From 6 December 2023, the duration of fixed term employment contracts will be limited due to amendments to the Fair Work Act 2009 (Cth) (Fair Work Act).
This post explains the changes, the reasons for the changes and the risks to employers who breach the provisions of the legislative amendments.
These changes will only apply to contracts entered into after 6 December 2023.
At Mal Ryan & Glen we can help you with employment-related disputes and advice.
What are fixed term contracts?
Fixed term contracts will be limited to a maximum duration of two years, unless an exception applies. This applies to a single contract or the renewal of a contract.
A fixed term contract includes an employment contract:
for a specified period of time;
for a specified task; or
for the duration of a specified season.
Fixed term contracts have been attractive to employers to limit protections connected to unfair dismissal laws as well as entitlements such as minimum termination for employment and redundancy pay.
However, Trade Unions and other employee advocates, as well as the Labour Government have been critical of these contracts for exacerbating job insecurity.
The changes aim to balance the interests of employees and employers by restricting the use of fixed term employment contracts while allowing legitimate commercial use of such contracts.
Employers will no longer be able to employ anyone on a fixed term contract of more than two years’ duration, unless an exception applies. Employers should also be aware that fixed term contracts of less than two years’ duration cannot be extended more than once.
Employers must also give employees engaged on a fixed-term contract a ‘Fixed Term Contract Information Statement’ (FTCIS). The FTCIS will be available to download from the Fair Work Ombudsman’s website from 6 December 2023. It must be provided to employees before they start employment, or as soon as possible after.
The new limitations on fixed term contracts don’t apply for the following exceptions:
Specialised skills: A contract to work on a specific task that requires specialised skills.
Training arrangements: A contract of employment in relation to an arrangement for the training of an employee under state or territory law, such as an apprenticeship.
Essential work: A contract for performing essential work during a peak demand period.
Emergency circumstances or temporary absences: Working in emergency circumstances or temporary replacement of an employee. For example, for an employee who has gone on an extended sabbatical.
High-income employees: Where a person earns more than the high-income threshold for a full-time employee (pro-rata for part-time employees).
Government funded contracts: Work that is funded by the government for more than 2 years and where the funding is unlikely to be renewed afterwards.
Governance positions: Contracts for a governance position that is for a limited time.
Award provisions: An award may allow for different fixed-term contract options.
Legal issues for employers who breach the new legislation
Employers who do not give employees on a fixed term contract a FTCIS risk civil penalties. These are monetary penalties that may be awarded by the court for contraventions of the Fair Work Act.
Where an employer does engage an employee on a fixed term contract of more than two years, the contract will be valid except for the term specifying the expiration of the contract, which will be void and unenforceable. This will have the effect of making the contract an indefinite contract of employment.
The Fair Work Ombudsman is responsible for education and enforcement of the breaches of the Fair Work Act. The Fair Work Ombudsman may investigate and commence court proceedings for non-compliance with the Fair Work Act.
From 6 December 2023, the Fair Work Commission will be able to hear disputes about fixed term contracts.
Employers who engage in behaviour intended to avoid the new restrictions will be exposed to General Protections claims under anti-avoidance provisions.
The new changes will require many employers to re-think their hiring practices.
This can be complex and employers should consider legal advice if they regularly use fixed term contracts.
At Mal Ryan & Glen, we take a commercial approach to assisting you with your business operations. Contact us by making an enquiry or by email or phone.
This article is general in nature. It does not constitute legal advice and should not be taken as such.