As outlined in our previous blog discussing the amendments to the Fair Work Act 2009 (Cth) following the enactment of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the Act) (see: Changes to the Fair Work Act blog), new rules concerning the engagement of employees on fixed-term contracts have been implemented since 6 December 2023.
A fixed-term contract terminates at the end of a predetermined period, such as a specific date or after a designated period. Employees engaged under fixed-term contracts, whether on a full-time or part-time basis, are entitled to similar conditions and entitlements as permanent employees, including leave entitlements. However, typically, fixed-term employees are not entitled to notice of termination or redundancy if their employment ends upon the contract expiration, nor are they usually eligible for unfair dismissal if the employment finishes because of the end of the contracted period.
The new rules also impose restrictions on how fixed-term contracts can be used. In summary, from 6 December 2023, employers are prohibited from entering into fixed-term contracts that:
Exceed a duration of 2 years, including any extensions or renewals;
Contain more than one extension option, including for a period longer than 2 years; or
Involve consecutive contracts fixed-term contracts.
Exceptions to these exist limitations, including situations where:
Specialised skills are required for a specific task.
The contract is part of a formal training arrangement combining work with study for a qualification.
The work is deemed essential during a peak demand period.
Temporary replacement of an employee
The employee’s guaranteed salary is more than the high-income threshold in the year the contract is entered.
The contract is for a governance position with a limited time (based on the rules of the corporation or association).
The employment is governed by an award that allows any of the circumstances restricted by the new rules.
These rules apply to new contracts entered into after 6 December 2023. However, fixed-term contracts entered into before this date must be evaluated when considering the consecutive contracts limitation.
Employers are also obligated to provide any employees engaged under a new fixed-term contract with a Fixed-Term Contract Information Statement (see: Fixed-Term Statement). This statement must be furnished upon commencement of the contract or promptly thereafter.
Failure to comply with the rules may render the end date specified in the contract invalid, resulting in the contract not automatically terminating. This does not affect the validity of other terms within the contract. Breaching these limitations may lead to civil penalties for individuals or companies.
Disputes regarding the application of these limitations or exceptions should initially be addressed at the local level, with escalation to the Fair Work Commission available if resolution cannot be achieved. The Fair Work Commission may resolve disputes through various methods, including mediation, conciliation, or arbitration. Furthermore, to prevent employers from circumventing these rules, anti-avoidance measures are in place. Engaging in actions to evade these rules may constitute adverse action, and if found, civil penalties may apply.
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