Successive contracts and continuous employment

4 August 2021

By Sagorika Platel (Associate) and Matthew Healy (Law Student)

Michael Nasr v Mondelez Australia Pty Ltd [2021] FWC 2802 (1 July 2021)

On 1 July 2021, Deputy President Young of the Fair Work Commission found that in specific situations, successive maximum term contracts did not amount to continuous employment for the purposes of unfair dismissal claims.

Background

Mondelez Australia Pty Ltd (Mondelez) is an Australian chocolate and confectionary manufacturer with five manufacturing plants in Australia. Due to the nature of the industry, staffing requirements are greatest for the Easter confectionary production, from May to August, and for the Christmas production, from August to December.

Mr Nasr was employed by Mondelez for some two and a half years as a confectioner pursuant to eight maximum term contracts of various lengths. Notably, the expiry date in each successive contract was clearly articulated, and required Mr Nasr to acknowledge that he was offered the contract “on the basis that there can be no guarantee of further employment beyond that period”.  

In addition to the above, Mr Nasr’s employment was governed by an enterprise agreement which specifically made provision for engaging employees for a given period, being a project, season or a job.

At the end of the eighth contract, on 31 December 2020, Mr Nasr’s employment came to an end and no further contract was provided to him.

On 21 January 2021, Mr Nasr applied to the Fair Work Commission alleging that he had been unfairly dismissed by Mondelez, and sought reinstatement. The basis of Mr Nasr’s claim was that he reasonably expected his employment to continue on the provision of another contract.

The Issue

Mondelez argued that by reason of the expiry of his maximum term contract, Mr Nasr was not dismissed, and by extension, he was not entitled to make a claim for unfair dismissal. Mondelez also submitted, in the alternative, that Mr Nasr was only employed for a specific period of time within the meaning of section 386(2)(a) of the Act, and that his employment ceased at the end of that period.

Mr Nasr, however, maintained his position. He submitted, among other things, that Mondelez reinforced his expectation of an ongoing employment relationship when it:

  • Offered him successive contracts, one after the other, seamlessly over two and a half years;
  • Provided Mr Nasr with payment of two and a half years’ worth of unused statutory entitlements at the expiration of the eighth contract;
  • Gave Mr Nasr notice that his employment will come to an end some two weeks before the expiry of the eighth contract; and
  • Made representations that he would be offered further employment.

The Decision

Deputy President Young preferred Mondelez’s evidence over that of Mr Nasr and found in favour of the Respondent.

In summary, the Deputy President rejected Mr Nasr’s arguments on the basis that:

  • The terms of all the agreements were clearly stated to expire on a specific date;
  • Mr Nasr was held to have read, understood and agreed to the terms of each of the contracts;
  • Mr Nasr was found to have agreed that he understood that there was no guarantee of employment after the expiry date in the contract;
  • Mondalez had a legitimate reason for offering each maximum term contract, namely, it did so for its genuine operational requirements; and
  • The fact that these maximum term contracts were offered as a result of the business’ genuine operational requirements was further supported by its enterprise agreement and consistent with the standard process at its Scoresby Plant.

Considerations

While the contents of the contractual agreements between Mr Nasr and Mondelez were relatively uncontested, finding whether the termination occurred at the initiative of the employer required an examination of whether, and despite the successive time-limited contracts, the employment relationship was ongoing. In so doing, the Deputy President clarified a long line of authority which outline several important factors.

The Agreement

Firstly, where an employee has not left the employment relationship, the focus is whether an action by the employer was the principal contributing factor resulting in the termination of employment. Even where parties have agreed that the contract will expire on a specified date but they have not agreed to the termination of the employment relationship, the termination may have occurred at the initiative of the employer.

Vitiating Factors

Secondly, in considering the employment relationship, the court may be required to consider whether the agreement has been vitiated in some way. This may include, but is not limited to, misleading conduct, serious mistake, unconscionable conduct, coercion, illegality or for being contrary to public policy.

Lessons for employers

At face value, the decision in Nasr v Mondelez appears to be straight forward. This conclusion, however, is deceptive.

Mondelez was successful because it did the following:

  • clearly stipulated the date upon which the contract would expire;
  • included a clause into the contract stating that there was no guarantee of ongoing employment following the contract’s expiry date; and
  • it required the employee to acknowledge his full understanding of these terms.

Most significantly however, Mondelez had a legitimate basis for offering a series of successive maximum term contracts, namely, it did so because of its genuine operational requirements.

We understand that it may be easy for businesses to rely on similar past agreements and recycle them for certain arrangements. However, the Fair Work Commission will look at the entirety of the relationship and not just at the wording of the contract or its expiry date.

As a result, the lesson for employers is that where a maximum term contract is provided to a prospective or current employee, the employer must ensure that it is done for a genuine operational reason.

Please do not hesitate to contact our dedicated team for timely, clear, and precise advice to protect your company from similar disputes.