Fixed term contract restrictions take effect 6 December 2023

Restrictions in relation to fixed term contracts are set to come into effect today, 6 December 2023. The changes are found in Division 5 of Part 2-9 of the Fair Work Act 2009 (Cth) (FW Act). The restrictions on the use on fixed term contracts is one of several key changes that were implemented under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (Secure Jobs, Better Pay Act).

We have previously written an article addressing the legislative amendments and implications of the proposed restriction on the use of fixed term contracts for employers, which is found here.

The focus of this article is on the most recent amendments to the Fair Work Regulations 2009 (FW Regulations) on 23 November 2023 by the Fair Work Amendment (Fixed Term Contracts) Regulations 2023 (Cth) that is relevant to the limited exceptions to the restriction on the use of fixed term contracts.

Background

From today, FW Act requires a national employer who engages employees under a fixed term contract to do the following :

1. Provide the employee with a Fixed Term Contract Information Statement that is published by the Fair Work Ombudsman, which can be accessed here.
2. Refrain from using fixed term contract for employment arrangements where the proposed period of engagement (including any extensions) exceeds two years, or, in the case of two consecutive contracts, where the employee is engaged for the same or similar work to the previous contract.

As outlined in our previous article, there are limited exceptions that apply to the legitimate uses of fixed term contracts. The most recent amendment to the FW Regulations explains the circumstances in which some of those exceptions will apply, which is discussed below.

High Income Threshold

The restriction on the use on fixed term contracts does not apply to a fixed term contract for which the employee’s earnings is above the high-income threshold. The amendment to the FW Regulations prescribes a method for calculating the high-income threshold for an employee engaged under a fixed term contract, who works part time or less than a year , as follows:

1. Work out the number of total hours the employee is required to work for the year;
2. Divide the number by the total number of hours a full-time employee would be required to work for the year to establish the proportion of yearly full-time hours the employee is required to work; and
3. Multiply the proportion of hours of yearly full-time hours that the employee is required to work by the high-income threshold, which is currently $167,500.00 (from 1 July 2023 to 30 June 2024).

Non-Government Funded – Philanthropic Entities

The restriction on use of fixed term contracts will also not apply to fixed term contract for the performance of work for which there is no reasonable prospects that funding is renewed at the end of the period.

The amendment to FW Regulation clarifies that positions for the performance of work funded, in whole or in part, by a philanthropic entity from a registered charitable entity, a testamentary gift, or by contribution to a philanthropic entity for a charitable purpose, is a legitimate use of a fixed term contract and would be exempt from restrictions. However, the contact must be entered into after 6 December 2033 but before 1 July 2024.

Contracts Prescribed by the FW Regulations

The restrictions on use of fixed term contracts will not apply to types of contracts of a kind prescribed by the FW Regulations. The amendment to the FW Regulations provides that the following types of contracts are legitimate uses of fixed term contracts and are exempt from the restrictions:

1. Organised Sport: a contract where the employee is being employed for the primary purpose of playing sport, either as an athlete, coach for an athlete, match official, or an ancillary staff who directly works to support an athlete or match official in participating in organised sport either physically or mentally. For example, this exception will apply to a physiotherapist who is contracted to provide services to assist the team in meeting their physical standards but not to a salesperson who assists the team with selling memberships. Additionally, the employer must be a recognised National Sporting Organisation or State or Territory governing body for sport;
2. High Performance Sport: a contract where the employee is being employed to directly support the administration or organisation of an international event for a high-performance sport. This exception is limited to international events that are not regularly held in Australia, such as Summer Olympics, the Commonwealth Games, and the International Federation of Association Football World Cup.
3. Live Industry Performance: a contract between an employer and an employee, where the employee is covered by the Live Performance Award 2020.
4. Higher Education Employees: a contract between an employer and employee, where the contract is covered by Higher Education Industry – Academic Staff – Award 2020, or the Higher Education Industry – General Staff – Award 2020.

As the restriction on the use of fixed term contracts comes into effect today, it is important to be aware how new amendments impacts the arrangement between an employee and employer.

If you would like any further advice on the impact of the new legislation on fixed term contracts, our Employment, Workplace Relations, and Safety group at McCabes Lawyers can assist.