Legal Insights

When employment is more than a contract:
another example

By Ross Jackson

• 09 August 2023 • 6 min read
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It is now settled law that when the Fair Work Act (FW Act) speaks of termination of employment, it is referring to the relationship of employer and employee, rather than any particular contract which may operate within that relationship from time to time.

A well-known example was Khayam v Navitas English Pty Ltd [2017] FWCFB 5162, in which a Full Bench of the Fair Work Commission confirmed that in the context of a maximum term contract’s expiry, the employment relationship may well continue, despite that particular contract having come to an end. The question in such cases, when determining whether the employee has access to unfair dismissal and other remedies, is whether the employment relationship has been terminated and if so, was this pre-agreed or if not, is it at the employer's initiative.

Employers can find this confusing. True it is that every employment relationship is contractual, whether the terms are written, verbal or implied. But the contract is not the full story.

Importantly, as illustrated by a recent decision of the Fair Work Commission, the employment relationship might have commenced before a new employee has actually started work.

In this case, as is common, a contract is established before the employee commences to perform that contract. What if the employer has second thoughts? Is there an employment relationship already from which the employee must be terminated, thus giving them potential access to the general protections provisions of the FW Act?

In Argentier v City Perfume Retail Pty Ltd [2023] FWC 1819, a decision of Deputy President Roberts, the question was whether Ms Argentier was 'dismissed' for the purposes of bringing a general protections claim involving dismissal under s 365 of the FW Act.

Ms Argentier was offered employment as a casual 'fragrance brand ambassador' on 6 April 2023. She was sent onboarding forms to fill out and activate a work-related app account. However, she wasn't due to start her first shift until 20 April 2023, though she was available from 18 April 2023 onwards.

Importantly, her new employer notified her on 11 April 2023 of training for new starters on 19 April 2023. By then, she had filled out all her onboarding forms, although she didn’t sign and return her contract until 12 April 2023.

On 17 April 2023, she asked whether the training session scheduled for 19 April (prior to her first scheduled shift) was to be paid. She was told it would not be. In reply, she indicated that if that were so, she would not be attending (being of the belief, as her later correspondence indicated, that mandatory training should have been paid).

Once she indicated she would not be attending, within a couple of hours, the employer messaged her it had 'decided to withdraw the brand ambassador role at this stage from the market'. This was on 18 April, two days before her first scheduled shift.

Ms Argentier contended she was dismissed by the message she received on 18 April. Accordingly, she brought an 'adverse action' claim, presumably on the basis that the reasons for her dismissal included prohibited ones, such as her exercising her workplace right to make an enquiry about her employment (such as whether the training would be paid). The employer argued she could not have been dismissed because her employment had not actually commenced.

The Commission held, following Navitas, that the employment relationship is to be distinguished from any particular contract existing within that relationship.

Whether an employment relationship exists at any point in time is a question of fact. In this instance, the Commission found that Ms Argentier and City Perfume Retail Pty Ltd were indeed in an employment relationship. The contract specified that it was 'made' on 6 April 2023, but 'commenced' on 18 April 2023. It specifically referenced that it recorded the conditions of the employment relationship established by the agreement and that the agreement itself will create "the relationship of employer and employee between them". In addition, Ms Argentier had done her onboarding paperwork, downloaded the required work app, and there were no contractual conditions yet to be fulfilled (typically, Working with Children checks or the like).

Just because she was not available to be allocated shifts until 18 April did not mean an employment relationship had not come into existence. One had, and therefore it was possible for Ms Argentier to be dismissed from it – and this is what occurred on 18 April 2023. She had been allocated her first shift for 20 April 2023, and this was now cancelled. The Commission's view was that despite each shift being a separate engagement for the purposes of casual employment, this action was sufficient to terminate the employment relationship, and this was done by the employer advising that the role had 'been withdrawn'.

Lessons to be learnt

It is clear from this case, and other cases such as Navitas and Kelly v Melbourne Support Services Australia Ltd (2021) FWCFB 845, that the employment relationship is to be distinguished from contracts that may exist from time to time within that relationship.

It is possible for parties to specifically agree that the employment relationship comes to an end when the contract comes to an end, or conversely that no employment relationship is created until work is performed and a right to wages in return is thereby created. Absent evidence of a sham or other circumstances negating the effect of such a clause, it should be effective to do what it says.

Whilst employees will not have access to unfair dismissal remedies during their minimum employment period (either six months or 12 months for a small business) all employees, including casuals, have access to the Fair Work Act's general protections provisions from as soon as the employment relationship is established. It is an interesting question as to whether the issue would have even arisen if Ms Argentier had framed her application as a non-dismissal dispute because it is often forgotten that general protections are available to prospective employees against a prospective employer under section 342 of the Fair Work Act.

The moral of the story remains – be aware that 'termination', whether in the context of general protections or unfair dismissal claims or in the context (for example) of NES entitlements to minimum periods of notice or pay in lieu, refers to the termination of the employment relationship rather than of a particular contract, even though in many cases the termination of the contract may well terminate the relationship.

As always when it doubt, given these liabilities turn on the facts of each case, seek advice.

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By Ross Jackson

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