Fixed term employment contracts are contracts that terminate at the end of an agreed specified period. In other words, a worker employed on a fixed term contract will only work for their employer until the date specified in their contract. From December 2023, changes to the Fair Work Act 2009 (Cth) ensure that fixed term employment contracts now have a maximum contract period of no more than two years.
Background to changes to fixed term employment contracts
The election of the Albanese Labor Government in May 2022 came with a refreshing desire to reinvigorate Australia's principal statute concerning workplace relations – the Fair Work Act 2009 (Cth) (the Act).
Changes to the Act made by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) have drastically altered the nature of fixed term employment contracts, reducing the length of time an employee can be subject to a fixed term contract.
New limitations on employers when using a fixed term employment contract
The limitations under section 333E of the Act ensure that:
- employers are unable to employ workers, who are not casual employees, on fixed term contracts for a period of more than two years;
- consecutive employment contracts that would have the same effect as having a worker on a fixed term contract for two years are prohibited;
- contracts that have an option for the employer to extend or renew a worker on the same or similar terms, and the extension would result in the worker being engaged under the same contract for longer than two years are prohibited.
Exceptions to fixed term contract limitations
The Federal Government understands the need for flexibility and has expressly provided for situations in which the fixed-term contract restrictions under section 333E would not apply.
These include contracts for employees that are:
- engaged to perform only a distinct and identifiable task involving specialised skills;
- engaged for a training arrangement;
- engaged to undertake essential work during a peak demand period;
- engaged to undertake work during emergency circumstances or during a temporary absence of another employee;
- earning over the high-income threshold;
- engaged under a contract for a job funded by the government
- engaged in a governance position which has a time limit applied under the governing rules;
- covered by a modern award that permits fixed-term contracts longer than two years.
Benefits of fixed-term contract limitations for employees
Before these amendments, workers could be employed on fixed term contracts for uncertain periods, with no guarantee of reemployment or improved pay. Workers would be subjected to the anxieties associated with financial insecurity.
In a time when the majority of workers are already subjected to the immense pressures caused by the cost of living and the housing crisis, these amendments seek to relieve workers of the pressures of prolonged employment uncertainty.
The new amendments to fixed term contracts will ensure that no worker can be strung along by an employer and be subject to constant uncertainty for time periods that span years.
What to look out for if you are employed under a fixed term contract
If your employer is attempting to engage you under a fixed term contract it is important to consider the following:
- whether the contract is for longer than a two-year period;
- whether you have been engaged under a series of fixed term contracts that would ultimately be in excess of two years;
- whether the contract provides an option for the employer to extend or renew the contract and, in doing so, may result in a fixed-term contract in excess of two years.
What if I was already on a fixed-term contract immediately before the changes were applied?
The changes to the fixed-term contract limitations only apply to new employment contracts; i.e. those contracts entered into after December 2023. However, if your employer seeks to extend your current contract, and this would result in a fixed-term contract in excess of two years, this may be a breach of section 333E of the Act.
Disputes about fixed term contracts
If a worker and their employer cannot resolve a dispute regarding a fixed term contract, either the worker or the employer can apply to the Fair Work Commission for help.
The Commission can help resolve the dispute by:
- holding conciliation or mediation between the parties to discuss a resolution;
- making recommendations on how to resolve the dispute; or
- making a final order in the Commission to resolve the dispute if the other steps above are unsuccessful.
Get help from an employment lawyer
If you are uncertain whether your employer is attempting to engage you under a contract that is inconsistent with these limitations (or you are concerned about other aspects of your employment contract), it is important to understand your rights and entitlements.
Hall Payne's award-winning employment lawyers are available to assist you with any concerns you have about your current employment contract or a new employment contract under consideration.
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.