New rules on fixed term contracts

From 6 December 2023, new provisions introduced into the Fair Work Act 2009 (FW Act) place a maximum limit of 2 years on the use of fixed term contracts. The new rules on fixed term employees exclude casuals.

These new rules exist in addition to the restrictions that already exist in enterprise agreements and in the modern award on what is a temporary employee.

Under the new provisions in the FW Act a fixed term contract cannot be set for more than 2 years. This includes renewals and extensions.

An employee cannot have more than 2 consecutive contracts for the same or similar work.

If schools engage an employee whose fixed term contract is not compliant with the new rules and extends beyond the two-year maximum, then the end date of that contract will be deemed to be invalid by the legislation.

Additionally, there are anti-avoidance provisions in the legislation, and an ability for disputes about the operation of the provisions to be brought to the Fair Work Commission.

From 6 December 2023, the legislation requires that fixed term employees are provided with the Fixed Term Contract Information Statement (FTCIS) in addition to the Employee Information Statement.

Copies of the FTICS will be available from 6 December on the Fair Work Ombudsman (FWO) website. FWO has noted that it is sufficient for an employer to email the employee a copy of the website link to the FTCIS before the employee commences employment.

There are exceptions to the limits on fixed term contracts, which include employees who will be paid more than the high-income threshold (currently $167,500) in the year the contract is entered into, or where an employee is engaged under the contract to undertake work during emergency circumstances or during a temporary absence of another employee. A Q&A on this topic, including a full list of exceptions can be found at the bottom of this article.

Schools are also encouraged to speak with AISNSW Employment Relations Consultants for more information on how the laws apply.

Careful consideration to ensure the reasons for engaging an employee on a fixed-term contract are clearly documented, particularly in the case of second fixed-term contracts. Schools may wish to discuss particular circumstances with an Employment Relations Consultant to identify if any exceptions may apply, and prepare reminders for when contracts can be offered and when they expire.

Australian Human Rights Commission Powers

The Sex Discrimination Act 1984 (Cth) (SD Act) now places a positive duty on Schools to ‘eliminate, so far as is possible, discrimination involving subjecting persons to workplace environments that are hostile on the ground of sex’.

From 12 December 2023, the Australian Human Rights Commission (AHRC) will have new regulatory powers to ensure schools are meeting the positive duty requirements. These powers include the ability to monitor, assess and enforce compliance.

To uphold the positive duties, Schools may inform its practices in view of the benchmarks set by the AHRC Guidelines. The Guidelines will be used by the ARC to assess compliance.

For more information please do not hesitate to contact the AISNSW Workplace Management Team on 02 9929 2845.

Questions and Answers – Fixed Term Contracts

Question 1: What are the exceptions to the limitations on fixed term employment?

The following exceptions to the upper limit of two years for fixed term contracts are provided under the Fair Work Act 2009 (Cth) (FW Act):

  • the employee is engaged under the contract to perform only a distinct and identifiable task involving specialised skills;
  • the employee is engaged under the contract in relation to a training arrangement;
  • the employee is engaged under the contract to undertake essential work during a peak demand period;
  • the employee is engaged under the contract to undertake work during emergency circumstances or during a temporary absence of another employee;
  • in the year the contract is entered into the amount of the employee’s earnings under the contract is above the high income threshold (currently $167,500) for that year;
  • the contract is wholly or partly funded by government funding (or a type of funding allowed by the regulations) and the funding is for a period of more than two years and there are no reasonable prospects that the funding will be renewed after that period;
  • a modern award covering the employee permits them to be employed for more than two years under a fixed term contract, a renewable contract and/or a consecutive contract;
  • the contract relates to a governance position that has a time limit under the governing rules of a corporation or association of persons;
  • the contract is of a kind prescribed by the regulations.

Question 2: Do the new laws apply to promotional positions which are established via fixed term appointments?

AIS considers that leadership appointments are not caught by the new FW Act provisions on fixed term employment where these appointments are additional to the substantive teacher contract.

The explanatory materials surrounding the changes to fixed term work in the FW Act indicate that the amendments were primarily designed to reduce the instances of “insecure work” and reduce “job security”. Promotional positions that are made via a separate appointment for a set time period are in our view an “add-on” to the substantive permanent employment and we would argue are not caught by the legislation.

Question 3: A sports coach works for three terms in a year and we offer this person temporary fixed term employment each year. Are we required to make them permanent?

The FWO view in relation to the consecutive contract limitations is that fixed term contracts cannot be used where the work is mainly the same, where there is no substantial break between the employment relationships and the total period of the combined contracts is more than 2 years.

The break between contracts of one full school term is likely to be regarded as a  “substantial break” in the employment relationship. As such, in our view, the employee can be offered a further fixed term employment as there has been a substantial break in the employment.

*Disclaimer: this advice is general in nature and not legal advice. The advice is current as at 5 December 2023.