2 min read

Terminating a fixed-term contract that has an option to extend

The Case

Crawford v Steadmark Pty Ltd (2015)

Ms Crawford was employed by Steadmark Pty Ltd as a store manager under a fixed-term 6-month contract that provided for an optional period of extension.

Five months into the contract, the managing director, Mr Rosenfeld, told Ms Crawford at a work function that they should meet to discuss her future with Steadmark. As he did so, he rubbed his leg against hers. Ms Crawford told Mr Rosenfeld she would not meet with him alone and ignored him for the rest of the evening.

When Ms Crawford gave Mr Rosenfeld the store’s figures the next day, Mr Rosenfeld was offensive and said, “Thanks very much for that, now that you have ruined my night.”

Ms Crawford complained to her manager, Ms Galina, who said she would discuss the matter with Ms Crawford the next day. Ms Galina never followed up with Ms Crawford.

Ms Crawford was absent from work when she was meant to have a meeting with Ms Galina to discuss whether her contract would be extended. Ms Crawford’s contract expired the next day. The day after that, Ms Galina emailed Ms Crawford informing her the contract would not be extended due to Ms Crawford being “unsuitable”.

Ms Crawford commenced an adverse action claim against Steadmark on the basis that her contract was terminated because she had made a complaint about Mr Rosenfeld. Steadmark claimed the contract was terminated because of Ms Crawford’s performance.

The Verdict

The Federal Circuit Court found that Steadmark’s decision not to extend Ms Crawford’s contract was adverse action based on the fact that Ms Crawford had made a complaint about Mr Rosenfeld. The Court found that the timing of events and the fact that Ms Crawford had never previously been performance managed made it more likely than not that Ms Crawford’s complaint was the “substantive and operative” reason her contract was not extended.

Steadmark agreed that Ms Crawford’s email constituted a workplace complaint, which is a workplace right.

The Court awarded Ms Crawford 6 months’ pay as compensation.

The Lesson

If you have an employee on a fixed-term contract with an option to extend, organise to meet with them before the contract expires. Provide the employee with as much notice as possible whether or not the contract will be extended so they can make other arrangements for work, if necessary. If you leave it until after the contract has expired, the employee may try to argue that the contract has been extended or a new contract has been formed.

Additionally, you should always investigate an employee’s complaints. If you don’t, this can expose you to a number of serious legal risks, such as an adverse action claim, a claim of sexual harassment (in which you are potentially vicariously liable for the alleged misconduct) and unfair dismissal.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.

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