Dismissing an employee on a fixed-term contract

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Dismissing an employee on a fixed-term contract

If we dismiss an employee working on a fixed term contract ‘early’, do we have to pay him notice and redundancy payments and can he take an unfair dismissal case against us?

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If we dismiss an employee working on a fixed term contract ‘early’, do we have to pay him notice and redundancy payments  and can he take an unfair dismissal case against us?

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Q  Our company is a consulting engineering firm which works for clients on construction projects. We have an employee employed on a fixed term contract that commenced in July 2012 and is due to finish in January 2014. Because of a change in circumstances the project he is working on will now finish in September 2013. However the employee was originally advised that his employment contract would continue till January 2014. We are not sure how to proceed:
  1. Would the employee be entitled to notice under the National Employment Standards (NES)?
  2. Would he be entitled to redundancy pay (based on 15 months service)?
  3. Could he be eligible to claim unfair dismissal to the Fair Work Commission (FWC)?
A Under the Fair Work Act (s386(2)(a)), a person has not been dismissed if the person was employed under a contract of employment for a specified period of time, for a specified task, or for the duration of a specified season, at the end of the period, on completion of the task, or at the end of the season.

Section 123 of the Fair Work Act also provides that the notice of termination and the redundancy payments provisions under the NES do not apply when an employee is employed under a contract for a specified period of time or for a specified task.
In this case, you should check the contract of employment: was it for a specified period of time (July 2012 — January 2014) or was it for a specified task (working on the specific project for a client which is finishing before the expected date of completion). This point is crucial in determining whether the employee is entitled to notice and redundancy payments under the NES, and whether he is able to seek a remedy under unfair dismissal law.

Specified period of time

When considering whether an employee has been engaged under a contract of employment for a fixed period of time it is necessary to examine the nature of the tenure of the employment provided in the contract. If the termination provisions are such that the contract is actually indeterminate and the cessation date is merely recording the outer limit of a period beyond which the contract of employment would not run, it is not a contract of employment for a specified period of time within the meaning of the Fair Work Act.

A contract of employment for a specified period of time however is one where the time of commencement and the time of completion are unambiguously identified by a term of the contract, either by the contract stating definite dates, or by stating the time or criterion by which one or other end of the period of time is fixed, and by stating the duration of the contract of employment.

An employee employed under a contract of employment for a specified period of time, whose employment is terminated other than at the expiration (effluxion) of that contract, may make an application under the unfair dismissal provisions of the Fair Work Act. See Drummond v Canberra Institute of Technology [2010] FWA 3534; [2010] FWAFB 5455. An application for unfair dismissal would not be successful if the dismissal was a case of ‘genuine redundancy’.

In the case of a genuine redundancy, the employee would be entitled to the minimum period of notice of termination and the appropriate redundancy payment under the NES.

Specified task

The specified task must be the employee’s task, not the employer’s task or project. The phrase ‘specified task’ only covers situations where an employee works under a contract for a project or job which is distinct or identifiable in its own right. It should not leave open the possibility of the employee working on other tasks outside the specific task for which the employee was employed. See Hewitt v ACTek Custom Engineering Pty Ltd [2001] AIRC PR904665.

If the employee was hired on the basis of work for a specific project and the contract of employment would cease when that project was completed, the employee would have been employed under a contract for a specified task, consequently, there would be no entitlement to notice of termination, redundancy pay, or access to an unfair dismissal remedy.
 


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