In the second of our updates on the changes arising from the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Secure Jobs, Better Pay Act), we take a look at the new provisions limiting the use of fixed-term contracts that have been inserted into the Fair Work Act 2009  (FW Act).

The changes to the FW Act with respect to fixed-term contracts are intended to address the concerns about the creation of insecure employment that attach to the use of such contracts.

The Secure Jobs, Better Pay Act was passed by both Houses of Parliament on 2 December 2022, and received Royal Assent on 6 December 2022. The new provisions will come into effect on a day fixed by Proclamation, but no later than 7 December 2023.

What are the changes?

The changes to the FW Act apply to fixed term contracts, maximum-term contracts and outer limit contracts, but for ease of reference we refer only to fixed term contracts below.

Prohibitions on employers entering into certain fixed-term contracts

Under the changes to the FW Act brought by the Secure Jobs, Better Pay Act, employers are, with limited exceptions, prohibited from:

  • entering into a fixed term contract with an employee for a period longer than two years or a fixed term contract that may be extended more than once (irrespective of whether the original term and the extension are for less than two years);
  • entering into a fixed term contract with an employee that could be extended or renewed for a period that, across all contracts, exceeds two years; and
  • entering into a fixed term contract that would continue the same, or substantially similar, employment relationship and duties as under a previous fixed term contract AND that contains a further right of renewal or extension or, in combination with the previous fixed term contract, exceeds two years in length.

The limited exceptions include:

  • 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;
  • the employer needs additional workers to do essential work during a peak period;
  • the employer needs additional staff members during an emergency, or needs to replace a permanent employee who is absent for personal or other reasons; and
  • the employee earns over the high income threshold for the first year of the contract.

The onus will be on the employer to demonstrate that an exception applies.

If the term of the fixed term contract extends beyond the conditions outlined above, the termination clause will be of no effect and the employee will become a permanent employee. However, the balance of the contract is otherwise valid and capable of being relied on to inform terms and conditions of employment of the affected employee.

Employers are also prohibited under anti-avoidance provisions from ending one employee’s employment in accordance with the terms of their fixed term contract and engaging another employee to do the same or similar work. However, for these provisions to apply, the first employee has the onus of demonstrating that the employer’s decision to terminate their employment was to avoid the operation of the new limitation provisions.

Civil penalty provisions

The provisions relating to fixed term contracts introduced into the FW Act under the Secure Jobs, Better Pay Act are civil penalty provisions – so any contravention of those provisions may expose an employer to prosecution and/or the imposition of pecuniary penalties.

Dispute resolution by Fair Work Commission and courts

The changes under the Secure Jobs, Better Pay Act also empower the Fair Work Commission and the courts to resolve disputes in relation to the fixed term contract provisions.

If there is a dispute in relation to a fixed term contract, and all attempts to resolve the issue at the workplace level have been exhausted, then a party may apply to the Fair Work Commission for assistance in resolving the dispute. The Fair Work Commission may deal with dispute as it sees fit, but any arbitration must be by consent of the parties.

The parties may also apply to the court using small claims procedure regarding a dispute about whether the employer has entered into a contract that is not permitted under the new fixed term contract provisions or whether the termination clause in a fixed term contract is effective.

Fixed Term Contract Information Statement

Under the changes, employers are to provide a Fixed Term Contract Information Statement to all employees entering into a fixed term contract, including if one of the limited exceptions discussed above applies.

Key issues for employers

The limitations on fixed term contracts introduced into the FW Act in the Secure Jobs, Better Pay Act are likely to have a significant impact on how businesses operate, particularly if the business model is reliant on the use of rolling fixed term contracts (irrespective of their length).

Employers are encouraged to review their employment arrangements and in particular their use of fixed term, maximum term or outer limit contracts to determine if those arrangements remain appropriate and feasible under the new limitations.

How we can help

Our experienced Employment Lawyers in Canberra can help you and your business to navigate the changes and to manage the risk of disputes in relation to the new provisions relating to fixed term contracts in the FW Act.

Our EIRS team is also available to discuss how the changes under the Secure Jobs, Better Pay Act may impact on your business more generally, and what you may need to do in order to prepare your business for the changes.

Please contact us on our website or call (02) 6279 4444.

Our next update will look at the changes in relation to the prohibition on pay secrecy under the Secure Jobs, Better Pay Act.