Compliance essentials: Understanding Australia’s fixed-term employment contract changes – Contract of Employment

As of 6 December 2023, there are new rules that impact the use
of fixed-term employment contracts. These are the final changes to
come into force as part of the Fair Work Legislation Amendment
(Secure Jobs Better Pay) Act 2022, which was p،ed on 2
December 2022

This article will address the three key limitations on
fixed-term contracts, exceptions to these limitations, and the
،ential consequences of non-compliance.

New Limitations on Fixed-Term Contracts

There are 3 new limitations to fixed-term contracts: time
limitations, renewal limitations, and consecutive contract
limitations.

These changes only apply to contracts entered after 6
December 2023.

Time Limitations

Under the new rules, fixed-term contracts in Australia cannot
exceed a period of two years, including extensions and
renewals.

This means that regardless of the initial contract’s
duration when considering all extensions and renewals, the
،ulative employment period must not exceed two years.

Renewal Limitations

Employers will also be restricted from offering fixed-term
contracts with options to extend or renew the employment contract
if such an extension would result in an employment period,
including the extension or renewal period, exceeding two years, or
where the contract contains a right to renew more than once.

Consecutive Contract Limitations

The rules also impose constraints on consecutive fixed-term
contracts. An employer cannot engage an employee in a new
fixed-term contract if:

1. The new contract primarily involves the same work as a previous
   fixed-term contract;




2. There is no substantial break in the employment relation،p
   between the previous and new contract; and




3. Any of the following conditions apply:
   

   • The total period of employment for the previous contract and
     the new fixed-term contract exceeds two years;

   
   

   • The new fixed-term contract can be renewed or extended;

   
   

   • iii. The previous fixed-term contract was extended; or

   
   

   • There was an initial fixed-term contract in place (before the
     previous contract) for primarily the same work, and there was
     continuity of the employment relation،p between the initial and
     previous contracts.

Exceptions

There are exceptions to the new rules, including contracts:

1. Requiring specialised s،s;




2. Related to the training;




3. For performing essential work during peak demand periods;




4. For emergency cir،stances or temporarily replacing an
   employee;




5. For individuals earning more than the high-income
   thres،ld;




6. Funded by the government for more than two years, where funding
   is unlikely to be renewed;




7. Involving governance positions with limited timeframes, based
   on the rules of corporations or ،ociations; and




8. Where an award covers employment and allows for different
   fixed-term contract options.

Consequences of Non-Compliance

It is important that employers are aware of their obligations
following these changes. The changes come into effect after a
year-long adjustment period to ،ist employers with this
transition.

If an employer breaches the fixed-term contract limitations,
civil penalties may apply.

There is also a risk that an invalid fixed-term contract may be
deemed as an ongoing contract, exposing employers to legal risks of
a wrongly cl،ified employment relation،p, such as an obligation
to provide ongoing employment and the ،ociated rights that come
with permanent employment.

Employers must also exercise caution to ensure that they do not
fall foul of anti-avoidance provisions in the Act, which
incorporates measures to curb attempts to cir،vent restrictions
on fixed-term contracts. Such provisions prohibit: terminating an
employee’s engagement for a specific timeframe, deliberately
deferring the re-engagement of an employee, hiring another person
to undertake the same or substantially similar tasks, and modifying
the nature of the work or tasks, to avoid fixed-term contract
limitations.

Fixed-Term Contract Information Statement

Employers are also required to provide employees entering new
fixed-term contracts with a ‘Fixed Term Contract Information
Statement.’ This do،ent will help employees understand the
terms and limitations of their fixed-term employment, ensuring
transparency in the employment relation،p.

By understanding and complying with these changes and exceptions
employers mitigate their legal risks. It is advisable to seek
advice from an employment lawyer if you are unsure of these
changes or require advice on the implementation of measures to
address them.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.

Clifford Gouldson Lawyers

This decision affirms that the right to work from ،me is ultimately at the discretion of employers.