New fixed term contract provisions under the Fair Work Act

On 6 December 2023, new restrictions on the use of limited (“fixed”) term contracts under the Fair Work Act 2009 (Cth) came into effect.

January 12, 2024

On 6 December 2023, new restrictions on the use of limited (“fixed”) term contracts under the Fair Work Act 2009 (Cth) came into effect. The laws prevent employers from using limited term contracts for longer than two years. This also applies to extensions or renewals, including extensions or renewals of contracts entered into prior to the changes coming into effect, if the total period would exceed two years. Renewals can be offered no more than once, regardless of the length of the term.

If a prohibited contract is entered into, employers may be liable for pecuniary penalties. A contravention does not invalidate the whole contract, but it can render the limited term as having no effect.

The provisions also contain anti-avoidance measures preventing employers from:

• terminating an employee’s employment;
• delaying the engagement of an employee;
• engaging a different employee to perform the same or substantially the same work;
• changing the nature of the work or tasks the employee is required to perform; or
• otherwise altering an employment relationship for the purposes of avoiding the provisions.

The provisions do not apply to casuals on limited term contracts. Employers can rely on exceptions for:

• employees engaged for distinct and identifiable tasks involving specialised skills;
• employees engaged under training arrangements;
• essential work performed in a peak demand period;
• emergency work or during the absence of another employee;
• employees earning above the high income threshold;
• contracts relating to the performance of work that is wholly or partly funded by government that lasts more than 2 years and there is no reasonable prospect that the funding will be renewed;
• governance roles that have a time limit under the organisation’s governing rules;
• modern awards permitting limited term contracts that would otherwise be a contravention under the new provisions; and
• the contract is of a kind prescribed by the regulations. According to the Fair Work Ombudsman, there are certain exceptions for contracts entered into between 6 December 2023 and 30 June 2024. These include:
  • sporting organisations;
  • live performance employees being subject to fixed term contracts less than 12 months;
  • higher education employees;
  • higher performance sport employees; and
  • organisations funded by philanthropic entities registered under the Australian Charities and Not for Profits Commission.

Employers are also required to issue employees engaged on a limited term contract with a Fixed Term Contract Information Statement.

If an employee under a limited term contract believes that their contract contravenes the new provisions they can apply to the Fair Work Commission, but first they must attempt to resolve the matter with the employer internally before doing so. Similar to the standard dispute resolution jurisdiction, the Fair Work Commission can only arbitrate with the consent of both parties.