Greater clarity for Maximum Term (Outer Limit) Contracts

The Federal Court (Alouani-Roby v National Rugby League Ltd [2024] FCAFC 161 (12 December 2024) has rejected an employee’s claim that the employer unfairly ended his employment by not renewing his maximum term contract.

The Court found the “outer limit” contract ended as agreed on the expiry date and was not a dismissal. Accordingly, the employee was unable to make an unfair dismissal claim because the Fair Work Act expressly excludes the cessation of employment on such terms.

Our Take

This is great news for employers, shedding new light on the grey area between expiry of a maximum term contract and dismissal.

In the bigger picture, this reflects real turning of tables on the previous Navitas authority (Saeid Khayam v Navitas English Pty Ltd t/a Navitas English [2017] FWCFB 5162 (8 December 2017), which had left the door open for employees on consecutive outer-limit contracts to allege they were unfairly dismissed if their contract was not renewed.

With the recent legislative changes to prevent more than 2 consecutive specified term contracts (or for more than a duration 2 years), Navitas cases were likely to be rare in any event. Nonetheless, provided that appropriate care is taken to draft and implement maximum term contracts, employers should feel confident that ‘backdoor’ claims are not attempted.

Action Items

• clearly specify the expiry date of the employment contract.

• carefully draft the terms of your employment contracts to reflect a genuine agreement – a consensus between the employer and employee - that the employment will end with the expiry of the contract on the specified date.

• ensure that both parties comprehend the terms of the contract – document any discussion between you and the employee about the duration and end of their employment.

• do not give any misrepresentations of future employment – otherwise – a contract which is not renewed may result in a termination at the initiative of the employer.

• reconfirm with the employee (an email will be sufficient), with reasonable notice, before the expiration date that their employment will end on the expiration so that they have time to get their personal arrangements in place.

Edge Legal

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