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On 6 December 2023, new rules will commence that apply to employers who engage employees on fixed term contracts.  A fixed term contract is a contract that terminates that the end of a defined period (rather than continuing indefinitely).   This article explores the changes to the legislation and the obligations on employers, effective immediately.

Fixed Term Contract Information Statement

With effect from 6 December 2023, all employers who engage employees on fixed term contracts must give those employees a “Fixed Term Contract Information Statement” before the employee commences employment with the employer or as soon as possible after commencement of employment.  The Information Statement is available to download on the Fair Work Ombudman’s website.   The requirement to provide the Information Statement is in addition to the existing requirement to provide employees with a Fair Work Information Statement.

Limitations on fixed term contracts

There are also now new limitations on the use of fixed term contracts.  Each of these limitations is considered in turn as follows:

Time limitation

A fixed term contract cannot exceed a period of two years.  This includes all extension and renewal periods.

Renewals

A fixed term contract must not include an option for:

• an extension or renewal which would result in the employment period being longer than 2 years; or
• more than one extension or renewal.

Consecutive contracts

An employer is not permitted to employ an employee on a fixed term contract if:

• the contract applies to the same work that was the subject of a previous fixed term contract; and
• there is no substantial break between the previous and new contract; and
• any of the following apply:o   The total period of employment (including the term of both the previous contract and the new contract) exceeds 2 years;o   The new contract contains a provision allowing it to be extended or renewed;o   The previous contract was extended; oro   There was an initial contract in place for the same work and there was continuity of the employment relationship between the initial contract and the previous (second) contract.

Exemptions

There are a number of exemptions from the new limitations on fixed term contracts.

The changes to fixed term contracts do not apply to contracts:

• entered into prior t 6 December 2023.  However, if a new fixed term contract is entered into after 6 December 2023, employers must have regard to the consecutive contract limitation;
• relating to a specific task that requires specialised skills;
• relating to an arrangement for the training of an employee under State law (eg. apprenticeships);
• relating to the performance of essential work during a peak demand period (eg. harvesting periods);
• relating to work in an emergency circumstance or due to a temporary replacement of an employee;
• which exceed the high income threshold for a full time employee;
• whereby the work is completely or partially funded by the Government for more than 2 years and the funding is unlikely to be renewed (eg. development of a community facility);
• for a governance position where a limited period of appointment applies;
• governed by an Award and the Award allows for different fixed term contract options.

Consequences of non-compliance

Employers who fail to observe the new limitations with respect to fixed term contracts will have the consequence of the end date of the contract not applying.  This means that the contract will not be a fixed term contract and instead, will continue indefinitely.  This is likely to expose the employer to additional costs and potential claims in the event they attempt to terminate the contract.

If you have any queries relating to the changes or employment law generally, please contact Sarah Stoddart on (07) 2140 0522 or sarah@vitalitylawaustralia.com

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Sarah Stoddart is the founder and director of Vitality Law Australia, an award winning commercial law firm servicing pharmacy businesses and healthcare professionals across Australia.  For further information, email sarah@vitalitylawaustralia.com or visit www.vitalitylawaustralia.com