From 6 December 2023, new laws will commence under the Fair Work Act 2009 (Cth) (‘FW Act’) limiting the use of fixed-term contracts with an ‘identifiable end date’ of more than two years. The use of fixed-term contracts for the same role (or substantially similar work) will be limited to two consecutive contracts or a maximum duration of two years, whichever is shorter, subject to specified exceptions.
There are penalties applicable to employers who fail to comply with these new obligations. Further, any term of a contract that is in breach of the new laws will be taken to have no effect. As previously reported these changes will have a significant impact on employers going forward.
Contracts that have the option to renew for a further term and the combined total of the contract exceeds two years will also be captured by the new restrictions.
This upcoming change is part of the government’s effort to minimise both insecure work and job insecurity.
What is changing?
Fixed-term contracts that are entered into on or after 6 December 2023 will be affected by the upcoming restrictions. These contracts will need to factor in any previous fixed-term contracts and include them towards the prescribed two-year limitation.
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 more 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 same or substantially similar work is being performed across these contracts, and these contracts demonstrate substantial continuity of the employment relationship).
The new restrictions will not apply where a fixed-term contract:
- covers an employee hired for a distinct and identifiable task requiring specialised skills;
- covers a training agreement (ie. apprenticeship or traineeship);
- covers a position entirely or partially funded by government funding payable for a period of two or more years with no reasonable prospect of renewal;
- covers the undertaking of work during emergency circumstances or during an employee’s temporary absence (ie. maternity leave backfills);
- for a time-limited governance position under the governing rules of a corporation or association of persons.
Other exceptions apply on an individual basis, such as those earning above the high-income threshold (currently $167,500 p.a. full-time), or more generally, such as when a contemporary award permits fixed-term contracts.
Fixed-term Contract Information Statement
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.
Fair Work Commission powers
The Fair Work Commission will conciliate, and if necessary, arbitrate, disputes regarding the operation of the fixed-term rules. Where a fixed-term contract breaches the new restrictions, the employee will be considered a permanent employee, and the employment contract will continue as if the fixed termination date has no effect.
Further, employers can be liable to severe monetary penalties for breaches of the new prohibitions. Anti-avoidance rules will also be applicable, and employers can be penalised for taking measures to avoid the effect of the fixed-term restrictions.
For social and community services sector employers
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 (when made available);
- Ensure the reasons for engaging an employee on a fixed-term contract are clearly documented, particularly in the case of second fixed-term contracts.
This information is provided by Jobs Australia to assist Members with awareness of commencement dates for amendments to the Fair Work Act 2009 (cth) throughout 2023.