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Fixed Term Contracts
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Where a fixed term contract is terminated prior to the end of the term
A fixed term employment contract is a type of employment contract that is limited to a specified period of time. Fixed term employment contracts are different to standard employment contracts as these types of contracts will automatically be terminated at the end of the fixed period rather than at the initiative of the parties. In recent years, fixed term employment agreements have become increasingly popular in the workplace. The key questions to consider with respect to the termination of a fixed term employment contract prior to the expiration of the fixed term include:
- Whether the contract does indeed define a fixed term of employment;
- The circumstances involving termination of the agreement; and
- Whether there was a breach by either party that justifies the termination.
It is important to note that if the employment contract affords either party a right to terminate the contract at any time with reasonable notice or payment in lieu of notice, it may not be categorised as a fixed term contract despite any representations by the employer that the contract is a fixed term contract. This is because the mere existence of a termination clause signifies that the employment contract is not strictly for a fixed term of employment and as such, cannot reasonably be considered in law a fixed term employment contract.
Generally, a fixed term employment contract can only be terminated if one party is in breach. This is as both parties have expressed an intention to be bound by the contract for the specified duration. Conversely, breach of the contract by either party can be used as evidence of an intention not to be bound by the terms of the employment for the specified time, and as such may be considered repudiation of the agreement. In such circumstances, the party in breach may be liable for breach of the contract. Typical instances that may amount to a repudiation of the contract include varying or proposing to vary the length of the fixed term of the agreement or the breach of an essential term.
Is a failure to renew a fixed term employment contract considered a breach of contract?
Most fixed term contracts contain a clause for renewal for a further fixed term. Such clauses are usually to the effect that at the conclusion of the initial fixed term, and following a review, the contract may be extended by the employer for a further specified fixed term. It is important to note that a mere failure of an employer to renew the fixed term contract will not be considered a breach of contract.
However, the court in the case of D’Lima v Princess Margaret Hospital1 held that where there has been a renewal of a series of short-term employment contracts, this may suffice as evidence of an intention by the employer not to end the employment relationship at the expiration of the fixed term. In D’Lima,2 the practice of renewing the short, fixed term contracts was for administrative convenience and accordingly defeated the employer’s claim in defence that they had an intention to end the employment relationship. As such, the plaintiff (the employee) was able to successfully claim that she had not been provided with notice of termination. This was held to be a breach of the plaintiff’s employment contract, and the employer was ordered to pay compensation for wrongful dismissal.
Is it a breach of contract if I was let go after I completed a specific task?
Contracts may also be for a specific task. Task-based employment contracts are another type of fixed employment contract as, at the completion of the task, the intention is that the employment relationship will end. However, as with fixed term contracts, fixed task contracts are not considered fixed contracts if the employment contract contains a clause that allows either party to unilaterally terminate with notice, or alternatively with payment in lieu of notice.
The case law is also relatively clear on the issue of when a fixed term contract is considered a pure task-based contract. Employment for a specific task only applies where that task is “for a project or job which is distinct or identifiable in its own right”.3 As such, the employee should only be working on the specific task for which they have been employed, and which justified the employee’s employment, or alternatively, should only be carrying out the tasks that are reasonably incidental to the nature of the specified task.
In the case of Henderson v John Holland Pty Ltd,4 an employee who was employed purely as a concrete finisher on a specific project was found to be employed for a specific task only, and as such, the employment contract was found to have reasonably come to an end once the employee completed the concrete finishing work on the project.
However, it is important to distinguish the difference between a fixed task contract and an apprenticeship or traineeship. Employment for the purposes of an apprenticeship or traineeship has been construed to be general employment and not for a specific task. This is because an apprenticeship or traineeship is a mixture of training and work that makes it difficult to prescribe, and as such, it does not come under the definition of employment for a specific task.
The remedies available for a successful claim for breach of a fixed term employment contract may include reinstatement and/or compensation. Compensation will generally be calculated based on an assessment of loss due to the breach across the remaining term of the fixed contract, but will be considered in light of all the facts and circumstances that relevantly apply to each individual claim.
Contact Gibbs Wright Litigation Lawyers
Contact our litigation lawyers at Gibbs Wright, for a free and confidential consultation about your fixed term contract dispute to explore your legal rights and options.
 D’Lima v Princess Margaret Hospital (1995) 64 IR 19.
 D’Lima v Princess Margaret Hospital (1995) 64 IR 19.
 Hewitt v ACTek Custom Engineering Pty Ltd, PR904665 (AIRC, Lacy SDP, 25 May 2001) .
 Henderson v John Holland Pty Ltd, PR917230 (AIRC, Spencer C, 30 April 2002).
The content of this publication is intended as general commentary only and may not be suitable or applicable to your personal circumstances. It is not intended to replace independent legal advice. You can contact us at our Brisbane Office for a free consultation on a range of litigation matters on (07) 3088 6364.
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