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Limebite 08/23

Changes to fixed-term contract provisions

Sarah Wood

 From 6 December 2023, new provisions in the Fair Work Act 2009 (Cth) made by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) will come into force, severely limiting the use of fixed-term employment contracts..

These new provisions will apply to fixed-term contracts entered into on or after 6 December 2023 and will also apply to contracts entered into before 6 December 2023, if the contract is one of a number of ‘consecutive contracts’.

A fixed-term contract is a contract of employment that provides the contract will terminate at the end of an identifiable period, even if the contract includes other provisions for early termination.

The new fixed-term contract prohibitions

From 6 December 2023, the legislation will prohibit fixed-term employment contracts that:

  • contain a fixed term of two years or more;
  • are renewable and the total sum of all of the renewed contracts is more than two years;
  • contain an option or right to extend or renew the contract more than once; and
  • contracts that are a series of contracts previously and contemplated in the future.

The exceptions

A fixed-term contract will not be prohibited where:

  • the employee is engaged to perform only a distinct and identifiable task involving specialised skills;
  • the employee is engaged in relation to a training arrangement
  • the employee is engaged to undertake essential work during a peak demand period; or
  • the employee is engaged to undertake work during emergency circumstances or during a temporary absence of another employee;
  • in the year the contract is entered into the amount of the employee’s earnings under the contract is above the high income threshold for that year;
  • the contract relates to a position for the performance of work that:
    • is funded in whole or in part by government funding or funding of a kind prescribed by the regulations;
    • the funding is for a period of more than 2 years; and
    • there are no reasonable prospects that the funding will be renewed after the end of that period;
  • the contract relates to a governance position that has a time limit under the governing rules of a corporation or association of persons;
  • a modern award that covers the employee includes terms that permits a fixed-term arrangement; or
  • the contract is of a kind prescribed by the regulations.

Should an employer rely on an exception, this should be stated within the terms of the contract, and the basis on which the exemption applies.

There are no exceptions for not-for-profits At this stage, there are no exemptions for fixed-term roles which are funded by donations or grants. This is likely to affect organisations in the charity and not-for-profit sector.

Anti-avoidance provisions

The legislation prohibits employers from trying to get around prohibited fixed-term contracts by:

  • terminating an employee’s employment for a period;
  • delay re‑engaging an employee for a period;
  • not re‑engage an employee and instead engaging another person to perform the same, or substantially similar, work;
  • change the nature of the work or tasks the employee is required to perform; or
  • otherwise alter an employment relationship.

Fixed Term Contract Information Statement

Employers must provide new employees before, or as soon as practicable after, the contract is entered into, a Fixed Term Contract Information Statement.

Failure to do this may expose an employer to civil penalties.

Next steps for employers

Prior to 6 December 2023, employers should review the contracts of its employees who are on fixed-term contracts and determine:

  • if contract that is 2 years or greater;
  • if the contract contains a term that provides an option to extend or renew the contract;
  • whether the contract is one or expected to be one in a series of contracts; and
  • if any exceptions could apply.

If you think these changes may affect your organisation, Gilchrist Connell is available to assist with any enquiries.

This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.