The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 signifies the most substantial changes to the Fair Work Act 2009 (‘the FWA’) since the Act’s introduction.
According to Tony Burke, the Minister for Industrial Relations, regulating fixed term contracts is integral because:
- the number of workers on fixed term contracts has increased by over 50% since 1998;
- more than half of employees engaged on fixed term contracts are women; and
- more than 40% of fixed term employees have been with their employer for two or more years.[1]
Limitations to Fixed Term Contracts
The amendments to the FWA that affect fixed term contracts are scheduled to commence on 6 December 2023 (unless an earlier date is fixed by proclamation).
Fixed-term contracts will not be fixed term (and will instead be permanent) if:
- the employer enters a contract of employment with an employee; and
- the contract will terminate at the end of an identifiable period; and
- the employee is not a casual employee; and
- any of the below apply:
- the contract is for greater than two years;
- the sum of the period that the contract may be extended or renewed is greater than 2 years;
- the contract provides the option or right to extend the contract more than once; or
- the contract comes into effect after another contract between the employer and the employee and certain circumstances apply such as that the sum of the previous contract and the identifiable period in the current contract is greater than 2 years or the current contract contains an option for renewal or extension.
By entering into one of these prohibited contracts, an employer is contravening a civil remedy provision of the Fair Work Act 2009 and may be subject to financial penalties.
Exceptions to Limitations
However, if a contract meets the above criteria, it can still be ‘fixed term’ if any of the following apply:
- the employee is engaged under the contract to perform only a distinct and identifiable task involving specialised skills;
- the employee is engaged under the contract in relation to a training arrangement;
- the employee is engaged under the contract to undertake essential work during a peak demand period;
- the employee is engaged under the contract to undertake work during emergency circumstances or during the 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 by the government, the funding is payable for more than 2 years and there is no reasonable prospect 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;
- the modern award which covers the employee includes terms that permit any of the circumstances mentioned in the limitations on fixed contracts to occur; or
- the contract is of the kind prescribed by the Fair Work Regulations 2009 – at the time of writing this article the regulations do not add any further exceptions.
Anti-Avoidance
The Bill also inserts anti-avoidance provisions, which prevent employers from avoiding limitations imposed on fixed term contracts. Prevention tactics include:
- terminating an employee’s employment for a period;
- delaying re-engaging an employee for a period;
- engaging another person to perform the same, or substantially similar work for the person as the employee had performed;
- changing the nature of work or task the employee is required to perform for the person; or
- otherwise altering the employment relationship.
Fixed Term Contract Information Statement
The Fair Work Ombudsman will prepare a Fixed Term Contract Information Statement – this must be given to each new fixed-term employee.
It is important that employers who use fixed term contracts are aware of the limitations and implications of these new laws on their practice.
For all employment related queries or concerns, please contact our Employment Law & Investigations Team at BAL Lawyers.
