New rules governing Fixed term Contracts

From 6 December 2023, employers utilising fixed term contracts are required to issue the Fixed term Contract Information Statement to all new ‘fixed term’ employees (engaged on or after 6 December 2023). This requirement flows from the first tranche of the Government’s ‘Secure Jobs’ legislation, which became law back in December 2022.

The Fixed term Contract Information Statement is now available on the Ombudsman’s website, and it is recommended it is downloaded separately each time a new fixed term employee starts, to ensure the most up-to-date document is always being issued.

The Fair Work Commission also has new powers to deal with disputes in relation to fixed term contracts from 6 December 2023.

New limitations on Fixed term Contracts

As previously reported, the legislation now prohibits an employer from entering into a fixed term contract with an employee for a period longer than two years whilst also prohibiting an employer from entering into a fixed term contract with an employee that either could be extended or renewed for a period that, in total across all contracts, exceeds two years. Employers are now also prohibited from entering into a fixed term contract with an employee that could be extended or renewed more than once.

An employer may enter into a contract of employment with an employee that is for longer than two years, contains more than one option for extension or renewal, or is a third or more consecutive fixed-term contract where:

• the employee has specialised skills that the employer does not have, but needs, to complete a specific task;

• the employee is engaged as part of a training arrangement (for example, an apprentice or a trainee);

• the employer needs additional workers to do essential work during a peak period, such as for fruit picking or other seasonal work;

• the employer needs additional staff members during an emergency, or needs to replace a permanent employee who is absent for personal or other reasons, for example parental leave, sabbatical, or long service leave, or absence relating to workers’ compensation;

• the employee earns over the high-income threshold for the first year of the contract;

• the employer is reliant on government funding, or other funding of a kind specified in the FW Regulations, to directly finance the employee’s position either in whole or in part – the employer must receive the funding for more than two years, and there must not be any reasonable possibility that the funding will be renewed;

• the employee is appointed under governance rules of a corporation or other association, where those rules specify the length of time that the appointment can be in place;

• the employer is permitted to enter into the fixed term contract by a term specified in a modern award that covers the employee; and

• the contract is a type of contract, prescribed in the FW Regulations, for which an exception applies.

In the event an employer enters into a fixed term contract which contravenes these new limitations, the term that ends the contract after a certain period would be considered to be invalid. This means that the contract would otherwise apply as to its terms, except that the contract does not end at the nominal expiry date. The employee would not be considered to have been employed for a specified period of time, a specified task, or a specified season for the purposes of unfair dismissal and/or notice of termination and redundancy pay (if applicable).

Civil penalties will apply to employers who contravene the new limitations on fixed term contracts.

We continue to recommend employers seek legal advice before acting in reliance on a fixed term contract.