27 Aug Fixed Term Contracts and the Fair Work Act
Amendments to the Fair Work Act 2009 (Cth) (Act) will come into effect from 6 December 2023 that include provisions on fixed term employments contracts. These include contracts that are expressed to end on a specific date or after a certain period of time.
New Limitations to Fixed Term Contracts
The Act will include penalties for employers that enter a fixed term employment contract that meets one of the conditions set out in the new section 333E.
From 6 December 2023, section 333E of the Act will prohibit an employer from entering into a contract of employment with an employee (other than a casual employee) that includes a term that the contract will terminate at the end of an identifiable period, if:
1. the identifiable period is greater than two years;
2. the sum of the identifiable period and any other period the contract may be extended or renewed is greater than two years;
3. the contract provides an option or right to extend or renew the contract more than once; or
4. the contract comes into effect after another contract of employment between the employer and the employee, where:
a. the previous contract included a term that provided the contract would terminate at the end of an identifiable period;
b. the previous contract was for the employee to perform the same, or similar, work for the employer as required under the current contract;
c. there is substantial continuity of the employment relationship from the previous contract terminating and the current contract commencing; and
d. any of the following apply: the term of the previous contract and the term of the current contract is greater than two years; the current contract includes an option for renewal or extension; the previous contract included an option for extension that was exercised; or, the previous contract came into effect after an initial contract that satisfies 4.a. and 4.b. above and there was substantial continuity of the employment relationship during the period between the initial contract terminating and previous contract commencing.
Effective of Contraventions
In addition to potential penalties, the Act will include an interesting provision where an employer and employee enter a fixed term contract that is not permitted.
The new section 333G of the Act includes that, if a person enters into a contract of employment with an employee in contravention of section 333E(1), the term of the contract that provides it will terminate at the end of the identifiable period will have no effect, but the contravention is taken not to affect the validity of any other term of the contract. This means that the contract would continue to apply, except that it will not end at the expiry date.
Exceptions
There will be some limited exceptions to the prohibition on entering fixed term contracts in section 333E of the Act. Examples of some of these exceptions include:
1. where the employee is engaged under the contract to perform only a distinct and identifiable task involving specialised skills;
2. the employee is engaged under the contract in relation to a training arrangement, for example, an apprenticeship;
3. if the employee’s earnings under the contract the year it is entered into are above the high-income threshold for that year; and
4. the contract relates to a governance position that has a time limit under the governing rules of a corporation.
Fixed Term Contract Information Statement
The Fair Work Ombudsman will also prepare a Fixed Term Contract Information Statement that, from 6 December 2023, must be given to an employee before, or as soon as practicable after, they enter into a contract that will terminate at the end of an identifiable period.
See more articles on the Fair Work Act 2009 (Cth) at our page here.
Written by Angus Macpherson.
GENERAL AND CONTACT INFORMATION
The article, the content and references made are intended to keep an audience updated with information. It is not intended that the article or part of it should be relied upon as advice. Information provided may not apply to in all circumstances or in particular situations. If you do want particular advice or you have any questions, we welcome you to contact us on (02) 9189 5905 or at [email protected]