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Fixed Term Contracts: New Requirements Have Commenced
Employers offering a fixed term contract to an employee are now also required to provide to the employee the Fixed Term Contract Information Statement, which is available from the Fair Work Ombudsman website here. The Fixed Term Contract Information Statement should be provided as soon as practicable after the contract is entered into.
There are now certain circumstances where employers are not allowed to offer a fixed term contract.
What happens if an employer offers a fixed term contract when they should not have?
If an employer offers a fixed term contract when they should not have, then the fixed term has no effect and cannot be enforced by the employer to terminate the contract at the end of the fixed term. As such the contract will be taken to be an ongoing contract of employment with no fixed term.
In addition, by offering the contract in the prohibited circumstance, there is also the possibility that one of the Fair Work Ombudsman, the affected employee or their union could prosecute the employer for contravening the prohibition and seek an order from the Court that the employer pay a penalty.
What are the circumstances in which offering a fixed term contract are prohibited?
We outline below some of the circumstances where there are restrictions on offering a fixed term contract (the “Fixed Term Contract Restrictions”).
As of the 6 December 2023, unless the contract falls within an exception, employers are now prohibited from offering an employee a fixed term contract in circumstances which include if the contract:
- has a fixed term of longer than 2 years (including the term of any extensions allowed for under the contract); or
- provides for more than one possible extension.
Where an employee has already been on a fixed term contract for the same work, some other circumstances that an employer is prohibited from offering that employee a further fixed term contract (the “Further Contract”) include if that employee:
- has already been engaged under an earlier contract that had an option to extend which has already been used;
- the Further Contract contains an option for renewal;
- has already been engaged under two earlier fixed term contracts; and
- would have been engaged continuously under fixed term contracts (including the Further Contract) for two years or more.
There are a range of contracts which do not have the Fixed Term Contract Restrictions apply to them. Some of the types of contracts which are exempted include contracts:
- where the employee is engaged to perform only a distinct and identifiable task involving a specialised skill;
- where there is a training arrangement (such as an apprenticeship);
- where the employee’s earnings under the contract will be more than the high income threshold;
- for work which is wholly or partly funded by government for more than two years and where that funding is unlikely to be renewed; or
- for governance roles which are time limited under a corporation’s rules.
PCS can assist employers with determining whether the contract they are proposing to offer falls within a category that is exempted from the Fixed Term Contract Restrictions.
Delay to the introduction of the Fixed Term Contract Restrictions for some type of contracts and in some industries to 1 July 2024
The government has delayed the implementation start date for the Fixed Term Contract Restrictions for some kinds of contracts offered for some industries and categories of employers until 1 July 2024.
The industries and types of employers who have the Fixed Term Contract Restrictions start date delayed include:
- some sporting organisations;
- organising bodies for international elite sporting events;
- the live performance industry;
- the employers who have the higher education modern awards apply to them; and
- employers who engage certain philanthropic entity funded positions.
Specific criteria for Sporting Organisations
For Sporting Organisations, it is useful to note that the delay to the operation of these Fixed Term Contract Restrictions only applies to Sporting Organisation that fit the following descriptions:
- a national sporting organisation;
- a national sporting organisation for people with disability recognised by the Australian Sports Commission;
- a governing body for an organised sport in a State or Territory;
- if the governing bodies for an organised sport in a State or Territory are split between metropolitan and non-metropolitan areas – the governing body for the non-metropolitan area;
- a body conducting a State or Territory level competition for an organised sport; or
- a member of, or a person otherwise affiliated with, an organisation or body referred to above.
The last point would capture many member sporting clubs.
In addition, the delay is only for contracts which are for the following types of roles with those Sporting Organisations:
- athlete or player of an organised sport;
- coach in an organised sport;
- another kind of performance support professional for an athlete participating in organised sport;
- match official for an organised sport; and
- performance support professional for a match official for an organised sport.
There are also specific criteria for the other industries that have been provided with the delay, which we have not detailed in this blog.
If you are unsure of whether you can offer a fixed term contract in a specific circumstance, PCS can assist with reviewing the circumstances and provide advice about whether the offer is prohibited under the legislation.
Michael Nguyen, Senior Associate
Other Relevant Resources
2 November 2014