The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 passed on 6 December 2022 (Amendment Act) which overhauled workplace and industrial relations laws in Australia.
One of the final components of the Amendment Act introduces limitations on the use of fixed/maximum term contracts into the Fair Work Act 2009 (cth) (the Act). Both fixed and maximum term contracts are employment contracts which automatically terminate on a set date (maximum term contracts also allow termination before that set date) (referred to herein as Fixed/Max Term Contracts).
The amendments to Fixed/Max Term Contracts come into effect today (6 December 2023).
The Limitations
Subject to the exemptions noted below, the following limitations now apply under section 333E of the Act:
- A Fixed/Max Term Contract cannot be for longer than two years, this includes extensions and renewals.
- Fixed/Max Term Contracts are prohibited from including options to:
- (i) Extend or renew the contract so that the total period of employment (including renewal/extension) is longer than 2 years; or
- (ii) Extend or renew a contract more than once.
- Consecutive contracts for an employee to perform the same, or substantially the same work for the same employer, which are for longer than two years or contain an option as set out at (b) above, are prohibited.
The new provisions focus on whether there has been a ‘continuity of the employment relationship’ between a new Fixed/Max Term Contract and any previous contract.
Exemptions
Section 333F of the Act details exceptions to the limitations outlined in section 333E as follows:
- Employees engaged under a training arrangement such as an apprenticeship;
- Contracts for employees working on a specified task requiring specialised skills;
- Contracts for performing essential work during a peak demand period;
- Employees temporarily replacing another employee or for work performed in emergency circumstances;
- Employees paid above the high-income threshold (currently $167,500);
- Contracts where the position is government funded, where the funding is for a period of more than 2 years, and there are no reasonable prospects that the funding will be renewed;
- Contracts for governance positions that are for a limited time; and
- Contracts that fall under an Awards with provisions for different fixed term contract options.
On 23 November 2023, the Fair Work Amendment (Fixed Term Contract) Regulations 2023 were introduced which delay the application of the above limitations until 1 July 2024 for:
- Organised sport: Contracts between specifically identified sporting bodies and coaches, athletes, performance sport professionals, etc;
- Live performance industry employees;
- Higher education employees;
- Non-government funded charities; and
- Non-government funded not-for-profit organisations.
Other changes
Employers engaging employees on Fixed/Max Term Contract will now also be required to provide them with a ‘Fixed Term Contract Information Statement’ (FTCIS). The FTCIS can be downloaded from the Fair Work Commission’s website.
From today, the Fair Work Commission will also be able to hear disputes about Fixed/Max Term Contracts, where the contract was entered into on or after 6 December 2023.
Moving Forward
Any existing Fixed/Max Term Contracts entered into before 6 December 2023 will continue to operate.
Any Fixed/Max Term Contracts entered into after 6 December 2023, (including the renewal of a Fixed/Max Term Contract) which are not compliant with the limitations will be invalid to the extent that the contract is does not comply with the limitations. The remainder of the contract will remain valid.
What Employers Need to Do
These provisions are civil penalty provisions and as such civil penalties may be ordered if the provisions are breached (up to $93,900.00 for corporations). Employers should:
- Review all current contracts to identify any employees engaged under the terms of a Fixed/Max Term Contracts, and those with options to renew;
- Carefully consider whether any Fixed/Max Term Contract to be entered into is for a substantially similar position to any previous Fixed/Max Term Contract;
- Seek advice before relying on any of the exemptions set out in the Act.
If you are unsure whether these limitations apply to you or what changes you need to make, please contact Nicole Dunn Lawyers on (02) 9058 4930 or at office@ndlaw.com.au.
Written by Alisar Tawil, Kate Barter and Nicole Dunn