From 6 December 2023 at the latest, limits will be placed on the use of fixed term contracts for the same role beyond two years (including renewals) or two consecutive contracts, whichever is shorter.
There will be exceptions though, including where employees are engaged:
- to perform only a distinct and identifiable task involving specialised skills (note that it will be important to get advice on what is a “specialised skill” because the term is more confined than most employers might like);
- by way of training arrangement;
- to perform essential work during peak demand period, emergency or temporary absence of another employee;
- and will earn more than the high-income threshold (currently $162,000) for the year in which the contract is entered into;
- in a governance role that is prescribed a time limit under the governing rules of a corporation or association;
- on a contract that is wholly or partly funded by government funding (or a type of funding allowed by the regulations), provided that the funding is for a period of more than two years and there are no reasonable prospects that the funding will be reviewed after that period; or
- and are covered by an Award which permits them to be employed for more than two years under a fixed-term contract, renewable contract and/or consecutive contract.
Employers must be able to demonstrate an exception applies if they seek to rely upon one.
If the rules are not followed, the contract will still be valid, except for the term of the contract that provides for its expiry on a set date. This essentially means where a fixed term contract is made in breach of the new provisions, the employee will be considered a permanent employee (retaining the terms and conditions of their contract, while gaining access to permanent employee entitlements).
Employers are also required to provide a new Fixed Term Contract Information Statement (which will be developed by the Fair Work Ombudsman) to all employees entering a fixed term contract.
Employers should be mindful that fixed term contracts entered into prior to the commencement of these changes will be relevant in determining whether parties have subsequently entered into a prohibited consecutive contract (so, the late start might look like a loophole, but it may in fact not be).
