04 December 2023
From 6 December 2023, the restrictions on fixed term employment contracts set out in the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Amending Act) come into effect. In a nutshell, the Amending Act limits the ability of employers to utilise fixed term contracts for periods greater than two years (with limited exceptions). Non-compliance with the obligations imposed by the Amending Act may result in the automatic conversion of employees from fixed term contracts to permanent contracts in certain circumstances.
Employers can prepare for the amendments by:
A fixed term contract is defined in the Amending Act as a contract that terminates at the end of an identifiable period, regardless of whether the contract includes other terms that provide circumstances for it to be terminated earlier. This is drafted to include both fixed term contracts and maximum term contracts.
The Amending Act imposes a suite of limitations upon employers entering fixed term contracts, they are:
The Amending Act contains anti-avoidance provisions which prohibit employers from taking actions to circumvent the new restrictions, including:
Under the Amending Act, employers will also be required to provide employees engaged on fixed term contracts with a Fixed Term Contract Information Statement (FTCIS), which the Fair Work Ombudsman will provide from 6 December 2023. Employers are obliged to give employees the FTCIS before their employment or as soon as possible after they commence.
If an employer fails to adhere to the limitations and an exemption does not apply, the term of the contract which imposes the ‘fixed term’ will be rendered inoperable and will have no effect. The rest of the contract will remain valid. This means that effectively, fixed term employees will be converted to and considered to be permanent employees in accordance with the Amending Act.
A range of exceptions apply to the restrictions imposed by the Amending Act. The new restrictions will not apply if the employee is:
On 23 November 2023, the Minister for Employment and Workplace Relations released the Fair Work Amendment (Fixed Term Contracts) Regulations 2023 (Regulations). The Regulations delay the commencement of the limitations of fixed term contracts for certain industries. Further, the Regulations clarifies how to calculate the high-income threshold exception if an employee works less than full-time hours or for only part of the year.
If you have any questions or wish to discuss what the changes mean for your organisation, please get in touch with our team.
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.