Fixed-term contracts

Background

The Secure Jobs, Better Pay Act amends the FW Act to include new obligations in respect of fixed-term employment contracts. Generally speaking, the new provisions limit the use of fixed-term contracts to a period of two years (with several exceptions). "Fixed-term employment contract" encompasses true fixed-term contracts (i.e. contracts that contain a term that ends the employment after a certain period and cannot be terminated at an earlier date) as well as maximum-term contracts (i.e. contracts that may be terminated on notice prior to the expiry of the term).

What's changing?

The amendments apply only in relation to new fixed-term employment contracts. However, previous fixed-term contracts will be relevant where the previous and new contracts together constitute consecutive contracts within the meaning of the new provisions.

A fixed-term contract will effectively be prohibited in circumstances where:

• an employer enters a contract of employment with an employee; and
• the contract has a stated termination date; and
• the employee is not a casual employee; and
• any of the following apply:
  • the contract is for greater than two years; or
  • the contract is renewable either for a period greater than two years or can be extended or renewed more than once; or
  • prescribed "consecutive contracts" criteria are satisfied (eg. the work to be performed across these contracts is the same or substantially similar, and there is substantial continuity of the employment relationship between these contracts).

Some exceptions apply. The new restrictions will not apply where a fixed-term contract:

• is for the performance only of a distinct and identifiable task using specialised skills;
• relates to a training agreement (ie. apprenticeship or traineeship);
• relates to an employee earning more than the high-income threshold (currently $162,000 per annum full-time - but this is expected to increase in July);
• is for the undertaking of essential work during a peak demand period;
• is for the undertaking of work during emergency circumstances or during a temporary absence of another employee (eg. a parental leave backfill);
• falls under prescribed government funding exceptions;
• relates to a governance position that has a time limit under the governing rules of a corporation or association of persons; or
• where a modern award permits the term.

Employers will also be required to provide to new employees before, or as soon as practicable after, entering into a fixed-term contract a new Fixed Term Contract Information Statement, to be drafted by the Fair Work Ombudsman.

The Fair Work Commission will have the ability to conciliate or, if both parties agree, arbitrate disputes in relation to fixed-term contracts.

Employers who fail to comply with these new obligations may be required to pay penalties.

Actions

Before 6 December 2023

• Review the manner in which you are utilising fixed-term employees.
• Update standard form contracts to amend fixed-term clauses.
• Identify any relevant exceptions that apply to your organisation, and prepare and implement guidelines and controls for when fixed-term contracts can be offered and when they expire.

After 6 December 2023

• Ensure fixed-term employees are provided a Fixed Term Contract Information Statement upon commencement. Ensure the reasons for engaging an employee on a fixed-term contract are clearly documented, particularly in the case of second fixed-term contracts.

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