DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Saeid Khayam
v
Navitas English Pty Ltd T/A Navitas English
(U2016/8466)

Application for relief from unfair dismissal – whether dismissal at the initiative of the employer – maximum-term contracts - employment ceased with effluxion of time.

[1] Mr Saeid Khayam has applied under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy with respect to his alleged dismissal by Navitas English Pty Ltd T/A Navitas English (Navitas).

[2] Navitas raised a jurisdictional objection to the Fair Work Commission (the Commission) dealing with the application, submitting that Mr Khayam had been employed under a series of ‘outer limit’ or ‘maximum term’ contracts, and on the latest contract expiring, his employment simply ended. Navitas submitted there had been no dismissal at its initiative.

[3] Following unsuccessful conciliation of the application, the Independent Education Union of Australia (the IEU), representing Mr Khayam applied to the President of the Commission for a direction that the determination of Navitas’ jurisdictional objection be referred to a Full Bench of the Commission pursuant to s.615A of the Act. President Ross dismissed the application under s.615A of the Act for reasons given on 6 December 2016. 1

[4] In the course of giving his reasons for refusing to make the directions sought, his Honour stated:

“[10] I accept that the jurisdictional objection in the substantive matter raises important questions as to the application of Lunn in the context of the current legislative framework. I note the observations of Vice President Hatcher in Jin and Commissioner Roe in Papalia, where both members have questioned the extent to which the principle in Lunn may accord with the current provisions of the FW Act. Such considerations tend to favour granting the referral application.” 2 (citations omitted)

and

[13] Finally, this is not a case where there are inconsistent first instance or Full Bench decisions in relation to the central issue in dispute. As Vice President Hatcher observed in Jin, ‘Lunn is a Full Bench authority which has become well entrenched in the Commission’s jurisprudence under the FW Act’. As I observed in Gee v Tasmanian Ports Corporation Pty Ltd, s.615A ‘is not intended to provide a mechanism to review Full Bench decisions in order to produce a favourable outcome for a party dissatisfied with a particular authority’.” (citations omitted)

[5] The matter has come to me for determination of the jurisdictional objection, which was heard in Sydney on 2 and 3 March 2017. Both parties sought permission to be represented pursuant to s.596 of the Act. I granted permission to both parties to be represented on the basis that it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter. Mr Mark Gibian of Counsel appeared for Mr Khayam. Mr Dilan Mahendra of Counsel appeared for Navitas.

[6] It is not contested that Mr Khayam’s employment ended on 30 June 2016. His application has been made within the period required in s.394(2) of the Act.

[7] Mr Khayam is protected from unfair dismissal having completed the minimum employment period and has an annual rate of earnings of less than the high income threshold

[8] Navitas is not a small business such that the Small Business Fair Dismissal Code is irrelevant

[9] It was not contended that the dismissal was a case of genuine redundancy.

Applicable legal principles

[10] A person can only have been unfairly dismissed if, amongst other things, the person has been dismissed. 3 The Act relevant to this matter defines ‘dismissed’ in s.386 to mean:

“Meaning of dismissed

(1)  A person has been dismissed if:

(a)  the person's employment with his or her employer has been terminated on the employer's initiative; …

(2)  However, a person has not been dismissed if:

(a)  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, and the employment has terminated at the end of the period, on completion of the task, or at the end of the season…

...

(3) Subsection (2) does not apply to a person employed under a contract of a kind referred to in paragraph (2)(a) if a substantial purpose of the employment of the person under a contract of that kind is, or was at the time of the person’s employment, to avoid the employer’s obligations under this Part.”

[11] For a termination to be “on the employer’s initiative” relevant to s.386(1)(a), there must be action by the employer that either intends to bring the employment relationship to an end, or has that probable result. 4

[12] It is open for employees and their employers to agree that an employment relationship will exist for a specified period of time as contemplated in s.386(2)(a) of the Act. They may agree that the employment will last for as long as a specified task takes to complete, or a specified season. In such circumstances, where an employer decides not to renew or extend an employee’s contract of employment beyond the specified period of time, task or season, s.386(2)(a) has the effect that even if the employer directly decided not to renew the contract, and intended that its action in doing so would bring the employment relationship to an end or have that probable result, the employee has not been dismissed.

[13] A contract for a specified period of time is one that terminates or ends by the natural passage of time at the agreed time, or at the end of the agreed period. Such contracts must be unambiguous in their dates of commencement and completion.

[14] It is often held in decisions of this Commission that where a contract is an ‘outer limits’ contract or maximum-term contract, the jurisdictional objection of the employer is made out by the finding that there has not been a dismissal relevant to s.386(1)(a).

[15] In Department of Justice v Lunn 5 a Full bench of the Australian Industrial Relations Commission considered a jurisdictional objection, similar to the one at present, involving a series of ‘outer limits’ contracts for a total period of almost 7 years. While the facts of the matter do have some complexities, at a broad level, Ms Lunn was employed on a number of outer limits contracts. A number of weeks prior to the specified end date of the final contract, Ms Lunn was advised that a new contract would not be offered to her by the employer. The Full Bench concluded:6

“The Department's practice of engaging almost all staff on successive 'outer limit' contracts may be viewed by some as industrially contentious. However, subject to legislative constraints, employers are entitled to structure their affairs, including the contracts they offer to employees, in the way that they think best suits their interests. There is nothing in the WR Act that prevents an employer from offering a series of 'outer limit' contracts to an employee. Moreover, even if it were shown that the purpose of the policy was to avoid the Commission's unfair dismissal jurisdiction (and we hasten to add that there was no evidence to that effect and the proposition was denied by counsel for the Department who advanced a plausible explanation for the practice) this would still not render such contracts a "sham" in the sense that, viewed objectively, the parties to those contracts had a common intention that they would not create binding legal rights and obligations according to their terms.”

Background

[16] Navitas is the largest provider of English language training in Australia. Training is provided for migrants, refugees, together with overseas students studying in Australia. 7

[17] The Australian Government provides funding for programs run by Navitas. There are three distinct programs:

(a) the Adult Migrant English Program (AMEP);

(b) the Humanitarian Settlement Services program; and

(c) the Skills for Education and Employment Program (SEEP);

[18] Mr Khayam commenced employment with Navitas in November 2005 as a teacher. He was employed as a casual employee between 2005 and 2012. During this time he was provided with written contracts of employment which surprisingly nominated a fixed period of casual employment. For example, the second period of casual employment agreed between the parties nominated a period between 17 May 2006 to 17 November 2006. The third period was 20 May 2008 to 20 November 2008.

[19] During the casual employment Mr Khayam was paid an hourly rate of pay relative to whether he was teaching or assessing. He was paid a lower casual rate of pay when preparing for class.

[20] There were seven stated periods of casual employment between November 2005 and April 2012. There was no discernible break of service between each period of casual work.

[21] In April 2012 Mr Khayam was employed pursuant to what is purported to be a ‘fixed- term contract’. The period referred to was 23 April 2012 to 30 June 2013. An annual salary was paid, together with paid leave entitlements.

[22] Notwithstanding the term of the contract, there existed a provision within the contract for either party to terminate the employment by the giving of 4 weeks’ written notice.

[23] In the lead-up to the 2012 contract expiring in mid-2013, Mr Khayam was offered and accepted an extension of the contract covering the period 1 July 2013 to 30 June 2014.

Enterprise Agreement

[24] The relevant industrial instrument governing the terms and conditions of employment of the contract extension in mid-2013 was The ACL Enterprise Agreement 2010-2012, (the 2010 Agreement).

[25] The 2010 Agreement contained a clause to state the criteria to be used when renewing fixed-term contacts:

“10. Contracts of employment

10.1 The capacity of ACL to sustain additional ongoing contracts will be reviewed every year in the context of ACL's annual budget. It is recognised that operational levels will fluctuate from time to time.

10.2 Fixed-term contracts of less than, or equal to one year's duration may be used for short programs where funding is assured, for filling temporary positions, or to replace employees on leave.

10.3 Casual contracts will be offered for intermittent and irregular work, initial teaching work, relief work, to allow flexible staffing, to undertake specific short-term tasks and where appropriate employees on fixed-term contracts are not available.

10.4 ACL will use the following eligibility criteria when renewing fixed-term contracts, offering ongoing employment, offering casual employment and assessing the merits of performance reviews:

10.3.1 The needs of ACL, the operational environment and the sustain ability of that program;

10.3.2 The employees' qualifications and skills which correspond to the requirements of the position;

10.3.3 Significant demonstrated contribution by the employee to the operations, standing and ongoing development of ACL as a centre of excellence;

10.3.4 Demonstrated ability of the employee to work as part of a team, sound interpersonal skills and cross-cultural awareness;

10.3.5 Relevant experience, including with ACL.

10.3.6 Meeting the accountabilities as outlined in the appropriate position description statement

10.5 As a general practice, as work becomes available it will be offered first to current staff. However, ACL retains the right to advertise any position externally and will continue to appoint according to merit. Where positions are advertised externally, staff will be notified.

10.6 Upon employment, employees will be provided with a letter of offer of employment that stipulates among other things the basis of employment, classification, hours to be worked and pay rate for the employee.

10.7 If ACL cannot renew a contract for operational reasons the employee will be given the maximum notice possible.”

[26] The 2010 Agreement was replaced by The Navitas English Enterprise Agreement 2013-2015, operative from 7 February 2014 (the 2013 Agreement). The contracts of employment clause had changed to now read:

“11. Contracts of employment

11.1 Fixed-term contracts may be used for programs where funding is assured, for filling temporary positions, or to replace employees on leave.

11.2 Casual employment agreements will be offered for intermittent and irregular work, initial teaching work, relief work, to allow flexible staffing, to undertake specific short-term tasks and where appropriate employees on ongoing and fixed-term contracts are not available.

11.3 Employees engaged under this Agreement may be employed on an Ongoing, Fixed-term, or Casual basis. Employees may be employed full-time or part-time.

11.4 Navitas English will determine in its absolute discretion, having regard to the following eligibility criteria, whether to offer or renew Fixed-term contracts, Ongoing employment and Casual employment and assessing the merits of performance reviews: The needs of the employer, the operational environment and the sustainability of its programs:

•  Qualifications and skills which correspond to the requirements of the position;

•  Significant demonstrated contribution by the employee to the operations, standing and ongoing development of the employer as a centre of excellence;

•  Demonstrated ability of the employee to work as part of a team, sound interpersonal skills and cross-cultural awareness;

•  Relevant experience, including with the employer;

•  Meeting the accountabilities as outlined in the appropriate position description statement.

11.5 As a general practice the employer retains the right to advertise any position externally and will continue to appoint according to merit. Where positions are advertised externally, employees will be notified.

11.6 Upon employment, employees will be provided with a letter of offer of employment that stipulates among other things the basis of employment, classification, hours to be worked and pay rate for the employee.

11.7 If Navitas English cannot offer a new fixed-term contract to an employee on a fixed-term contract for operational reasons the employee will be given the maximum notice possible.”

2014 Contract Renewal

[27] In or around June 2014 Mr Khayam attended a meeting with Ms Melissa Young, Human Resources Officer, and Ms Nicola Gray, the then College Manager to discuss his contract which was due to expire on 30 June 3014. At the meeting Mr Khayam was told his contract would not be renewed for the following year as his administrative work had not been satisfactory.

[28] The following day Mr Khayam provided Ms Gray with minutes of a previous staff meeting acknowledging his work performance. Having considered Mr Khayam’s concerns, Ms Gray then decided to renew Mr Khayam’s contract, which was issued for the period of 1 July 2014 to 30 June 2016. The letter relevantly states:

“I am pleased to offer you fixed-term, Full-Time employment as a Teacher with Navitas English Pty Ltd from 1^st July 2014 to 30 June 2016 (The Expiry Date). Your employment will terminate automatically on the Expiry Date, unless it is terminated earlier by either party.”

[29] In cross-examination, Mr Khayam stated that he did not read the terms of the contract; he simply signed it. 8

Navitas contracts with the Federal Government

[30] On 30 June 2014 Navitas entered into a contract extension with the Federal Government for the AMEP, with an extension date of 30 June 2017. During closing submissions for the respondent, it was demonstrated that at some point in time the SEEP was extended from an end date of 2013 to 30 June 2016. 9

[31] It is Mr Khayam’s evidence that he predominantly performed work under the funding for AMEP and SEEP contracts. 10 Mr Botto’s evidence is that in the period from August 2015 until when he finished up in June 2016, Mr Khayam was predominantly performing work under AMEP.11

[32] I expressed disappointment to Navitas during the hearing because it had allowed extensive questioning to Navitas’ witnesses by Mr Gibian on the basis of the work Mr Khayam was performing ending in 2017 due to funding ending. There was no attempt by Mr Mahendra until closing submissions to bring to the Commission’s attention that one of the contracts’ funding ended 30 June 2016. The respondent did not qualify this understanding with Navitas’ witnesses when they gave evidence that the funding attached to Mr Khayam’s role would end in 2017. Only during closing submissions did it become clear the respondent was seeking to assert that Mr Khayam’s role was predominantly linked to funding expiring 30 June 2016.

Disciplinary issues in 2016

[33] Mr Khayam had been subject to an ‘action plan’ in June 2015 relating to an incident where he had used unsuitable material entitled, ‘The Way to Happiness – a Common Sense Guide to Better Living’ in a class. The material, as I understand it, promotes Scientology. Mr Khayam did not agree with the basis for the action plan, but participated in the process and successfully completed the plan.

[34] On 10 February 2016 Mr Khayam was issued with a letter by Mr Botto, Area Manager. The letter was titled ‘Disciplinary Meeting’, requiring Mr Khayam to attend a meeting on 17 February 2016 to discuss punctuality concerns Navitas held.

[35] Mr Khayam attended the meeting with Mr Botto and Mr Karl Vrolyk, Human Resources Business Partner. Mr Khayam was accompanied by Mr Kendall Warren, Organiser, Independent Education Union. Mr Khayam raised concerns that certain issues contained in the letter were from some time in the past, but agreed to provide a written response at a later time.

[36] Mr Khayam later provided his written response to Mr Botto and Mr Vrolyk, but did not hear anything further relevant to the concerns discussed with him. Mr Khayam concluded that his explanations had been satisfactory, with the issues not being raised further.

Meeting - May 2016

[37] In late May 2016 Mr Botto sent an email to Mr Khayam requesting his attendance at a meeting on 31 May 2016 to discuss the outcome regarding the ‘issuing of new teacher contracts’. Mr Khayam enquired as to whether he would need a support person. It is Mr Khayam’s evidence that Mr Botto had replied, saying, “Let’s go ahead with the meeting tomorrow.” 12 Mr Khayam took this to indicate a support person would not be necessary.

[38] Mr Khayam attended the meeting with Mr Botto and Mr Vrolyk. It is Mr Khayam’s evidence Mr Botto stated that he would not be offered a further contract based on an assessment of his performance and disciplinary record. 13

[39] It is Mr Khayam’s evidence that Mr Botto said the termination included the following considerations:  14

● Needs of the employer;

● Operational environment;

● Sustainability of programs;

● Flexibility;

● Past performance;

● Qualifications and skills;

● Demonstrated contributions;

● Personal development;

● Ability to work as part of the team;

● Sound interpersonal skills & cross cultural awareness;

● Meeting account abilities as outlined in position description statement.

[40] Mr Khayam inquired if he would continue his employment as a casual employee. He was informed that he would not be employed anymore. It is Mr Khayam’s evidence that Mr Vrolyk stated, “We are actually under no obligation to give you any reason. We are just here to inform you that your employment is to end on 30^th June.” 15

[41] Mr Khayam’s employment was considered to have ended as at 30 June 2016. Mr Khayam sought and was approved some unpaid leave following the above meeting.

[42] In answering questions from me during the hearing, it is Mr Khayam’s position that he considered his employment open-ended, subject to Navitas’ right to address disciplinary matters. Mr Khayam considered that if an employee “kept their nose clean”, they would not be subject to their employment ending on the expiration of a fixed-term contract. 16

Evidence of Jetinder Macfarlane

[43] Ms Macfarlane is the Director of Education Programs for Navitas reporting to the Executive General Manager. Ms Macfarlane has responsibility for 12 colleges.

[44] Ms Macfarlane gave evidence as to the AMEP and SEEP programs. AMEP provides students with 510 hours of free English language tuition to allow students the ability to better integrate into Australian society. The students may use these hours of tuition as they see fit over a maximum five year period.

[45] The SEEP provides up to 800 hours of English language, literacy and numeracy training for eligible adults who are looking to return to the workforce after an absence.

[46] Most particularly with AMEP, student numbers fluctuate significantly. Students know that they can drop in and out of study if other matters arise. Given that many AMEP students are refugees or migrants, and some may have experienced distressing circumstances, their attendance at class can be uncertain.

[47] Ms Macfarlane stated that some cultural events can affect student numbers, including, for example, the Chinese Lunar New Year, where many Chinese students will not attend resulting in classes being cancelled, moved or merged.

[48] It is Ms Macfarlane’s evidence that Navitas does not receive funding when students fail to attend class for whatever reason. Accordingly, it is necessary for Navitas to be flexible and adapt to changes in student numbers at short notice.

Evidence of Mr Michael Botto

[49] Mr Michael Botto commenced employment with Navitas in August 2015. His evidence is that the contracts with the Federal Government are due to expire on 30 June 2017. All maximum-term contracts - including his contract - are due to expire no later than 30 June 2017. Navitas would not know until around February or March 2017 if it has secured further funding.

[50] It is Mr Botto’s evidence that due to fluctuating student numbers, Navitas needs to ‘strike a balance between permanent ongoing employees, maximum-term employees and casual employees.’ 17

[51] Each year in March or April, Area Managers meet to discuss information with respect to the proposed number of migrants and refugees entering Australia, and the cultural and linguistic heritage of those groups of people. This kind of planning has been in place for approximately 20 years, and is used to determine the resources available and required to meet the needs of Navitas based on the funding available at the time.

[52] The Area Managers then discuss a number of factors including:

● Teacher availability;

● Student numbers and availability;

● Teaching times required; and

● Teacher performance.

[53] In considering teacher performance, the following criteria are considered: 18

● Performance generally;

● Student retention numbers;

● Flexibility across timetables, language levels and programs;

● Student feedback;

● Punctuality;

● Whether the employee is reflecting Navitas’ values and behaviours in their work and interactions with students and colleagues;

● Administrative and paperwork skills;

● The ability to foster cohesion and work as part of a large team;

● Professional development;

● Qualifications; and

● Flexibility to work at other locations, within reason and according to student need.

[54] Having considered the above criteria, a decision will then be made as to who will be offered a new maximum-term contract. In determining who will not be offered a new contract, it is Mr Botto’s evidence that employees were scored against a set of criteria. This criteria is arbitrary, known only to the Area Managers and the Academic Manager.

[55] Evidence was provided to the Commission with the criteria considered by Navitas and used to determine who would be offered a maximum-term contract and who would not. With respect to Mr Botto’s area, there were five teachers on the list. With a scoring system of 0 being unsatisfactory and 5 being the highest score a teacher could achieve, Mr Khayam scored as follows: 19

[56] Mr Khayam’s score was 26. One other teacher scored 33, while the other three teachers scored between 42 and 43.

[57] Mr Botto and Mr Vrolyk met with Mr Khayam on 31 May 2016 to inform him he would not be offered a new maximum-term contract when his current contract expired on 30 June 2016. Mr Botto denies that he informed Mr Khayam his employment was being terminated.

[58] Mr Botto informed Mr Khayam that in deciding not to grant a further contact to him he had taken the following into consideration: 20

● His unwillingness to work mornings or evenings;

● His poor performance record;

● His inability to maintain accurate administrative records;

● Complaints from staff members about verbal and written harassment;

● His inability to work cordially with his direct manager;

● An earlier written warning;

● The Action Plan;

● Navitas did not have the capacity to offer further work;

● The Auburn campus numbers had been falling; and

● Mr Khayam’s afternoon class numbers had also been falling.

[59] In cross-examination Mr Botto agreed that Mr Khayam had been scored one with respect to his willingness to work mornings or evenings, despite Mr Botto being aware Mr Khayam had child care responsibilities and only wished to work in the afternoons. 21

[60] Mr Botto confirmed that afternoon classes continued following the cessation of Mr Khayam’s employment, and were in place at the time of the hearing. 22 On that basis, it is assumed that Mr Khayam’s class has been filled by another teacher.

Evidence of Mr Karl Vrolyk

[61] Mr Vrolyk was employed by Navitas as the Human Resources Partner between May 2014 and 30 September 2016. Mr Vrolyk was not involved in the issuing of a two year contract to Mr Khayam for the period 1 July 2014 to 30 June 2016.

[62] Mr Vrolyk was involved in the determination of which teachers would be offered further contracts beyond 30 June 2016. It is his evidence that after assessing Navitas’ teaching needs to the period ending 30 June 2017, and assessing each employee against the factors at [53], of the 58 fixed-term contract teachers, 10 teachers were not offered a new maximum-term contract. Of these 10 employees, 6 of them were offered on-going casual work.

[63] It is Mr Vrolyk’s evidence that while Navitas had a small number of permanent employees, these were ‘legacy’ roles. During Mr Vrolyk’s tenure, permanent employment was no longer offered, and senior management roles were also subject to maximum-term contracts due to the uncertainty of government funding. 23

[64] In cross-examination Mr Vrolyk was asked of his knowledge with respect to the maximum-term contacts used by Navitas, and whether employees would be entitled to redundancy payments in certain circumstances. The following exchanged occurred: 24

Mr Gibian: In terms of aligning the end dates of maximum-term contracts with a federal government funding agreement, I take it what was contemplated was if for some reason or other the funding wasn’t secured – and that is the funding came to an end – that the employment of those employees would come to an end. Correct?

Mr Vrolyk: Yes.

Mr Gibian: There would be no redundancy payments paid to those employees?

Mr Vrolyk: If the contract expired at the same date, then that’s correct, yes.

Mr Gibian: You understand that many types of businesses are faced with situations in which they may use contracts?

Mr Vrolyk: Yes.

[65] When questioned as to the effect a maximum-term contract would have on an employees’ right to bring a claim of unfair dismissal, the following exchange occurred: 25

Mr Gibian: If Mr Khayam was an ongoing employee dismissed on performance grounds, he would be able to bring an unfair dismissal claim. You would accept that?

Mr Vrolyk: Yes.

Mr Gibian: The company’s position, put in its employer response – and I can tell you it remains its position – is that Mr Khayam cannot because of the maximum-term contract. Correct?

Mr Vrolyk: I understand, yes.

…….

Cmr: Was it within your knowledge that that is a reason why Navitas employs people under that form of contract?

Mr Vrolyk: To my knowledge, that is not a reason why they employed people under those type of employment agreements.

[66] There was a further exchange between the Commission and Mr Vrolyk as to the effect of maximum-term contracts and an employee’s right to bring a claim of unfair dismissal: 26

Cmr: Was it your view that Navitas was protected from unfair dismissal by employees who were on fixed or max term contracts if the contract ended on the end date?

Mr Vrolyk: Yes.

…

Cmr: So when there are problems in May 2016, you don't say, "Well, let's finish Mr Khayam up now."  Did you give any advice that, "If you wait until 30 June, he won't be able to bring an unfair dismissal claim"?

Mr Vrolyk: No, my advice was the opposite, because I was quite conscious of making sure that with Mr Khayam proper processes were followed in terms of managing his performance.  That's why there were two instances around where he had formal performance management or disciplinary hearings.  The other piece of my advice was I was quite conscious of making sure that a broad process was followed in terms of making an assessment around who contracts were going to be offered to, so that's why we had a process in terms of these are all the criteria.  There was an assessment against all those criteria and then a moderation process, so I was trying to make it really clear that it wasn't just, "Oh, well, wait until the contract ends."

Cmr: Who were you trying to make it clear to?

Mr Vrolyk: Make it clear that there was a fair process in terms of that assessment.

Cmr: It was unilateral, wasn't it?

Mr Vrolyk: The decision?

Cmr: Well, yes.  Your investigation as to who would be offered contracts and who wouldn't be offered was unilateral.  It wasn't shared.  Employees weren't consulted with, were they?

Mr Vrolyk: No.

Cmr: They would be, if not for being on max term contracts, wouldn't they?

Mr Vrolyk: I don't understand your question.  Sorry.

Cmr: If you had a group of 10 ongoing employees - - -?

Mr Vrolyk: Yes.

Cmr: ---you couldn't sit there and suddenly decide that, "We're going to end someone's employment", could you?

Mr Vrolyk: No, you have to go through a consultation process.

Cmr: You thought there was some protection by having one-sided reviews of employees' performance because they were coming up to their end date?

Mr Vrolyk: I wouldn't say the reviews were one-sided.  The reviews that were looked at were the reviews that were part of the annual performance review process which is a two-way process, but, to answer to your question, yes.

Cmr: So the way that Navitas went about this in choosing who to give contracts to or not, you felt there was some security that the decision couldn't be challenged, did you?

Mr Vrolyk: Yes.

Cmr: Because of the end term date?

Mr Vrolyk: Yes.

Cmr: That is the advice you gave to the business or you didn't give that advice?

Mr Vrolyk: I didn't give that advice.

Cmr: Did you think it was a shared knowledge?

Mr Vrolyk: Yes.

Cmr: All right.  It's not directly relevant for Mr Khayam's matter, but I'm interested in your understanding at the time as to casual employees?

Mr Vrolyk: Mm-hm.

Cmr: If you had concerns about casual employees, did you address those matters with casual employees or did you have a look at their contracts to see if they had an end date?  What were your views?

Mr Vrolyk: Yes, so my views around casual employees were that generally we would address them.  The reason for that - one of the reasons for that was that we had a lot of long-term casual employees.  They weren't on a contract with a fixed or max term, but they had been with us for some time.  The advice that I gave was that for that reason when it came to dealing with poor performance, we needed to treat them and go through a proper performance process.

Cmr: Some of the earlier contracts that Mr Khayam received - and well before your time.  They're in 2005 - he did receive casual contracts which had an end date on them?

Mr Vrolyk: Okay.

Cmr: Which - - -?

Mr Vrolyk: Doesn't make sense.

Cmr: It doesn't make sense, does it, no.  So did a practice change in the business for casual employees in your two years there?

Mr Vrolyk: So when I was there, to the best of my knowledge I'm pretty sure the casual contracts didn't have end dates on them.  It was a straightforward casual contract that did purport to be for a period of time.

Cmr: So with your knowledge, a casual employee with more than six months' service would be protected from unfair dismissal if they had a regular and systematic schedule of work and an expectation of continuing employment?

Mr Vrolyk: Correct.

Cmr: But people on max term contracts would not have protections for unfair dismissal?

Mr Vrolyk: That's correct.

………

Cmr: So you’ve got casual employees who might be there for nine months who have unfair dismissal protections?

Mr Vrolyk: Yes.

Cmr: But somebody who has been there for 11 years who is on a max term contract up until 30 June 2016 – as soon as that date hits and there is no offer of future employment, there is no unfair dismissal protection for that person. Is that your understanding?

Mr Vrolyk: That’s my understanding.

Navitas’ submissions on the jurisdictional objection

[67] It is Navitas’ contention that the reason maximum-term contracts are offered to its workforce is to enable it to operate effectively in the environment that it is in.

Considering s.386(1)(a)

[68] Navitas submitted on a first principle that it had been made clear to Mr Khayam in the final contract he entered into with Navitas that his employment would end on 30 June 2016, unless terminated earlier by either party. The contract stated:

“…..Your employment will terminate automatically on the Expiry Date, unless it is terminated earlier by either party.”

[69] It is submitted that this is a similar scenario in the leading authority in Lunn. As stated in Lunn:  27

“[the] practice of engaging almost all staff on successive ‘outer limit’ contracts may be viewed by some as industrially contentious. However, subject to legislative constraints, employers are entitled to structure their affairs, including the contracts they offer to employees, in the way that they think best suits their interests.”

[70] In Lunn, the Full Bench considered whether these sorts of contracts could be considered a ‘sham’. The Full Bench said the following: 28

“There is nothing in the WR Act that prevents an employer from offering a series of ‘outer limit’ contracts to an employee. Moreover, even if it were shown that the purpose of the policy was to avoid the Commission’s unfair dismissal jurisdiction (and we hasten to add that there was no evidence to that effect and the proposition was denied by counsel for the Department who advanced a plausible explanation for the practice) this would still not render such contracts a “sham” in the sense that, viewed objectively, the parties to those contracts had a common intention that they would not create binding legal rights and obligations according to their terms.”

[71] Navitas referred to a decision in Sharrment, which states: 29

“I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities… that for acts or documents to be a ‘sham’, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to crate the legal rights and obligations which they give the appearance of creating.”

[72] Navitas submitted that Mr Khayam entered into the final contract freely, with an intention that it had a finite period, coinciding with the expiry date of the SEEP contract, 30 June 2016. Accordingly, it is submitted, Mr Khayam’s employment ended by the effluxion of time, in the same vein of the decision in Lunn.

[73] It is Navitas’ contention that none of the terms of the 2013 Agreement affected the fact that the employment ended due to the effluxion of time. Accordingly Navitas submitted the application should be dismissed for want of jurisdiction.

Considering s.386(2)(a)

[74] Navitas put an alternative to s.386(1)(a), referring to s.386(2)(a). Reference was made to the Explanatory Memorandum, and specifically contracts with the ability to terminate during the life of the contract: 30

“Paragraph 386(2)(a) reflects the common law position that termination in these circumstances would not be a dismissal. The fact that an employment contract may allow for earlier termination would not alter the application of this provision as the employment has terminated at the end of the period, task or season. However, if a person engaged on this sort of contract is terminated prior to the end time specified in the contract, they may seek an unfair dismissal remedy if they satisfy the other requirements.”

[75] The Explanatory Memorandum, which on the face of it might allow any contract with an end date to be considered employment for a ‘specified time’ has been recently viewed against the decision in Andersen v Umbakumba Community Council (1994) 126 ALR 121. In Dale v Hatch Pty Ltd 31, the Full Bench stated:

“[22] There is one other aspect of the Contract which requires comment. Clause 27 of the Contract provided, among other things, that Ms Dale’s employment could be terminated by Hatch without cause on one week’s notice during the probation or minimum employment period and on four weeks’ notice thereafter. In relation to employment contracts for a specified time, it was held in Andersen v Umbakumba Community Council (in the context of the termination of employment provisions of the Industrial Relations Act 1988) that an employment contract will not be one for a specified period of time if it gives either party an unqualified right to terminate the contract on notice or with payment in lieu of notice within any specified term. The basis for this proposition is that a specified period of time is a period of employment that has certainty as to its commencement and time of completion, and where a contract provides a broad or unconditional right of termination during its term, the period of the contract is indeterminate and thus not for a specific period of time.

[23] We would be inclined to the view that, by parity of reasoning, this proposition would apply to the exception for contracts of employment for a specified task. Employment for a specified task would equally suggest certainty that the period of employment began and ended with the commencement and completion of the task, and that a broad or unconditional right of termination is inconsistent with that certainty. If so, the existence of such a right in clause 27 would provide further support for our conclusion that Ms Dale’s contract of employment was not for a specified task. However we note the following comment made by Hatcher VP in Jin v Sydney Trains  as follows (emphasis added):

“[29] Arguably the applicability of Andersen to the proper interpretation of s.386(2)(a) has been called into question as a result of paragraph [1532] of the Explanatory Memorandum for the Fair Work Bill 2009 which said (emphasis added):

“[1532] Paragraph 386(2)(a) reflects the common law position that termination in these circumstances would not be a dismissal. The fact that an employment contract may allow for earlier termination would not alter the application of this provision as the employment has terminated at the end of the period, task or season. However, if a person engaged on this sort of contract is terminated prior to the end time specified in the contract, they may seek an unfair dismissal remedy if they satisfy the other requirements.”

[24] We were not addressed in relation to this issue, and it is not necessary for us to express a final view about it in order to determine this appeal. Accordingly it can be left for another day.” (references omitted)

[76] It is Navitas’ contention that the Commission should find that despite the contract entered with Mr Khayam being a maximum-term contract containing an early termination clause, and not a “genuine” fixed-term contract, upon the contract reaching its term, the contract ends and Mr Khayam is excluded from protection from unfair dismissal.

[77] Navitas submitted that there was no evidence before the Commission that it had entered into a contract with Mr Khayam with an expiry date for a “substantial purpose” of avoiding an employee’s right to bring an unfair dismissal claim. Navitas submitted that on its evidence, it entered into the contract with Mr Khayam (and other employees) to provide to it the flexibility it required having regard to its operating environment.

[78] It is submitted that it would not be appropriate for the Commission to draw an inference that Navitas entered into maximum-term contracts with employees, a substantial purpose for which to deny employees the right, at the end of their contracts, to bring a claim of unfair dismissal.

[79] Reference was had to the decision of Vice President Hatcher in Jin v Rail Corporation New South Wales [2015] FWC 4248. Hatcher VP stated his many reservations about the decision in Lunn, but ultimately concluded that it was a Full Bench decision and therefore it was necessary for the Commission to follow it.

Mr Khayam’s submissions on the jurisdictional objection

[80] Mr Khayam submitted that he had held an expectation that fixed-term contracts with Navitas would be renewed, subject to considerations of performance, maintenance of government funding and student enrolments.

[81] Mr Khayam submitted that none of the contracts he had entered into with Navitas over the years had ever been a contract for a specified period of time, as each contract contained an unqualified right for either party to terminate the contract on the giving of notice or payment in lieu of notice. 32

[82] Mr Khayam submitted that since his commencement in November 2005 his employment had been pursuant to four successive enterprise agreements.

[83] It is Mr Khayam’s contention that he considered there was a continuous employment relationship with Navitas for the following reasons:

•  it was consistently held out to Mr Khayam that he would progress from the more precarious casual contracts to on-going contracts;

•  those representations were consistent with the scheme of progression that was in place in the 2003 Agreement at the time of commencement of Mr Khayam’s employment;

•  Mr Khayam was given assurances when he applied for a fixed-term contract, that such contracts would be renewed without further need to apply;

•  Mr Khayam was told during enterprise bargaining by the Executive General Manager of the Respondent that satisfactory performance would lead to contract renewal;

•  the terms of each of the enterprise agreements that applied to Mr Khayam’s employment contained provisions that set out the criteria to be considered by the Respondent prior to the renewal of fixed contracts including the “merits of performance reviews”, qualifications and skills, demonstrated “contributions” and “abilities”, and whether an employee was “meeting the accountabilities as outlined in the appropriate position description statement”;

•  the terms of each of the enterprise agreements that applied to Mr Khayam’s employment contained provisions that required the Respondent to give an employee the maximum notice possible if a contract was not going to be renewed, or a new fixed-term contract could not be offered, due to “operational reasons”;

•  in 2013 the fixed-term contracts of teachers were automatically renewed/rolled over pending the outcome of a tender process;

•  in 2014 when it was proposed by Nicola Gray that Mr Khayam’s contract would not be renewed, he addressed the single performance concern that was drawn to his attention and his contract was subsequently renewed;

•  on 31 May 2016 when he asked why his contract was not being renewed, Michael Botto indicated that it was due to performance matters (albeit matters that Mr Khayam submits were unspecified and unfounded).

[84] It is Mr Khayam’s contention that the 2013 Agreement contemplates and requires the employer to conduct an assessment by reference to the criteria within clause 11 of the 2013 Agreement, for the purposes of determining whether the employee, subject to an end date in their contract, will have their contract renewed. The employer must take an active step along the lines of the decision in Mohazab 33 to consider the eligibility of the employee, and then to give notice to the employee if the contract will not be renewed.

[85] Mr Khayam contended that similar to a decision of Roe C in Papalia v Co.As.It – Italian Assistance Association 34, Mr Khayam’s contract did not contain a ‘fixed end date’ because of considerations that needed to be taken into account in the applicable enterprise agreement, and were not. An employee who will not have their contract renewed will be provided with a maximum amount of notice by Navitas.

[86] Reference was also made to the decision of Senior Deputy President Drake in Hope v Rail Corporation New South Wales 35. Her Honour distinguished Lunn for a number of reasons, including that Mr Hope’s last period of employment finished several weeks from the stated date in the letter provided to him. It was also held that the way in which Mr Hope was employed under purported temporary appointments did not meet the criteria within the relevant enterprise agreement.36

[87] It is Mr Khayam’s contention that the decision in Lunn is no longer applicable to maximum-term contracts under the Act and the decision in Lunn was wrongly decided.

[88] Mr Khayam has had regard for the decision in Jin, and the three reasons outlined by Hatcher VP as to the concerns the Vice President identified with Lunn:

“[67] In my view, there are good grounds for reconsideration as to whether Lunn should continue to be regarded as giving correct guidance concerning the interpretation and application of s.386(1)(a). I will not undertake a full re-analysis of Lunn in relation to the current statutory framework, but simply identify three matters which I consider give rise to serious doubt on my part as to whether it should continue to be followed in relation to “outer limit” fixed-term engagements to which s.386(2)(a) does not apply (on the assumption that the analysis in Andersen v Umbakumba Community Council remains applicable to s.386(2)(a)).

[68] First, the meaning assigned to “dismissed” in s.386 is constructed on the basis that s.386(2)(a) operates as one of a number of specified exceptions to the general definition in s.386(1). That exception applies, among other things, to a termination of employment at the end of a contract of employment for a specified period. Under conventional principles of statutory interpretation, it is necessary to interpret s.386 in a way which gives the exception in s.386(2)(a) practical operation in relation to time-limited contracts of employment. However, if the reasoning in Lunn is applied to s.386, s.386(2)(a) is otiose with respect to such time-limited contracts. Because, under Lunn, a termination of employment at the expiration of any employment contract which is limited in its operation by reference to a period of time is not a termination at the initiative of the employer, whether the contract is one which meets the description of a contract “for a specified period of time” or not, the exception in s.386(2)(a) is unnecessary. The logic in Lunn would apply equally to seasonal and task based contracts: a termination of employment at the end of the specified season or task would not be a termination of employment at the initiative of the employer under s.386(1)(a), with the result that the exception in s.386(2)(a) has no work to do.

[69] That suggests that the application of Lunn to the current statutory framework may be flawed. The existence of s.386(2)(a) as a specific exception suggests that it represents the means by which the legislature proposed that time-limited contract be addressed, so that an approach to s.386(1)(a) which renders the exception redundant is unlikely to be correct.

[70] The statutory frameworks the subject of consideration in Victoria v The Commonwealth, upon which critical reliance was placed in Lunn was quite different. At the time of Victoria v The Commonwealth, the relevant prohibition in relation to harsh, unjust or unreasonable termination of employment in s.170DE(1) of the Industrial Relations Act 1988 was expressed with the formulation “An employer must not terminate an employee’s employment…”. There was no provision in the statute excluding from this formulation any termination of employment at the end of a contract for a specified period of time. Section 170CC empowered the making of regulations to exclude specified employees from the operation of specific provisions of Division 3 of Part VIA of the Act (in which s.170DE was located) provided that exclusion was permitted by identified provisions of the Termination of Employment Convention. Pursuant to this power, reg.30B(1) of the Industrial Relations Regulations exempted any employee engaged under a contract of employment for a specified period of time that was entered into before 16 November 1994, and any employee engaged under a contract of employment for a specified period of time entered into on or after 16 November 1994 that was less than six months. The general rule being that delegated legislation made under an Act is not to be taken into account for the purpose of interpretation of the Act itself, it is not surprising that in Victoria v The Commonwealth no regard was had by the Court to the exception in the regulations in its construction of the statutory termination of employment provisions. That is of course a very different position to the FW Act where the exceptions relate directly to the definition of “dismissed” and are part of the statutory scheme itself.

[71] For the above reasons, I consider that the automatic reliance in Lunn on Victoria v The Commonwealth to construe a different scheme of legislation in which there was a specific statutory exception for contracts for a specified period of time was highly problematic. In my view a fresh consideration of the proper interpretation of s.386(1)(a) of the FW Act which takes into account how it relates to the exception in s.386(2)(a) and leaves that exception with a substantive function in the statutory scheme might well result in Lunn being distinguished.

[72] Second, as earlier stated, Lunn proceeds on the basis that the relevant question is whether the contract of employment and not the employment relationship was terminated on the initiative of the employer. That approach was based on the proposition that, as a result of the 1996 legislative amendments by which the Industrial Relations Act 1988 metamorphosed into the Workplace Relations Act 1996, the termination of employment provisions in the legislation were fundamentally altered in that they were no longer founded upon and to be interpreted by reference to the Termination of Employment Convention. Under that approach the earlier decision of the Full Court of the Industrial Relations Court of Australia in Brackenridge v Toyota Motor Corporation Australia Ltd, which concerned the legislation as it was before those amendments, was treated as no longer applicable. In Brackenridge, termination of employment under the legislation was interpreted, by reference to the provisions of the Termination of Employment Convention, as meaning termination of the employment relationship, not termination of the contract of employment.

[73] There is significant doubt in my view as to whether “termination of employment” in s.386(1)(a) should be read as referring to the contract of employment and not the employment relationship. There are a number of reasons why I hold that view, but it is sufficient for present purposes to refer to paragraph [1528] of the Explanatory Memorandum, which explains the clause which became s.386 in the following way:

“1528. This clause sets out the circumstances in which a person is taken to be dismissed. A person is dismissed if the person's employment with his or her employer was terminated on the employer's initiative. This is intended to capture case law relating to the meaning of 'termination at the initiative of the employer' (see, e.g., Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200).”

[74] Mohazab v Dick Smith Electronics Pty Ltd (No 2) was a decision of the Full Court of the Industrial Relations Court. The legislation at that time (s.170CB of the Industrial Relations Act 1988) required that expressions in the termination of employment provisions of the legislation be treated as having the same meaning as in the Termination of Employment Convention. In the Convention, the terms “termination” and “termination of employment” were defined as meaning “termination at the initiative of the employer”. The Court gave consideration to the meaning of the expression “termination at the initiative of the employer”, and said (emphasis added):

“It is necessary to consider the ordinary meaning of the expression "termination at the initiative of the employer" in context in the Convention having regard to its object and purpose. The word "initiative" is relevantly defined in the New Shorter Oxford Dictionary in the following way:

"initiative 1. The action of initiating something or of taking the first step or the lead; an act setting a process or chain of events in motion; an independent or enterprising act."

And in the Concise Macquarie Dictionary in the following way:

"initiative 1. an introductory act or step; leading action; to take the initiative. 2. Readiness and ability in initiating action; enterprise: to lack initiative."

These definitions reflect the ordinary meaning of the word "initiative". Viewed as a whole, the Convention is plainly intended to protect workers from termination by the employer unless there is a valid reason for termination. It addresses the termination of the employment relationship by the employer. It accords with the purpose of the Convention to treat the expression "termination at the initiative of the employer" as a reference to a termination that is brought about by an employer and which is not agreed to by the employee. Consistent with the ordinary meaning of the expression in the Convention, a termination of employment at the initiative of the employer may be treated as a termination in which the action of the employer is the principal contributing factor which leads to the termination of the employment relationship. We proceed on the basis that the termination of the employment relationship is what is comprehended by the expression termination of employment: Siagian v Sanel [1994] IRCA 2; (1994) 1 IRCR 1 at 19; 54 IR 185 at 201. In many, if not most, situations the act of the employer that terminates the employment relationship is not only the act that puts in train the process leading to its termination but is, in substance, the entire process. An example would be a situation where the employer decided to dismiss an employee and did so orally or in writing with immediate effect. Other situations may be more complex as exemplified by the circumstances considered by Moore J in Grout v Gunnedah Shire Council (1994) 1 IRCR 143; 57 IR 243 where an employee had given written notice purporting to terminate the employment relationship. The notice was not reasonable but was accepted by the employer which later refused to allow the employee to withdraw the notice. A question arose as to whether that was a termination of the employment at the initiative of the employer and his Honour held it was. His Honour said at 372:

"I have already said that Div 3 concerns termination at the initiative of the employer. The respondent submits that 'initiate' means 'to begin, commence, enter upon; to introduce, set going, or initiate': see Shorter Oxford English Dictionary. In this matter, it is submitted, it was the applicant and not the respondent that initiated the termination by writing the letter of 18 May. This, in my opinion, gives the expression 'termination' in the Act, read in conjunction with Art 3 of the Convention which speaks of 'termination ... at the initiative of the employer', a narrow meaning that was not intended. A principal purpose, if not the sole purpose, of Div 3 is to provide an employee with a right to seek a remedy in circumstances where the employee did not voluntarily leave the employment. An employee may do some act which is the first in a chain of events that leads to termination. An example would be an employee who engaged in misconduct at work which ultimately led to the employer dismissing the employee. However, that situation and the present are not situations where the termination was at the initiative of the employee. In both instances the step or steps that effectively terminated the employment or purported to do so were taken by the employer."

In these proceedings it is unnecessary and undesirable to endeavour to formulate an exhaustive description of what is termination at the initiative of the employer but plainly an important feature is that the act of the employer results directly or consequentially in the termination of the employment and the employment relationship is not voluntarily left by the employee. That is, had the employer not taken the action it did, the employee would have remained in the employment relationship.”

[75] The above approach is plainly founded upon the proposition, contrary to that taken in Lunn, that the relevant question was whether the employment relationship had been terminated at the initiative of the employer, and that this encompassed any situation where an act of the employer results in the employment terminating and the employee does not voluntarily leave the employment relationship.

[76] That an analysis of this type might lead to a different result than that which would flow from the application of the narrower, contract-based approach in Lunn is well illustrated by the decision of the Industrial Relations Court (Marshall J) in D’Lima v Board of Management, Princess Margaret Hospital for Children. In that case the employee was employed under a succession of short-term temporary appointments which the employer characterised as fixed-term contracts of employment. During the period of the last of these, the employee was informed that at the end of the period her employment would cease. The employer contended, among other things, that this was not a termination of employment at the initiative of the employer but simply the result of the expiry of a fixed-term contract of employment. The Court rejected this, and said:

“I likewise reject the submission of Mr Hooker that the dismissal of Ms D'Lima was not a termination of employment at the initiative of the employer. The fact of the matter was that Ms D'Lima was continuously employed from 18 June 1993 to 11 December 1994 on which latter date her employment was terminated by the hospital. The practice of signing of further contracts for alleged periods of temporary employment appears to have been one of mere administrative convenience and cannot compel the Court to ignore the weight of strong countervailing factors indicating a continuous employment relationship. Mr Hooker described the relationship as "relatively" continuous. I find no basis for the use of the adjective "relatively" in that context. As Ms D'Lima said in unchallenged evidence on the review:

"... I had continuous employment ... except for my father's death [on] which I approached Ms Dyson and asked her to grant me leave.".”

[77] D’Lima was decided before Mohazab, but the approach taken is consistent with it, in that the analysis was conducted by reference to the employment relationship as a whole and not merely the final contract of employment. It may also be noted that Marshall J was part of the Full Court in Mohazab. In Lunn, the Full Bench sought to distinguish D’Lima on the basis that the contracts were treated as a sham. However, it is apparent from a plain reading of D’Lima that the decision did no such thing; the result there arose from a different approach to the meaning of the expression “termination at the initiative of the employer”.

[78] It is apparent that if the legislative intention was that s.386 be interpreted and applied in accordance with the approach stated in Mohazab, then that would necessarily make Lunn inapplicable.

[79] The third is that the approach in Lunn creates insuperable problems in relation to unfair dismissal cases involving casual employees. It is apparent from the exclusion in s.384(2)(a) from the definition of “period of service” in s.384(1) that the legislature intended that casual employees employed for the length of the applicable minimum employment period prescribed in s.383 on a regular and systematic basis, and with a reasonable expectation of continuing employment on that basis, would be able to make an unfair dismissal claim. However, the conventional contractual construct for casual employees is that they are engaged by the day, so that each day’s engagement represents a separate contract of employment that is limited to the period of that working day. If that is so, then on the approach in Lunn, a long-term regular casual who completes a particular day’s engagement and is thereafter not engaged by the employer can never be regarded as having been dismissed, since this must be treated as an agreed termination of employment occurring at the end of the contract period as a result of the effluxion of time. This again strongly indicates, in my view, that it is a flawed approach to apply Lunn to the provisions of the FW Act.

[80] The above does not represent the totality of my concerns about the application of Lunn, but identifies some of the main reasons why I consider it is necessary to reconsider its correctness in relation to the current statutory framework. In my view, the question of whether a person’s employment has been terminated at the initiative of the employer requires an analysis of what, as a matter of practical reality, brought about the end of the employment relationship. In the case of an employment relationship which is constructed of a series of “outer limit” fixed-term engagements not encompassed by s.386(2)(a) (again assuming Andersen remains applicable), where such engagements are utilised by the employer on an essentially unilateral basis as an administrative mechanism, I consider that it may be open to find that the decision of the employer to bring the employment relationship to an end by not offering any further engagements constitutes a termination of employment at the initiative of the employer under s.386(1)(a). That is an approach which is in substance the same as in Mohazab and D’Lima. I consider that in the situation described an approach which confines the analysis to the circumstances of the termination of the final employment contract is far too narrow and is likely to lead to a result that is at odds with practical reality.

[81] However Lunn is a Full Bench authority which has become well entrenched in the Commission’s jurisprudence under the FW Act. I do not think it is appropriate that I determine this matter in disregard of it. Any reconsideration of Lunn should take place at the Full Bench level. Therefore I will apply Lunn to determine the outcome of this case.

[82] I note at this point that Mr Jin relied upon the decision in Hope v Rail Corporation New South Wales T/A Rail Corp to support his position. In that case, an employee who had been engaged by RailCorp on the basis that he was a temporary employee over a series of fixed-term engagements was held in fact to be a “permanent” employee whose employment had been terminated at the initiative of the employer. However, the facts of that case make it distinguishable - particularly the fact that the employee’s employment was terminated prior to the end date of his final employment contract. Had that been the case here, I would not have hesitated in concluding that Mr Jin’s employment had been terminated at the initiative of the employer. But it was not.

[83] Applying Lunn, my conclusion is therefore that Mr Jin’s employment was not terminated at the initiative of the employer, but rather terminated as a result of the expiration of his final contract of employment. In short, he was not dismissed.”

[89] It is submitted regard should be had for the decision in Searle v Moly Mines Ltd 37 finding that the test is whether there has been a termination of the employment relationship, not termination of the contract of employment.

[90] As to the evidence of Navitas at hearing, it is submitted that Navitas did not call any witnesses who were able to state the actual reasons as to why Mr Khayam was subject to a two year maximum-term contact for the period 2014 – 2016.

[91] It is submitted that fluctuating student numbers could not sincerely represent a reason for the issuing of the maximum-term contract. Casual teachers are employed by Navitas and can assist with fluctuating numbers of students.

[92] Mr Vrolyk’s evidence is that there was a shared understanding of managers that maximum-term contracts would permit Navitas to be protected from employees bringing claims of unfair dismissal if their employment ended at the end of the term. It is submitted that the end-of-contract date was used by Navitas to end the employment of teachers with alleged poor performance.

[93] Mr Khayam submitted that the only available inference is that the use of maximum-term contracts is a sham, the purpose and intended effect of which was to have an on-going workforce without potential liability for redundancy payments, and to permit teachers to be removed on alleged performance or conduct grounds without threat of unfair dismissal proceedings. 38

[94] In closing submissions, Mr Gibian said the following: 39

“….All businesses, would no doubt sensibly enough sit down and look at their staffing needs, that doesn’t prompt all businesses to have only or primarily outer limit contracts. There’s no evidence, in fact, that was the process for setting the contract length in this case and, in any event, there’s no logical reason why that would lead to that conclusion.”

[95] The following exchange took place in discussing the concept of a ‘sham’ arrangement in Lunn: 40

“Cmr:  What do you say about Lunn where the definition of sham is so narrow?

Mr Gibian: In relation to this second argument, what I say is - - -

Cmr: Sorry, it appears to be a collusion between the parties.

Mr Gibian: Yes.  I mean, my submission would be (a) it was wrong at the time, but (b) it can't be as limited if one applies to the current Act because the previous legislation didn't have subsection 386(3), so we didn't have that anti-avoidance provision in it, and one has to apply subsection (1)(a) in light of the Act as a whole, obviously, and one would not apply it in a manner which would lead to the important protection afforded by subsection (3) against avoidance of the rights conferred by the Act in respect of unfair dismissal by applying a narrow approach to what termination at the initiative means.

The circumstances have changed in the context in which the provision is to be interpreted, and plainly so.  The Act can't be read in a manner which would give subsection (3) no work to do, which is exactly what would happen if paragraph 42 particularly if one were applied literally to the current legislation.  As I say, that aspect, I don't think, has been considered, that particular sham or avoidance aspect or the avoidance in its context of the narrow definition of sham in Lunn I don't think's been considered in the context of the current Act as I am aware at least.”

Consideration

The terms of the contract

[96] I am satisfied that the terms entered into between Mr Khayam and Navitas are clear and unambiguous. The contractual terms clearly state the contract would end on 30 June 2016, unless terminated earlier by either party. There is no subjectivity to the terms agreed. There is no contingency such as ‘subject to funding’ as is the case in Papalia.

[97] In fact, Mr Khayam was aware his employment could end by a maximum-term contract reaching its end date. He almost experienced this reality in 2014 when he was informed his contract ending 30 June 2014 would not be renewed. Upon learning this news, he successfully protested the decision and was issued a new two year contract.

The 2013 Agreement

[98] I have had regard to the 2013 Agreement, and in particular, to clause 11. The 2013 Agreement was negotiated with the IEUA. Mr Khayam participated in the negotiations. 41

[99] The terms of the 2013 Agreement allow for Navitas to employ employees on ‘fixed-term’ contracts. The Agreement provides that ‘fixed-term’ contracts may be used where funding is assured, which is certainly the case with respect to the last contract issued to Mr Khayam.
[100] ‘Fixed-term’ is defined in the 2013 Agreement as follows:

“‘fixed-term’ employment has a start date and a finish date, and occurs for a specified period that the employee agrees to work, the amount of work that will be undertaken and the salary that will be paid. A fixed-term contract includes entitlement to paid leave and other entitlements on a pro rata basis, as specified in this agreement and relevant legislation.”

[101] Mr Khayam’s final contract had a start date of 1 July 2014, and a finish date of 30 June 2016. If Mr Khayam did not agree to work up until 30 June 2016, the definition contemplates such a scenario.

[102] Ordinarily I would conclude, strictly speaking, that the expression ‘fixed-term’ is for a definite period of time, without the capacity for a party to conclude the agreement earlier. If an employee wished to cease their employment early while bound to a ‘fixed-term’ contract, injunctive relief could be sought by an employer to compel the employee to be bound by the agreement reached; a definite term. Similarly, an employer would not have capacity to terminate earlier than the agreed term.

[103] Navitas has, by virtue of the common law contracts purportedly supplementing the various enterprise agreements across the years, sought to employ Mr Khayam subject to a maximum-term contract. While a date over two years has been nominated, it is subject to the ability to terminate earlier than the nominated end-date. The common law contract is effectively a maximum-term engagement.

[104] In the above scenario, I would find that the common law contract providing for a maximum-term could not trump the terms of the 2013 Agreement expressly nominating a fixed-term. However, in the circumstances of Mr Khayam, it is not terribly relevant given Mr Khayam’s employment did come to an end on 30 June 2016 and not beforehand.

[105] Clause 11.4 of the 2013 Agreement allows Navitas, ‘in its absolute discretion’ to determine if it will offer or renew fixed-term contracts having regard to agreed criteria. While the bullet points in 11.4 setting out the criteria Navitas is required to have regard to detail important and substantial considerations, the expression ‘in its absolute discretion’ is an incredibly strong statement. Arguably, such a strong expression does not provide for any challenge to Navitas’ assessment against the criteria. It may well be entitled to say that it has had regard for each of the bullet points, and decided not to renew an employee’s fixed-term contract, or offer to them a new contract, without an obligation to provide any reasons at all.

[106] Mr Khayam argues that because of the obligation of 11.4, and the requirement to give employees as much notice as possible if further employment will not be offered, there is a positive act that the employer must do in order to end the employment. It is said it therefore is a termination at the employer’s initiative.

[107] While it is true there is an obligation within the 2013 Agreement to give an employee as much notice as possible, if an employee was not given any notice at all, and their employment ended at close of business on the last day of their fixed or maximum-term, it would not affect the rights of that employee as opposed to an employee who had been given two weeks’ notice of the fact that they will not be issued with a further contract.

[108] I do not consider this set of circumstances to be aligned to the argument put by Mr Khayam having regard to Mohazab. If Navitas genuinely decided only one hour before the expiry of an employee’s contract that it could not offer subsequent employment to the employee, it would have met its obligation to the employee by giving the employee the maximum notice possible. It is simply a requirement to inform. It is a positive step that is required to be undertaken, but it is only a communication of fact; that no further work will be offered beyond the end date of the contract.

[109] If a genuine decision was made by Navitas that it could not offer further work to an employee with an end date, and this decision was communicated to the employee at the close of business on the end date, the employer arguably still would have met its obligations, albeit the maximum notice it has given the employee is zero hours and minutes.

Is there a dismissal relevant to s.386(1)(a)?

[110] It is Navitas’ principal argument that there has not been a dismissal at the employer’s initiative, a requirement that is necessary for the application to have jurisdiction. This is so because of the Full Bench authority in Lunn.

[111] The decision in Lunn has come under criticism in recent years. Most notably in the decision of Hatcher VP in Jin. I concur with the sentiments of Hatcher VP in Jin, and have further things to say about Lunn.

[112] I am troubled by the concept of a ‘sham’ in [42] of the Lunn decision, where it is suggested that in order for there to be a sham, there would need to be some common intention on the two parties’ behalf that they would not create binding legal rights and obligations according to the terms they entered into. This concept of sham would require collusion between the parties to represent to third parties or to the world an arrangement that they had no collective intention to be bound to.

[113] The Macquarie Dictionary defines the term ‘sham’ as:

1. something that is not what it purports to be; a spurious imitation.

2. a hoax.

3. pretended; counterfeit: sham attacks.

4. designed or used as a sham.

[114] The construction of what constitutes a sham in Lunn is, in my view, very narrow. It has no regard to the power imbalance of the parties, where an employee is aware that their employment has a purported end-date, and it is the employer’s discretion whether or not to offer a new contract to the employee. An employee can be on their third, fourth of fifth maximum-term contract, and be subject to precarious employment. This precarious employment is not experienced by employees with open-ended employment.

[115] In Sharrment, the same concept rings true; a sham is in place to represent to third parties or to the world at large that the arrangement between the first and second parties means one thing, when the parties between themselves mean for it to have an alternate meaning. There is collusion between the parties to give this false representation.

[116] When one considers the work of Chapter 3 – Part 3-1 – Division 6 – Sham arrangements in the Act, it can be said that the concept of sham arrangements is that there is one party with the power in the relationship, misrepresenting to the other party the true nature of the relationship. The effect of the above provisions in the Act is that sham arrangements may be exposed where a ‘principal’ misrepresents to a worker that they are an independent contractor when they should be an employee.

[117] From the introduction of the general protections provisions in the Act to include sham arrangements, it can no longer be said that a sham should be limited to where two parties collude together to represent to third parties or the world at large an arrangement they have no intention to be privately bound to. A sham in 2017 would more commonly be one where there is one party exerting influence over the other party to conceal the true relationship between the parties.

Determination of s.386(2)(a)

[118] If one is to have regard to the Explanatory Memorandum, arguably ‘outer limits’ contracts or maximum-term contracts are contracts which fall into the definition of a contract for a specified period of time as provided for in s.386(2)(a). The Explanatory Memorandum suggests that simply because a common law contract allows for earlier termination than the specified date, it would not ‘alter the application of this provision’.

[119] If that is the case, and the Explanatory Memorandum does expressly include outer-limits or maximum-term contracts into those contracts excluded from unfair dismissal protection by s.386(2)(a), then those contracts are then open for scrutiny pursuant to s.386(3). In Lunn it was said that it might be industrially contentious to engage almost all staff on successive ‘outer limit’ contracts, but there was no constraint on an employer in doing so. There was not, however, a constraint the like of s.386(3) at the time Lunn was decided.

[120] In Mr Khayam’s case, on Navitas’ alternative argument, he was employed for a specified period of time and the employment terminated at the end of the period. Therefore Mr Khayam has not been dismissed.

[121] One is then required to look behind Navitas’ decision to enter into maximum-term contracts with employees. For Mr Khayam to succeed, he would need to satisfy the Commission that a substantial purpose of entering into the maximum-term contract was to avoid Navitas’ obligations under the Act’s unfair dismissal laws. It would not be necessary to determine that it was the substantial purpose, but simply, a substantial purpose.

[122] There was no substantial evidence led by Navitas as to why maximum-term contracts attracting leave accruals and the like were preferred over on-going casual employment. Nor did Mr Khayam suggest that he would have preferred to have had on-going casual employment with Navitas instead of permanent entitlements for a nominated period of time. Clearly, Mr Khayam did accept the first offer in April 2012 to be employed subject to a maximum-term. He later accepted extensions and fresh contracts on the same or similar terms.

[123] It is accepted that Navitas aligned Mr Khayam’s last contract term to the SEEP funding and not to the AMEP funding. It was its usual practice to align maximum-term contracts with relevant funding. Mr Khayam was unsuccessful in cross-examination of Navitas’ witnesses in having them concede that at least one of the reasons Navitas offers maximum-term contracts to employees is to escape its unfair dismissal exposure.

[124] What Navitas did say is there was a shared knowledge or understanding within relevant levels of management that employees on a maximum-term contract did not or might not have unfair dismissal protections if their contract ended on their term date. Nor would those employees have access to severance pay at the conclusion of their term.

[125] One may well ask, if Navitas is correct in its understanding of unfair dismissal laws and severance payments applicable to maximum-term or outer-limits contracts, why should Navitas be so protected? Arguably many Australian businesses work on the basis of employing groups of employees where the funding or budgeting for those groups is subject to the usual wins and losses of contracts. Could entire workforces be employed on maximum-term contracts? In an example where funding is issued annually, might an employer have a workforce on annual maximum-term contracts, with employees waiting to hear annually if they will be offered a new contract? On Navitas’ submissions, it would not matter if the decision to end an employee’s employment was relevant to the funding issue or poor performance; the employment would end on Navitas’ submissions because of the effluxion of time.

[126] Mr Khayam was not offered a new contract from 1 July 2016 on the basis that Navitas unilaterally determined that his performance was not satisfactory. Mr Khayam was not given an opportunity to be involved in the discussion. The criteria set by Navitas and discussed among Area Managers and Mr Bernard Lewis, Operations Manager was then communicated to Mr Khayam. While 11.4 of the 2013 Agreement contemplates a number of criteria to be taken into consideration in offering new ‘fixed-term’ contracts, there is no course an employee can take to challenge the employer’s view or address the alleged performance concerns.

[127] Mr Khayam had been employed for approximately 11 years. Relevant Navitas managers were comforted Mr Khayam’s employment could end on 30 June 2016 for any reason, and as long as the employment ceased on that date, Navitas was protected from Mr Khayam bringing an unfair dismissal claim within jurisdiction.

[128] Mr Vrolyk acknowledged in questions from the Commission that a casual employee with much less service than Mr Khayam would need to be performance counselled if Navitas held concerns in relation to their performance. 42 In my view, it is inherently unfair that a casual employee with, for example, nine months’ service as a regular and systematic employee, and a reasonable expectation of continuing work would have greater unfair dismissal rights than an employee of 11 years such as Mr Khayam. By virtue of Mr Khayam accepting term contracts in the last few years of his employment, subject to the employment ending on those term dates, Mr Khayam could not challenge any decision not to be offered a new contract for any reason determined by Navitas.

[129] As stated earlier, the 2013 Agreement allowed Navitas ‘in its absolute discretion’ to determine if Mr Khayam was to be offered a new term contract following the expiration of his last agreement on 30 June 2016. It may be that in future enterprise agreements entered into between Navitas and its employees such a broad discretion is limited, with some transparency to employees if one of the reasons they might not be offered a new contract is performance-related.

[130] When considering s.386(3), I do not consider that a substantial purpose of Navitas offering maximum-term contracts to Mr Khayam and other employees was to avoid its unfair dismissal obligations. I determine that the substantial purpose was to align employees’ employment (with paid leave conditions) to the relevant funding for programs it was operating. The Commission heard Navitas had been meeting yearly for approximately 20 years to determine its prospective requirements, and attempting to align its resources with its projected needs. While it could be said that due to the fluctuating numbers of students, and payment to Navitas under the programs limited to actual attendance of students, it would make more sense to employ teachers on a casual basis, it is for Navitas alone to determine the most suitable form of employment it offers to its employees.

[131] While I am confident Navitas took comfort in what it considered to be its legal protections in finishing employees up at the end of their employment term, I have not found the substantial reason to enter into that relationship was for that purpose. There was no demonstration of intent.

[132] If Navitas had engaged Mr Khayam and other employees for maximum terms without a correlating link to the end of funding under the various programs, it might be difficult to resist the urge to find a substantial purpose was to escape unfair dismissal obligations. If it was a matter of convenience without any apparent bona fides, the finding would likely be a different result. In this instance, the federal government contracts are an intrinsically fundamental part of Navitas’ operations and it elects to employ employees for maximum periods of time for that purpose.

Conclusion

[133] It is no doubt inherently unfair that an employee with 11 years’ service on consecutive maximum-term contracts can have their employment end at a stated period of time due to the employers’ concerns relevant to the employee’s performance, without the employee having the opportunity to challenge the concerns.

[134] Mr Khayam’s performance was measured by Navitas in early 2016, and Navitas made a determination at its discretion, without input from Mr Khayam that he was no longer suitable for the role. He was not offered work beyond the term of his expiring contract. If the work was no longer available, it might be more palatable. However, the work is being done by another teacher. Quite simply, Navitas no longer wished for Mr Khayam to perform the work beyond 30 June 2016.

[135] By virtue of the maximum-term contract entered into between Navitas and Mr Khayam, he held fewer rights than a regular and systematic casual employee with at least six months’ service and a reasonable expectation of on-going work.

[136] In the same way Hatcher VP in Jin was bound by the Full Bench authority in Lunn, so too am I, and accordingly I must find that in accordance with the authority in Lunn, there has not been a dismissal at the initiative of Navitas. Relevant to s.386(1)(a), the employment came to an end due to the effluxion of time. In the alternative argument, having considered s.386(3) and the work that it has to do relevant to s.386(2)(a), Navitas did not enter into a maximum-term contract with Mr Khayam, the substantial purpose to avoid its unfair dismissal obligations to Mr Khayam.

[137] No doubt there is unfairness to Mr Khayam in not being offered a new maximum-term contract due to the unilateral views held by Navitas as to Mr Khayam’s work performance. That is not, however, the matter to be determined by the Commission in this matter. In any event, the 2013 Agreement allows for Navitas to exercise its discretion to award a further contract or not.

[138] Having found that there was not a dismissal at the initiative of Navitas, I must dismiss the application. The application is dismissed.

COMMISSIONER

Appearances:

Mr. M Gibian of Counsel for the Applicant.

Mr. D Mahendra of Counsel for the Respondent.

Hearing details:

2 and 3 March 2017.

Sydney.

 1   Khayam v Navitas English Pty Ltd T/A Navitas English [2016] FWC 8759.

 2   Ibid at [10].

 3   See Fair Work Act 2009 (Cth) s.385(a).

 4   Barkla v G4S Custodial Services Pty Ltd (2011) 212 IR 248; citing O’Meara v Stanley Works Pty Ltd (2006) 58 AILR 100 at [23].

 5   Ibid.

 6   Ibid at [42].

 7   Statement of Karl Vrolyk at [3].

 8   PN300.

 9   PN1666.

 10   Statement of Saeid Khayam at [11].

 11   PN512.

 12   Statement of Saeid Khayam at [37]

 13   PN187.

 14   Statement of Saeid Khayam at [38].

 15   Ibid at [39].

 16   PN410.

 17   Statement of Michael Botto at [3.9].

 18   Ibid at [4.13].

 19   Exhibit A5.

 20   Statement of Michael Botto at [7.6].

 21   PN802.

 22   PN904.

 23   Statement of Karl Vrolyk at [13].

 24   PN1201.

 25   PN1319.

 26   PN1385 – PN1413.

 27   Lunn at [42].

 28   Ibid.

 29   Re Sharrment Pty Limited; Lee Wynyard; Lorreine Claire Wynyard and Seyta Pty Ltd v the Official Trustee in Bankruptcy [1988] FCA 179 (3 June 1988).

 30   Explanatory Memorandum to the Fair Work Bill 2008, at [1532].

 31   [2016] FWCFB 922.

 32   Andersen v Umbakumba Community Council (1994) 126 ALR 121, 125-126.

 33   Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200.

 34   [2013] FWC 7996.

 35   [2014] FFWC 42.

 36   Hope v Rail Corporation New South Wales [2014] FWC 42 at [28].

 37   (2008) 174 IR 21.

 38   Applicant’s closing submissions at [5].

 39   PN1509.

 40   PN1539.

 41   Statement of Saeid Khayam at [26].

 42   PN1412-1413.

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