notice.

On 31 May 2016, Mr Khayam was informed that he would not be offered another full-term contract because of disciplinary and performance issues. His employment ended at the cessation of the contract on 30 June 2016.

Mr Khayam claimed he was unfairly dismissed and argued he was dismissed at his employer’s initiative pursuant to s 386(1)(a) of the Fair Work Act.

Navitas conversely argued they did not dismiss Mr Khayam, rather his employment contract came to an end and they chose not to reemploy him.

Decision at first instance

Commissioner Hunt dismissed the application, finding the employment contract was “clear and unambiguous” and would end on 30 June 2016 unless terminated earlier. Navitas was not required to perform any positive act to end the contract other than providing notice to Mr Khayam that there would be no further contract.

The application was found not to fall under s 386(1)(a) of the Fair Work Act pursuant to the Full Bench decision in Department of Justice v Lunn.

Decision on appeal

The Full Bench reviewed the decision in Department of Justice v Lunn and found the approach taken by the Bench in the interpretation of the meaning of “termination of employment at the initiative of the employer” was not “stated in a correct or complete way”. They therefore found they were not restricted to follow the decision in this case.

It was held by the Full Bench that a “termination at the initiative of the employer” was determined by reference to the employment relationship being terminated, and not merely the contract of employment being terminated. The distinction was noted to be important when an employment relationship is made of several, sequential time-limited contracts and the termination occurred at the end of these. In such a case, it may be necessary to consider “the circumstances of the entire employment relationship, not merely the terms of the final employment contract”.

The majority of the Full Bench upheld the appeal and referred the matter back to Commissioner Hunt for redetermination.

Key issues for employers

This case provided a new interpretation of the meaning of “termination at the initiative of the employer”. Employers should be aware that “termination at the initiative of the employer” refers to termination of the employment relationship and not merely termination of an employment contract. As a result, where an employee is on a series of fixed-term contracts and their employment is terminated or the contract expires and is not renewed, the employment relationship as a whole may be considered.

Read the full decision here

* PCC Employment Lawyers are a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training. They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.

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