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  • It has been long standing authority that an employee whose employment ended as a result of the expiry of an outer limit contract was not eligible to bring an unfair dismissal claim because the employment is not ‘terminated on the employer’s initiative’. Instead, the employment ends due to the expiry of the contract or ‘effluxion of time’.
  • The Full Bench of the Fair Work Commission in Khayam v Navitas English Pty Ltd revisited this issue and, by majority, opened the door for unfair dismissal actions to be commenced by employees who were subject to an outer limit contract.
  • The Full Bench’s decision sets aside the certainty of Department of Justice v Lunn and replaces it with a new test for dismissal in the case of outer limit and fixed term contracts, requiring consideration of the circumstances of the entire employment relationship.

Section 386(1) of the Fair Work Act 2009 (Cth) (‘FW Act) provides that a person is only dismissed, and thus capable of bringing an unfair dismissal claim, if their employment is ‘terminated on the employer’s initiative’. There are also exclusions from the meaning of dismissal that are set out in section 386(2)(a) of the FW Act. One such exclusion is a person ‘employed under a contract of employment for a specified period of time’ where the employment has terminated at the end of the period.

An ‘outer limit’ contract (also known as a maximum term contract) is a contract that has a stated end date. Unlike true ‘fixed term’ contracts, however, an outer limit contract provides for the possibility for a party to terminate the contract prior to that nominated end date, for example, by notice. In contrast, a truly ‘fixed term’ contract can only be terminated prior to the end date in the event of a breach or misconduct by the employee.

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