Amendments made to the Fair Work Act 2009 (Cth) regarding the use of fixed-term employment contracts will come into effect on 6 December 2023. These amendments will restrict the use of fixed-term employment contracts entered into on or after 6 December 2023 and may also impact ‘consecutive contracts’ entered into prior to this date.

What defines a fixed-term employment contract?
Under a fixed-term employment contract, employees have the same entitlements as permanent full-time or part-time employees. However, where permanent employees have an ongoing employment expectation, fixed-term employees are only employed for a specific period and their contract will terminate at the end of that time. Fixed-term employment contracts are often used where a business requires someone for a specific project, or as a temporary replacement for an existing employee who is taking maternity or long service leave.

What are the four new rules that apply?
The four new rules that apply are:

1: Employer’s must provide a copy of the Fixed Term Contract Information Statement
Employers must give employee’s they are engaging on new fixed-term contracts a copy of the Fixed Term Contract Information Statement (to be available on the Fair Work website from 6 December 2023). This is in addition to the Fair Work Information Statement – both must be provided. This can be done by providing a copy of these documents or by emailing a link to the document’s locations on either your business intranet or on the Fair Work website.

2: Fixed-term contracts are capped at two years
Fixed-term contracts are now restricted to two years in length. This includes any extensions or renewals.

3: Fixed-term contracts can only be renewed or extended once
These contracts can no longer have an options to renew or extend a contract:

1. More than once
2. Where the renewal or extension would result in the employment period exceeding two years.

4: A fixed-term contract can not be created for the same role as a previous contract
Employers are no longer able to employ someone on a new fixed-term employment contract where any of the following apply:

1. The new contract:
   1. Is mainly the same as a previous fixed-term contract, or
   2. Would cause the period of employment to extend beyond 2 years, or
   3. Allows for renewal or extension.
2. Or the previous fixed-term contract had already been extended
3. Or where initially a fixed-term contract was in place (before the previous contract) where:
1. The work in the fixed-term contract was mainly the same as the previous contract, and
2. There was continuity in the employment relationship between the initial fixed-term contract and the previous contract.

This is known as the ‘consecutive contract’ limitation.

Who do the new rules apply to?
The new rules apply to all businesses and industries, including not-for-profits.

There are some exceptions where the new rules won’t apply. These include situations where the fixed-term contract:

1. Comes under the scope of an award which allows for different fixed-term contract options, or
2. Is for a specific task and requires specialised skills, or
3. Is for a governance position (that is for a limited time based on the rules of the corporation or association), or
4. Is for essential work and relates to peak demand periods, or
5. Is for the temporary replacement of an employee, or
6. Is funded by the government for more than two years (if the funding is unlikely to be renewed), or
7. Provides a high income (more than than the high income threshold for a full time employee), or
8. Relates to an apprenticeship or other training arrangement under state or territory law, or
9. Relates to working in emergency circumstances.

What happens if a fixed-term contract doesn’t meet the new rules?
From 6 December 2023, where a fixed-term contract doesn’t meet the new rules, the effect is that the contract termination date specified in the contract is not applicable. The other terms and conditions of the contract would still apply.

For more information on these changes, including some examples, go to https://www.fairwork.gov.au/newsroom/news/new-rules-for-fixed-term-contracts.

If you have any questions or concerns about fixed-term employment contracts, your Human Resources advisor may be able to assist, alternatively contact us here.

Thanks for reading.

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