What is a fixed term contract?
A fixed term contract is a contract of employment which is for a fixed length of time or for the duration of a specified project or for a specified season. A fixed term contract will state precisely when the term of employment will end. Fixed term contracts are often used, for example, to cover maternity leave positions. Fixed term contracts can lead to job insecurity when used for the same role over an extended period, for a position which should really be treated as permanent – hence the law reform in this area as part of the Australian Government’s plan to improve job security in Australia.
What is changing?
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 amends the Fair Work Act 2009 to limit the use of fixed term contracts for the same role beyond 2 years or two consecutive contracts, whichever is the shorter.
There are a range of exceptions, including:
- the contract is for a discrete task for a fixed period
- the contract is for an apprentice or trainee
- the contract is for work undertaken during peak demand such as harvest
- the contract replaces another employee on long service leave
- the contracted employee is earning more than the high income threshold
- the relevant Award allows a fixed term contract
If an employer wants to rely on an exception, they will bear the onus of proving the exception applies.
If a fixed term contract is made in breach of the new provisions, that term will be invalid but all other terms in the contract will remain and the employee will be deemed to be a permanent employee.
Employers will need to provide a fixed term information statement to all affected employees.
Actions for employers to take
- Ensure fixed term employees are given a copy of the fixed term information statement from 6 December 2023
- Consider the risk that any employee on a fixed term contract will be deemed a permanent employee after 2 years if their employment does not cease
- Consider the need to review employment contracts to avoid potential breaches of the new provisions
Our employment lawyers at Dobson Mitchell Allport can provide further advice and assistance in relation to the above to both employers and employees.