In December 2022, significant changes were made to the Fair Work Act 2009 (Cth) through the Fair Work Amendment (Secure Jobs, Better Pay) Act 2022. These amendments, effective from 6 December 2023, place strict limitations on the use of fixed term contracts. Understanding these changes is crucial for employers to ensure compliance and avoid penalties. Here’s a comprehensive breakdown of what you need to know.

Key Provisions of the New Limitations

1. Prohibited Terms in Fixed Term Contracts:
   • Duration: Contracts cannot exceed two years.
   • Renewals: Contracts cannot be renewed or extended if the total period exceeds two years or if renewed more than once.
   • Rolling Contracts: Consecutive contracts for the same or substantially similar work with substantial continuity are restricted.
2. Exceptions to the Rule:
   • Specialised Skills: Employees with unique skills needed for specific tasks.
   • Training Arrangements: Trainees or apprentices engaged in a training programme.
   • Peak Periods and Emergency Situations: Additional employees required for essential work during peak periods or emergencies.
   • High-income Employees: Employees earning above the high-income threshold.
   • Funding Reliance: Positions financed by specific types of government or philanthropic funding.
3. Regulations and Exceptions:
   • The Fair Work Amendment (Fixed Term Contracts) Regulations 2023 provide detailed exceptions and extend certain exemptions until November 2025 for specific industries and roles, such as those in live performance and organised sports.

Practical Implications for Employers

1. Issuing Information Statements:
   • Employers must provide a Fixed Term Contract Information Statement and a Fair Work Information Statement to employees entering fixed term contracts.
2. Assessing Continuity:
   • Factors such as the length and reason for breaks between contracts, and the nature of work continuity, play a role in determining if contracts are consecutive.
3. Anti-avoidance Measures:
   • Employers must not artificially structure contracts to circumvent these limitations. Actions like creating artificial breaks in employment or changing job duties to avoid continuity can result in significant penalties.
4. Dispute Resolution:
   • Disputes over fixed term contract limitations should first be resolved internally. If unsuccessful, parties can approach the Fair Work Commission or Federal Court for resolution.

Risks and Penalties

Non-compliance with these limitations can lead to:

• The fixed term contract being deemed ineffective, converting the employee to an ongoing status with recognised service.
• Significant fines for breaches, particularly if contraventions appear deliberate.

Preparing for Compliance

Employers should:

• Review and update employment contracts to ensure compliance with the new rules.
• Seek legal advice if uncertain about the application of exceptions or how to structure contracts within the new framework.