Does Expiry of Fixed-Term Contract Amount to a Termination?

In the recent case of Zurina Othman v Bank Pertanian Malaysia Berhad, Award No 1451 of 2025 [Case no. 4/4-945/24], the Industrial Court reaffirmed a well-established legal principle: where an employee is engaged under a genuine fixed-term contract, the natural expiry of that contract does not constitute as a dismissal under Section 20 of the Industrial Relations Act 1967.

Brief Facts

The dispute involved an employee appointed as Chief Credit Officer (CCO) at the Bank, under a contract clearly specifying a two-year term beginning 6 January 2020 and ending 5 January 2022. Upon completion of the initial term, both parties entered into a second agreement for another two-year period, effective from 7 January 2022 to 6 January 2024.

On 29 November 2023, the Bank notified the employee that her contract would not be extended beyond its expiry date. The employee challenged this decision, alleging that she had been dismissed without just cause or excuse. She argued that her role was effectively permanent and that the use of consecutive fixed-term contracts was a strategy to deny her job permenancy. She further claimed that the non-renewal was linked to her involvement as Chair of the Disciplinary Review Committee, where she had allegedly acted contrary to the Board’s expectations and was subsequently issued a show cause letter.

The Bank contended that the employment had concluded in line with the agreed contractual terms. It highlighted that senior management roles, including C-Suite positions, were governed by fixed-term arrangements due to the Bank’s status as a government-linked corporation (GLC) under the Ministry of Finance.

The Bank contended that the employment had concluded in line with the agreed contractual terms. It highlighted that senior management roles, including C-Suite positions, were governed by fixed-term arrangements due to the Bank’s status as a government-linked corporation (GLC) under the Ministry of Finance.

Industrial Court Findings

Presiding over the matter, the Industrial Court examined whether the employment was genuinely fixed-term. The Industrial Court reviewed both contracts and found them to be clearly worded, with no indication of permanence or automatic renewal. The employee had voluntarily entered into both agreements and accepted the terms, including a notable salary increase in the second term. The Industrial Court noted that the parties’ intention was to engage on a time-bound basis, with renewal being discretionary rather than guaranteed, which is a fact acknowledged by the employee during the trial proceedings.

The Industrial Court also considered the Bank’s conduct throughout the employment period. Each renewal was executed through a new agreement following the expiry of the previous one, reinforcing the non-continuous nature of the engagement. Evidence was accepted that the Bank’s policy for senior roles required fixed-term contracts to promote accountability and enable performance-based assessments.

Regarding the employee’s claim of victimisation, the Court found no substantiated link between the disciplinary proceedings and the decision not to renew her contract. Testimony from the Bank’s witnesses, deemed credible by the Court, confirmed that the non-renewal was consistent with established governance and contractual practices.

Conclusion

The Industrial Court reiterated that determining the nature of employment requires examining the parties’ intent, the employer’s conduct, and the structure of the contract. Where a fixed-term arrangement is found to be genuine, its expiry does not amount to dismissal, and no justification for termination is required. Based on the evidence, the Court concluded that the employee’s contracts were authentic fixed-term agreements, and her employment ended as a matter of course upon the lapse of the second term.

The above decision reinforces the principle that genuine fixed-term contracts, when clearly defined and consistently applied, are legally valid and do not amount to dismissal upon expiry. For HR professionals, this case serves as a reminder to ensure that employment contracts are drafted with precision, especially when engaging senior or C-Suite personnel on time-bound terms.

To mitigate legal risks, HR teams should:

• Ensure that fixed-term contracts explicitly state the duration, renewal terms, and non-permanent nature of the role.
  

• Avoid practices that may suggest continuity or permanence, such as automatic renewals or informal extensions without formal agreements.
  

• Maintain consistent documentation and renewal procedures that reflect the organisation’s intent and policy, particularly in government-linked corporations or regulated sectors.
  

• Communicate clearly with employees about the nature of their engagement and manage expectations around contract renewals.
  

Finally, HR should be cautious when non-renewal decisions coincide with internal disputes or disciplinary matters. While employers retain discretion not to renew fixed-term contracts, transparency and documentation are key to defending against claims of victimisation or unfair treatment. A well-structured contract and a consistent approach to renewals can help HR uphold both legal compliance and organisational integrity.