Fair Work Act 2009
s.604 - Appeal of decisions

Application for permission to appeal decision [2017] FWC 1524 of Commissioner Hunt at Brisbane on 22 May 2017 – whether dismissal at the initiative of the employer – maximum term contracts – consideration of Full Bench decision made under the Workplace Relations Act - public interest enlivened – permission to appeal granted.

[1] This decision concerns an application for permission to appeal against a decision issued by Commissioner Hunt on 22 May 2017 (Decision) 1, in which the Commissioner dismissed Mr Khayam’s application for an unfair dismissal remedy.

[2] Mr Khayam had been employed by Navitas English Pty Ltd (Navitas) on a series of maximum term contracts between April 2012 and May 2016. At the expiration of the last contract, Navitas decided not to offer Mr Khayam a further contract because of concerns about his performance.

[3] The Commissioner considered herself bound by the decision of the Full Bench of the Australian Industrial Relations Commission in Department of Justice v Lunn 2 (Lunn), and concluded that there had been no dismissal at the initiative of the employer for the purposes of s386(1)(a) of the Fair Work Act 2009 (Cth) (FW Act). In doing so, she noted concerns about the applicability of the decision in Lunn to the FW Act, including those expressed by Vice President Hatcher in Jin v Sydney Trains3 (Jin).

[4] The Commissioner also found that, if the contract in question was one for a specified period of time for the purposes of s386(2)(a), the anti-avoidance provision in s386(3) did not apply in the circumstances.

[5] Mr Khayam contends that the decision in Lunn was wrongly decided, or alternatively that it is not applicable to the relevant provisions of the FW Act. He also challenges the Commissioner’s conclusion that, if his employment fell within s.386(2)(a), the anti-avoidance provision in s386(3) did not apply.

Background

[6] The background to this matter is set out in the Decision and can be briefly summarised.

[7] Mr Khayam was initially employed as a casual employee between 2005 and 2012.

[8] In April 2012, Mr Khayam was offered and accepted employment as a ‘fixed-term teacher’ from 23 April 2012 to 30 June 2013. 4 The letter of offer dated 14 April 2012 contained a provision allowing either party to terminate the employment by giving 4 weeks’ written notice.

[9] Mr Khayam was offered and accepted further fixed term employment covering the period 1 July 2013 to 30 June 2014, on substantially the same terms as the letter of 14 April 2012. 5

[10] A further fixed-term contract was entered into in respect of the period from 1 July 2014 to 30 June 2016. It stated that the employment will terminate automatically on the expiry date unless terminated earlier by either party. 6

[11] On 31 May 2016, Mr Khayam was informed that he would not be offered a further contract, based on an assessment of his performance and disciplinary record. 7 For present purposes, it is not necessary to set out the details of the relevant disciplinary and performance issues.

[12] Mr Khayam contends that he was unfairly dismissed from his employment at the initiative of his employer. Navitas maintains that he was not dismissed at its initiative, but that the employment ended on 30 June 2016 in accordance with the parties’ agreed terms.

Permission to appeal

[13] An appeal under s.604 of the FW Act is an appeal by way of rehearing and the Commission’s powers on appeal are only exercisable if there is error on the part of the primary decision maker.⁸ There is no right to appeal and an appeal may only be made with the permission of the Commission.

[14] This appeal is one to which s.400 of the Act applies. Section 400 provides:

(1) Despite subsection 604(2), the FWC must not grant permission to appeal from a decision made by the FWC under this Part unless the FWC considers that it is in the public interest to do so.

(2) Despite subsection 604(1), an appeal from a decision made by the FWC in relation to a matter arising under this Part can only, to the extent that it is an appeal on a question of fact, be made on the ground that the decision involved a significant error of fact.

[15] In Coal & Allied Mining Services Pty Ltd v Lawler and others, Buchanan J (with whom Marshall and Cowdroy JJ agreed) characterised the requirements of s.400 as ‘stringent’.⁹

The task of assessing whether the public interest test is met is a discretionary one involving a broad value judgment.¹⁰ In GlaxoSmithKline Australia Pty Ltd v Makin a Full Bench of the Commission identified some of the considerations that may enliven the public interest:

‘... the public interest might be attracted where a matter raises issues of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters.’¹¹

[16] It will rarely be appropriate to grant permission to appeal unless an arguable case of appealable error is demonstrated. This is so because an appeal cannot succeed in the absence of appealable error. 12

[17] Mr Khayam advances two principal grounds of appeal.

Ground of appeal 1: No dismissal at the initiative of the employer

[18] First, he contends that the Commissioner erred in finding that he was not dismissed by Navitas for the purposes of sections 385(a) and 386(1)(a) of the FW Act. These provisions confine the concept of dismissal, for the purposes of the unfair dismissal provisions, to termination of employment at the initiative of the employer.

[19] In this regard, Mr Khayam submits that the Commissioner erred in relying on the decision in Lunn, which it contends was either wrong when it was decided or, in the alternative, is not applicable to the provisions of the FW Act.

[20] In Lunn, a Full Bench of the Australian Industrial Relations Commission considered a jurisdictional objection to an unfair dismissal application involving a series of ‘outer limits’ contracts spanning nearly 7 years. Shortly before the specified end date of the final contract, Ms Lunn was advised that she would not be offered a new contract. The Full Bench concluded:

‘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.’ 13

[21] Mr Khayam submits that the Commissioner should have determined whether Mr Khayam's employment had been terminated on the employer's initiative by asking what, as a matter of practical reality, brought about the end of the employment relationship.

[22] This submission adopts the reasoning of Vice President Hatcher in the decision of Jin. In that decision, the Vice President considered Lunn to be binding on him and followed it. However, he expressed a number of concerns with the reasoning of Lunn and its applicability to the FW Act. He stated:

‘[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)).’

[23] The Vice President’s decision goes on to address the three matters of concern. These passages are set out in the decision of Commissioner Hunt 14 and we do not reproduce them here. They are conveniently summarised in Mr Khayam’s submissions on permission to appeal.15

[24] First, Mr Khayam says that the approach in Lunn would render the specific exclusion of persons employed under a contract for a specified period in s386(2)(a) redundant. It will be recalled that under s.386(1)(a), a person is ‘dismissed’ only if the person’s employment has been terminated ‘on the employer’s initiative.’ Section 386(2)(a) then provides that a person has not been ‘dismissed’ if (among other things) the person is employed on a contract for a specified period of time, and the employment has terminated at the end of that period. Mr Khayam contends that, if the approach in Lunn is correct, s.386(2)(a) is simply not necessary.

[25] Secondly, Mr Khayam contends that the approach in Lunn wrongly focuses upon whether the employment contract was terminated on the employer’s initiative, rather than the employment relationship. Section s386(1)(a) refers to ‘termination of employment’, not termination of the contract of employment. On Mr Khayam’s argument, the reference to employment should be understood as referring to the employment relationship.

[26] Thirdly, Mr Khayam submits that the approach in Lunn presents serious difficulties in relation to the application of the unfair dismissal provisions in the FW Act to casual employment. Under the Act, casual employees have access to unfair dismissal remedies if their employment as a casual was on a regular and systematic basis. 16 However, the approach in Lunn would seem to have the effect of preventing such casuals from bringing unfair dismissal claims, because their contracts are not terminated at the employer’s initiative. At common law, each day’s engagement of a casual ordinarily stands as a separate contract. It terminates at the end of the day, much like a contract for a specified period. This is said to make the approach in Lunn incompatible with the FW Act.

[27] Mr Khayam contends that the proper approach is that identified by Hatcher VP in Jin, namely, 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. 17

[28] According to Mr Khayam, if the approach proposed by Hatcher VP in Jin had been adopted by the Commissioner, it would have led to a finding that his employment had been terminated at the initiative of the employer. He says that Navitas implemented a series of “outer limit” fixed term contracts and then made a decision to discontinue the employment in 2016 for performance related reasons. In a practical sense, he contends, Navitas brought an end to the employment relationship.

[29] Navitas’ position was that Mr Khayam agreed in his final contract that his employment would end on 30 June 2016, unless terminated earlier. It contends that, as in Lunn, Mr Khayam’s employment ended by the effluxion of time, not at the initiative of the employer.

[30] The decision in Lunn is a well-established Full Bench authority. A Full Bench of the Commission is not bound by the principle of stare decisis to follow the decision of another Full Bench, however as a matter of policy and sound administration, it generally does so, in the absence of cogent reasons for taking another course. 18 The reconsideration of a Full Bench authority is a serious step that is rarely taken.19

[31] However, we have concluded that Mr Khayam has raised an arguable case of error concerning the application of Lunn to the provisions of the FW Act. In this regard we note that decision concerns the unfair dismissal provisions in the Workplace Relations Act 1996 (Cth), and that the applicability of the reasoning in the decision, as it pertains to the FW Act, has not been the subject of analysis by a Full Bench.

[32] In our opinion, the question raised by the first ground of appeal concerns a matter of importance and general application, namely the approach that is to be taken to the interpretation of s.386(1) of the FW Act.

[33] In our view, it is in the public interest that permission to appeal be granted in relation to the first ground of appeal.

Ground of appeal 2: Alleged purpose to avoid obligations (s386(3))

[34] Mr Khayam’s second ground of appeal contends that, if he was employed on a contract for a ‘specified period of time’ for the purposes of s386(2)(a) (which he does not accept), the Commissioner erred in finding that the anti-avoidance provision in s386(3) was not engaged. Mr Khayam says that the Commissioner erred in not finding that ‘a substantial purpose’ of Navitas employing him on an outer limit contract was to avoid Navitas' obligations under Part 3-2 of the Act. There are several limbs to this ground.

[35] Mr Khayam submits that the Commissioner erroneously approached s386(3) of the Act on the basis that there could only be one substantial purpose for an employer entering into outer limit contracts.

[36] He also contends that the Commissioner wrongly determined that the substantial purpose of Navitas in using the contract was to align employees' employment with the relevant funding programs. His submissions on this point contend that the Commissioner’s conclusions were incompatible with the evidence. In this regard, he submits that: Navitas failed to call evidence from any person involved in the decision to apply outer limit contracts to him; the major part of his work involved a funding program which did not conclude on 30 June 2016; and that the Commissioner found ‘Navitas took comfort in what it considered to be its legal protections in finishing employees up at the end of their employment term.’ 20

[37] Section 386(3) operates as an exception to the position established by s386(2) that a person is not dismissed if they are engaged on a ‘contract of employment for a specified period of time’, and the employment terminates at the end of that period.

[38] Section 386(3) states:

‘Subsection(2) does not apply to a person employed under a contract of a kind referred to in paragraph (2) 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.’ (Emphasis added)

[39] As a preliminary matter, we note that it is not entirely clear exactly what obligations an employer has under Part 3-2. The Part confers on certain employees protection from unfair dismissal, subject to various conditions. Unlike Part 3-1 or Part 6-4 (which relate to general protections, and to additional provisions relating to termination of employment) Part 3-2 for the most part does not impose obligations on employers. Rather, the consequence of an employer not taking account of the various considerations in Part 3-2 in effecting the termination of an employee’s employment is that the Commission may order an unfair dismissal remedy that is binding on the employer. In such a case, an employer would have an obligation under s.405 not to contravene the order. But this is not an obligation that could realistically be avoided by the use of contracts for a specified period.

[40] Section 386(3) is clearly an anti-avoidance provision. Read in the context of s.386 as a whole, it appears to us that it is intended to target an employer’s avoidance of the operation of the Part, rather than obligations that are notionally imposed on employers under it. That is, the intention appears to be that s.386(3) applies if ‘a substantial purpose’ of an employer in using contracts for a specified period is to avoid the operation of the unfair dismissal provisions.

[41] We were not addressed on the question of what s.386(3) means by ‘employer’s obligations’. For the purposes of permission to appeal, it is sufficient for us to find that there is at least an arguable case that the section operates in the way we have just described. This is important, as it seems to us that the second ground of appeal is not tenable unless s.386(3) is read as having this meaning. For present purposes, we proceed on this basis.

[42] We agree with Mr Khayam’s position that, for section s386(3) to be engaged, it is only necessary that avoidance be ‘a substantial purpose’. Mr Khayam contends that the Commissioner erred in her application of the provision by approaching it on the basis that there could only be one substantial purpose for an employer entering into outer limit contracts.

[43] We do not believe that the Commissioner approached the provision in this way.

[44] In stating her conclusion at paragraph 136 of the Decision, the Commissioner said the following:

[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, [with] the substantial purpose to avoid its unfair dismissal obligations to Mr Khayam.

[45] We also note the following passage in the Commissioner’s decision:

[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.

[46] Although the Commissioner used the definite article in these passages, which might suggest that she thought there could only be one substantial purpose, we believe it is clear from the context of the Decision that the Commissioner applied the provision correctly; that is, she consider whether a substantial purpose was avoidance. The following passages of the Decision support this conclusion:

[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

…

[135] 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.’ (Emphasis added)

[47] The Commissioner concluded that in this particular case, ‘the substantial purpose’ of the employer was to align the contracts with the relevant funding. This finding is not incompatible with her conclusion that avoidance was not ‘a substantial purpose’. Her finding in relation to ‘the substantial purpose’ suggests that there was only one substantial purpose in this case. But that does not mean the Commissioner did not consider whether there were more substantial purposes. In fact two substantial purposes appear to have been mooted (each of which could be described as a possible substantial purpose); one of the two was found not to exist (the avoidance purpose).

[48] We do not discern an arguable case that the Commissioner erroneously approached s.386(3) of the FW Act on the basis that there could only be one substantial purpose for an employer entering into outer limit contracts.

[49] As to the contention that the Commissioner’s conclusions concerning the anti-avoidance provision were not supported by the evidence, we have considered Mr Khayam’s contention that Navitas failed to call evidence from any person involved in the decision to apply outer limit contracts to Mr Khayam. However, several witnesses for Navitas gave evidence about the question of funding, and the general practice of aligning contracts with funding. 21

[50] The Commissioner noted in particular the evidence of Mr Vrolyk:

[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.’  22

[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: 

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.

[51] Later in her Decision, the Commissioner stated:

[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.

[52] She then concluded:

[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.

[53] It is important to recall the requirement of s.400(2) that, where an appeal is made on a question of fact from a decision under the unfair dismissal provisions, it must relate to a significant error of fact.

[54] In our opinion, the evidence referred to and the conclusions drawn by the Commissioner do not give rise to an arguable case that she made a significant error of fact in finding that the substantial purpose of using contracts for a specified period was the question of funding, and that avoidance was not a substantial purpose.

[55] We have also considered Mr Khayam’s contention that the major part of his work involved a funding program which did not conclude on 30 June 2016. There was evidence that Mr Khayam had worked on two particular programs, SEEP and AMEP, and that only one of these ended at the time his contract expired. However, the Commissioner’s conclusion was that the substantial purpose of Navitas was to align ‘employees’ employment … to the relevant funding for programs it was operating;’ not that an employee’s employment was aligned to a particular funding project or projects on which that employee was working.

[56] Finally, Mr Khayam contends that the Commissioner’s finding that ‘Navitas took comfort in what it considered to be its legal protections in finishing employees up at the end of their employment term’ is incompatible with her conclusion that the substantial purpose of the contracts was related to funding arrangements. However, the ‘taking of comfort’ is not the same thing as ‘a substantial purpose.’ Again, we do not discern an arguable case of significant error of fact in this connection.

Conclusion

[57] We have concluded that Mr Khayam has established an arguable case of error in relation to the first, but not the second ground of appeal.

[58] In our view, the first ground of appeal raises issues of importance and general application in relation to the question of the approach that should be adopted by the Commission in determining whether there has been a termination of employment at the initiative of the employer, particularly in relation to employees who have been employed on a series of fixed-term or outer limit contracts.

[59] Accordingly, we are satisfied that it is in the public interest to grant permission to appeal in relation to the first ground of appeal. Directions will shortly be issued for the hearing and determination of the appeal.

PRESIDENT

Appearances:

Mr Gibian, for the appellant

Mr Murphy, for the respondent

Hearing details:
2017.
Melbourne
Sydney (video link)
12 July

<Price code C, PR595119>

 1   [2017] FWC 1524, matter number U2016/8466

 2   (2006) 158 IR 410

 3   [2015] FWC 4248 at [80]

 4   See Annexure 10 to Statement of Saeid Khayam, A 369

 5   Annexure 11 to Statement of Saeid Khayam, A 372

 6   Annexure 13 to Statement of Saeid Khayam, A 402

 7   Paragraph [38] of the Decision; Transcript of proceedings before Commissioner Hunt, PN187

⁸ See Coal and Allied v AIRC (2000) 203 CLR 194 at [17] per Gleeson CJ, Gaudron and Hayne JJ

⁹ (2011) 192 FCR 78 at [43]

¹⁰ O’Sullivan v Farrer (1989) 168 CLR 210 per Mason CJ, Brennan, Dawson and Gaudron JJ; applied in Hogan v Hinch (2011) 85 ALJR 398 at [69] per Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ; Coal & Allied Mining Services Pty Ltd v Lawler and others (2011) 192 FCR 78 at [44] to [46]

¹¹ Ibid at [27]

 12   Wan v AIRC (2001) 116 FCR 481 at [30]

 13   At [42]

 14   Paragraph 88 of the Decision

 15   See paragraph 13 of the Appellant’s submissions, and paragraphs 67 to 83 of the decision in Jin

 16   Section 384(2)(a). There must also be a reasonable expectation of continuing employment.

 17   Jin, at [80]; Appellant’s submissions at paragraph 14

 18   [2016] FWCFB 2432 at paragraph 28. See also Cetin v Ripon Pty Ltd (t/as Parkview Hotel), (2003) 127 IR 205 at p. 214. See also Re Queensland v Construction, Forestry, Mining and Energy Union (1998) 86 IR 216

 19   [2016] FWCFB 2432 at paragraph 29. See also Telstra Corporation Ltd v Treloar [2000] FCA 1170; (2000) 102 FCR 595, at paragraph 28; and Australian Nursing Federation v Alcheringa Hostel Inc, (2004) 134 IR 466 at p. 457

 20   Paragraph 131 of the Decision

 21   Ms Macfarlane, Mr Botto, and Mr Vrolyk

 22   Witness statement of Mr Vrolyk at paragraph 13

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