Fixed Term Contracts

Changes are happening to fixed-term contracts. Another significant modification to the Fair Work Act 2009 (Cth) (FW Act), brought about by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 enacted by the Federal Government, revolves around employers’ capacity to excessively utilise fixed-term employment agreements. This will come into effect in December 2023. 

These alterations arise from the notion that recurrent or continuous fixed-term contracts fail to provide job security. 

Secure Jobs, Better Pay legislation changes that relate to Fixed Term Contracts: 

Before we go into the finer details, let’s look at the following first.

Changes will come into effect in December 2023

A Recap: What Constitutes a Fixed-Term Contract?  

A fixed-term contract stipulates that employment will terminate, as mutually agreed, upon the conclusion of a definite time period. 

Certain fixed-term contracts do not stipulate any notice period. Conversely, other fixed-term contracts bestow the right to terminate the contract with prior notification before the agreed-upon culmination date. These contracts are occasionally denoted as “maximum-term” or “outer limits” contracts. 

Regardless of whether a contract incorporates a notice period, there has been minimal to no regulation of fixed-term contract utilisation under the FW Act. Most employers and employees have enjoyed the liberty to repeatedly engage in such arrangements, often without apprehension of repercussions or constraints. 

A particular risk has been the sequential employment of consecutive fixed-term contracts. The more these contracts persist, the riskier it is for an employer to rely solely on the contract’s end date to end the employment relationship. In such cases, the employer could still be accused of “dismissal,” making them susceptible to claims of unfair dismissal under the FW Act.

Breaching these new regulations will carry consequences for employers

What’s in Transition?  

Upon the commencement of the FW Act amendments (with certain restricted exceptions), it will be deemed unlawful for an employer to enter into a fixed-term employment agreement in various situations, specifically when the fixed-term contract: 

Similarly, it will be unlawful for the parties involved to consecutively execute a series of fixed-term contracts in scenarios where: 

Breaching these new regulations carries two consequences for employers: 

These new  regulations also comprise anti-avoidance provisions that prohibit employers from circumventing these prohibitions. For instance, it will be illegal for employers to terminate an employee, postpone re-engagement, enlist another individual for comparable work, or alter the nature of assigned tasks to avoid this new legislation.  

Furthermore, employers are required to provide new employees with a prescribed Fixed Term Contract Information Statement. This will be available closer to the implementation ate. Failure to fulfill this obligation will lead to civil penalties and would also be considered illegal. 

Do Exceptions Exist? 

Indeed, several exceptions; however, there is not much room for negotiation.  

Among the most notable exceptions are circumstances where the employee is engaged: 

While there are other exceptions, the main goal is to discourage employers from using fixed-term contracts for workforce management, except in limited cases. The emphasis is on permanent, secure employment, with fixed-term contracts primarily for short-term arrangements or high-earning senior employees.

Why Does This Matter?

Employers found in violation of these new statutes will face civil penalties. In the case of a deems  “serious contravention of the Fair Work Act,” the maximum penalty increases significantly. 

Moreover, if a contract doesn’t meet these laws, the fixed-term duration becomes invalid and unenforceable. Essentially, the contract remains in force beyond the specified term. This allows employees to use its terms and conditions even after the unlawful fixed-term period ends.

How Can Employers Prepare for These Changes?  

To brace for these impending changes, employers should: 

This could seem too much for businesses, but of course, we are here to help. Reach out to our team now or email [email protected] for expert advice and guidance on fixed-term contracts.

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