On 2 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (Cth) passed both houses of Parliament and is now law. Many of the changes will impact a range of workplaces.
One of those changes is the regulation of fixed term contracts. This will be a new set of statutory requirements which may catch a few employers off guard. In a last-minute reprieve, Workplace Relations Minister, Tony Burke, confirmed this week that those fixed term rules will not commence for 12 months. The rules will commence on 7 December 2023 (day after 12 months following royal assent). This gives employers time to get their contractual arrangements in order to ensure compliance.
What are the new fixed term rules?
The new provisions make it an offence, subject to some exceptions, for an employer to enter into a fixed term contract with an employee:
- for a period that exceeds two years;
- that allows the contract to be extended or renewed for a period that exceeds two years;
- that provides for an option or right to extend or renew the contract more than once; or
- where the contract continues the same, or substantially similar, employment relationship and work duties as a previous fixed term contract, and:
- the contract and previous fixed term contract exceed two years in length;
- the contract or previous fixed term contract contains a right of renewal or extension; or
- the employee has previously been engaged under two consecutive fixed term contracts.
Additionally, it will be an offence for an employer to take any action for the purpose of avoiding any of the limitations listed above.
Exceptions
There are a range of exceptions to the rules above including where:
- the employee has specialised skills that the employer does not have, but needs, to complete a specific task;
- the employee is engaged as part of a training arrangement;
- the employer needs additional workers to do essential work during a peak period;
- the employer needs additional staff members during an emergency, or needs to replace a permanent employee who is absent for personal or other reasons;
- the employee earns over the high income threshold (being $162,000 as at the date of publication of this article) for the first year of the contract;
- the employer is reliant on government funding to directly finance the employee’s position and there are no reasonable prospects that the funding will be renewed;
- the employee is appointed under governance rules of a corporation or other association (such as a Constitution for a company or Rules of Association for an incorporated association) and those rules specify a length of time that the appointment can be in place (such as a term of office of three years); or
- the employer is permitted to enter into the fixed term contract by a term specified in a modern award that covers the employee.
Consequences for fixed term contracts
If an employer enters into a fixed term contract with an employee that contravenes any of the limitations listed above:
- the ‘expiry mechanism’ will be considered invalid; and
- all other terms in the contract will remain valid.
In effect, the contract will be an ongoing contract which is subject to the usual termination rules in any applicable industrial instrument and legislation. Remedies such as those available through the unfair dismissal framework in the legislation could also be available.
What does this mean for employers?
If fixed term contracts are part of the employment arrangements with some or all employees, employers are on notice that some arrangements may not be permitted once the rules take effect. Now is the time to review and assess if exceptions will apply that permit the ongoing use of fixed term contracts or whether those arrangements will need to be transitioned sooner rather than later.
Any option will need to be considered carefully alongside the terms of any applicable modern award(s) that covers affected employees (among any other applicable exceptions listed above) and tailored to the operational needs of employers.
How we can help
Our Workplace Relations team can assist you to review your existing fixed term contracts of employment and develop a pathway forward before the relevant legislative changes take effect, including by preparing new contracts of employment for affected employees.
Contact us
Please contact us for more detailed and tailored help.
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