New laws on fixed-term contracts starting 6 December 2023

New laws will apply to all National Employment System employers seeking to engage employees on fixed-term contracts from 6 December 2023. The changes will not apply to state or local government employers in South Australia.

Employers can face significant civil penalties if they breach or attempt to avoid these provisions.

We recommend that all employers review their fixed-term and maximum-term contracts urgently to determine their rights and obligations moving forward.

The key changes are that employers will no longer be able to:

• employ employees on contracts with a fixed term of more than two years, including extensions and renewals;
• include options to renew or extend fixed-term contracts so that the total term of the employment is more than two years;
• include options to extend or renew fixed-term contracts more than once; or
• employ employees on more than two consecutive fixed-term contracts where the employee is undertaking the same (or substantially similar) work, and there is substantial continuity of the employment relationship during the period between the previous contract terminating and the current contract coming into effect.

Employers will also be required to provide a Fixed-term Contract Information Statement to all employees engaged on a fixed-term basis (in addition to the existing Fair Work Information Statement).

Importantly, however, a number of exceptions to these rules apply. Consecutive and/or longer term fixed-term contracts are still permitted for high-income employees, government funded contracts, training arrangements, the provision of specialised skills, essential work, governance positions and employees covering for temporary absences, as well as in other circumstances permissible under the applicable modern award.

Examples

Sally is employed on a fixed-term contract as a Payroll Officer for the period 1 January 2022 to 31 December 2022. She travels overseas for a month and returns to the same employer to work as a Payroll Officer for a further fixed-term from 1 February 2023 to 31 January 2024. Can you employ Sally on a further fixed-term contract from 1 February 2024?

You cannot employ Sally on a further fixed-term contract because she has already been employed on two consecutive fixed-term contracts performing the same role. Despite the one month break in service, in our view, there remains ‘substantial continuity’ of the employment relationship.

What if Sally’s second contract instead expired on 30 November 2023, rather than 31 January 2024? Can you employ her on a further fixed-term contract on 1 December 2023?

You can employ Sally on a further fixed-term contract because the new rules only apply to contracts entered into after 6 December 2023. However, you will not be able to enter into any further fixed-term contracts for Sally to perform the same role once that new contract expires.

What if Sally was employed to backfill a particular employee on parental leave?

This situation falls under the ‘temporary absence’ exception so you are permitted to employ her on a fixed-term basis.

What if Sally’s contract starting 1 February 2024 was for the role of Executive Assistant, rather than Payroll Officer?

In our view, the role of Executive Assistant does not require substantially the same work as the role of Payroll Officer, so the employer is entitled to employ Sally on a fixed-term contract.

If you require any assistance determining how the new fixed-term contract laws apply to your organisation, please contact Sathish Dasan on please contact Sathish Dasan on + 61 8 8217 1337 or sdasan@normans.com.au or Lincoln Smith on + 61 8 8210 1203 or lsmith@normans.com.au.