The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (the Bill) passed Parliament on 2 December 2022.
We held a webinar on 1 December 2022 to highlight some of the changes made by the Bill. Please get in contact with us for a copy of the webinar. You can also find our previous article on the Bill here.
This article will be the first in a series of articles examining the key amendments to the Fair Work Act 2009 (Cth) (FW Act) made by the Bill. The focus of this article will be on the Bill's changes to fixed-term contracts.
What is a fixed term contract?
A 'fixed term contract' is not defined in the Bill, however, it is contemplated as being a contract of employment that includes a term that provides that the contract will terminate at the end of an identifiable period (whether or not the contract also includes other terms that provide for circumstances in which it may be terminated before the end of that period) (Fixed Term Contract Term).
So, the legislation appears to make it clear that it also extends to 'maximum term contracts', and other contracts that may be terminated before the expiry of the contract period.
Modern awards and fixed term contracts
A modern award may include terms that permit an employee to be employed under a contract of employment that includes a Fixed Term Contract Term.
Fixed Term Contract Terms prohibited by the FW Act
A person will contravene the FW Act if the person enters into a contract of employment with an employee (that is not a casual employee of the employer), and the contract includes a Fixed Term Contract Term, and one of the following applies:
Employment for more than two years
The identifiable period in the contract is greater than two years.
Renewable contracts
The sum of the identifiable period and any other period for which the contract may be extended or renewed is greater than two years, or the contract provides for an option or right to extend or renew the contract more than once.
Consecutive contracts
If a contract comes into effect after another contract in the following circumstances:
- The previous contract included a Fixed Term Contract Term.
- The previous contract was for the employee to perform the same, or substantially similar, work for the person as the employee is required to perform.
- There is substantial continuity of the employment relationship between the person and employee during the period between the previous contract terminating and the current contract coming into effect.
- Any of the following apply:
- The sum of the period for which the previous contract was in effect and the identifiable period for the current contract is greater than two years.
- The current contract contains an option for renewal or extension.
- The previous contract contained an option for extension that has been exercised.
- The previous contract came into effect after another contract that included a Fixed Term Contract Term, that was for the same work, or substantially similar work, and there was substantial continuity of the employment relationship between the person and the employee during the period between the initial contract terminating and the previous contract coming into effect.
Any contravention of this provision may attract a civil penalty, with a maximum current penalty of $133,200 (600 penalty units) for a serious contravention, or otherwise a maximum current penalty of $13,320 (60 penalty units).
Effect of entering a prohibited fixed term contract
If a person enters into a contract of employment with an employee in contravention of the FW Act, the Fixed Term Contract Term is taken to have no effect, and the contravention is taken not to affect the validity of any other term of the contract.
Exceptions
Exceptions to the prohibition on contracts of employment including a Fixed Term Contract Term include any of the following:
- Where an employee is engaged:
- To perform an identifiable task that involves specialised skills.
- In relation to a training arrangement.
- Is engaged to undertake essential work during a peak demand period.
- To undertake work during emergency circumstances or during a temporary absence of another employee.
- Where, in the year the contract is entered into, the amount of the employee's earnings under the contract is above the high-income threshold (currently $162,000) for that year.
- Where the position is a government funded position, and the funding is payable for more than two years, and there are no reasonable prospects that the funding will be renewed after that period.
- Where the contract relates to a governance position that has a time limit under the governing rules of a corporation or association of persons.
- A modern award that covers the employee includes terms that permit a contract of employment including a Fixed Term Contract Term in the circumstances.
- As allowed by the regulations.
An employer must not do any of the following to avoid any right or prohibition under these changes to the FW Act:
- Terminate an employee's employment for a period.
- Delay re-engaging an employee for a period.
- Not re-engage an employee and instead engage another person to perform the same, or substantially similar, work for the person as the employee performed.
- Change the nature of the work or tasks the employee is required to perform.
- Otherwise alter an employment relationship.
Importantly, an employer must not take adverse action against an employee because of a workplace right of the employee created under these changes to the FW Act.
Fixed Term Contract Information Statement
Like the current Fair Work Information Statement, and Casual Employment Information Statement, the Fair Work Ombudsman will be tasked to prepare a Fixed Term Contract Information Statement. This Statement must be given to an employee before or as soon as practicable after they enter into a contract of employment that includes a Fixed Term Contract Term.
A contravention of this provision may also attract a civil penalty.
What happens to current fixed term contracts when the changes are enacted?
These changes apply in relation to a contract of employment entered on or after the commencement of the changes to the FW Act. Workplace Relations Minister Tony Burke has confirmed that employers will have 12 months to comply with these amendments to the FW Act.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
