New Fair Work Regulations on Fixed Terms Contracts
By Paolo, 03.12.2023
The Secure Jobs Better Pay Act 2022 received Royal Assent on 6 December 2022. The Bill is not a new legislation but an amendment of the Fair Work Act 2009, The Fair Work Registered Organisations Act 2009 and The Fair Work Transitional Provisions and Consequential Amendments Act 2009.
The Secure Jobs Better Pay Act includes several changes to Employment Relations, including bargaining, agreement-making, sexual harassment cases and registered organisations. These changes have been implemented over 12 months, from 7 December 2022 (the day after the Bill received Royal Assent) to 6 December 2023.
In chronological order, the Secure Jobs Better Pay Act 2022 has implemented the following amendments to Employment Relations:
From 7 December 2022:
- Objects of the Fair Work Act, modern awards objective, minimum wages objective;
- Equal remuneration;
- Prohibiting pay secrecy;
- Anti-discrimination and special measures;
- Termination of enterprise agreements after the nominal expiry date;
- Sunsetting of “zombie” agreements;
- Initiating bargaining;
- Dealing with errors in enterprise agreements;
- Communications to be available in multiple languages.
From 6 March 2023:
- Prohibiting sexual harassment in connection with work;
- Expert Panels;
- Absorb the functions of the Registered Organisations Commission.
From 6 June 2023:
- Flexible work and unpaid parental leave requests;
- Enterprise agreement approval and the Better off overall test;
- Bargaining disputes, industrial action, supported bargaining, single-interest employer authorisations, varying enterprise; agreements to remove employers and their employees, and co-operative workplaces.
From 6 December 2023:
- Fixed-term contracts.
This blog article focuses on the new restriction clauses applicable to Fixed Terms Contracts of Employment commencing from 6 December 2023. More information about other amendments that are part of this Bill can be found at: https://www.dewr.gov.au/secure-jobs-better-pay/bargaining-and-workplace-relations
Overview of Fixed-Term Contracts and Employment Basis
There are two aspects of Employment type: employment type and employment basis. Employment type relates to the employee being employed Full-time, Part-time, or Casual. Employment Basis is whether the employee is employed on either a permanent or temporary basis.
When an employee is employed on a permanent basis, there is an intention of the employer to continue the employment long-term. Employment termination instigated by the employer can only happen due to specific reasons, such as lack of work, poor performance, redundancy or misconduct.
Temporary basis Employment (or fixed-term contract) instead, allows the employer to set out a termination date right from the start of the employment, which does not have to be backed up by a specific termination reason.
Before the introduction of the Fixed-Term clause limitations by the Secure Jobs Better Pay Act 2022, Fair Work only provided general guidelines about Fixed-Term Employment contracts, including:
- A genuine contract for a specified period may terminate by the passing of time at the end of the period rather than by termination at the initiative of the employer;
- In order to be a contract for a specified period of time the dates of commencement and completion of the contract must be unambiguous;
- If the contract gives either party an unqualified right to terminate the contract on notice or with payment in lieu of notice, it will not be a contract for a specified time.
- A contract giving either party the right to terminate for a breach of the contract may still be a contract for a specified period of time;
- A contract may still be a contract for a specified period of time if it allows for review and extension by consent after a specified period of time;
- Where there has been a series of fixed-term contracts and renewal is a mere formality, the Fair Work Commission may look beyond the terms of the contract to the reality of the employment relationship;
The Secure Jobs Better Pay Act 2022 has introduced stricter guidelines and limitations to this type of employment.
In a speech about the Fair Work Legislation Amendments, Mr Tony Burke (Minister of Employment and Workplace Relations) expressed grave concern about the rise and the abuse of Fixed-Term contracts in Australia by quoting the following statistics:
- an increased fixed-term employment contracts of over 50% since 1998;
- over 40% of fixed-term contracts exceeding 24 months;
- over half of employees engaged in fixed-term contracts to be women.
New Rules and Regulations on Fixed-Term Contracts
The Bill restrictions apply exclusively to new contracts stipulated on or after 6 December 2023. However, previous fixed-term contracts will be considered relevant where the previous and current agreements constitute consecutive contracts as stipulated by the Secure Jobs Better Pay Act.
The limitations affect both the commencement and renewal stages of a fixed-term contract of employment:
- New Engagement
- The contract cannot exceed a duration of 2 years;
- The contract cannot include terms and conditions that allow more than one renewal, or no renewal, if the original contract is already for a 2-year period;
- The Employer must provide the newly engaged employee a Fixed Term Contract Information Statement;
- Contract Renewal
- The total length of the original contract and the renewal contract cannot exceed the duration of 2 years;
- No further renewals allowed (even if the lengths of the two contracts have not exceeded 2 years);
The new clauses limit the use of fixed-term contracts for the same position to a period of two years or two consecutive renewal contracts, whichever is shorter.
- The renewal is not allowed when the original contract specifies the contract terminates at the end of the fixed term;
The Act also includes provisions that limit an employer to engage a new employee on a Fixed-Term contract that would perform the same, or substantially similar, work for the employer as the employee is required to perform under the current contract without a substantial break between the end of the current contract and the new engagement.
Furthermore, employers cannot take any of the following actions to avoid the limitations stipulated by the Secure Jobs Better Pay Act:
- terminate an employee’s employment for a period;
- postpone the contract renewal;
- alter the nature of the work or duties the employee is required to perform, or change the employment relationship.
The Secure Jobs Better Pay Act acknowledges certain situations where employers could be deemed exempt from these limitations. These exemptions include where:
- the employee is engaged to perform exclusively a distinct and identifiable task involving specialised skills;
- the employee is engaged as part of a training program with a defined duration;
- the employee is engaged to undertake essential work during a peak demand period (i.e. seasonal employees);
- the employee is engaged to undertake work during emergency circumstances or a temporary absence of another employee (i.e. maternity leave);
- the employee is engaged full-time for 12 months or more and earns more than the high-income threshold stipulated for that Financial Year (currently $162,000 per annum full-time. This amount is expected to be indexed each Financial Year). The Act also includes provisions for part-time work arrangements and periods of employment of less than one year;
- the employee is engaged in a Government contract that has a time limit under the governing rules of a corporation or association of persons;
- the employee’s classified Award provides specific provisions that allow exemptions to the regulations stipulated by the Secure Jobs Better Pay Act.
Consequences for Non-Compliance
Contracts that fail to comply with the new provisions, will have the terms that set out the end date of the contract deemed null and void, turning the employment agreement from temporary to permanent. This could result in the employee being entitled to notice, redundancy pay, and protection from unfair dismissal under the Fair Work Act.
Any employer that wishes to claim an exception in civil penalty proceedings will bear the onus of establishing that the exception applies to their employment contract.
Key Takeaways and Tips for Employers
New limitations apply to all Fixed-term Employment Contracts commencing on or after 6 December 2023. Limitations include:
- a limit of 2 years or 2 renewals (whichever is shorter) applicable to any new fixed-term contracts;
- a new mandatory document to provide to fixed-term employees at the start of their engagement;
- restrictions with signing up new fixed-term employees who would perform a similar job to the previous employee who has just completed fixed-term employment.
Employers regularly employing workers on fixed-term contracts should ensure they are ready for these new regulations. This includes:
- Reviewing the current terms and conditions of their fixed-term contracts;
- Updating their standard fixed-term contracts of employment;
- Identifying any exception that is relevant to their industry and/or organisation;
- Downloading and saving the Fair Work Fixed Term Contract Information Statement and including it with their new fixed-term employment contracts;
- Preparing and implementing processes and procedures that monitor when fixed-term contracts can be offered, expired and renewed.
Small Employers, in particular, should seek professional support and advice to ensure they maintain compliance with all the provisions stipulated by the Secure Jobs Better Pay Act.