Australia: New law limiting the use of Fixed Term Contracts of employment: commenced 6 December 2023, but many exceptions – Part 2 of 3

In a previous article on this website, we advised that changes to Federal law enacted on 6 December 2022¹ limiting the use of "fixed term contracts" by employers would commence on 6 December 2023.

That article briefly described the scope and purpose of those changes and foreshadowed that we would publish a further article on this subject close to the time of commencement of these changes in order to provide more detail, particularly on the various exemptions to the new limitations.

In Part Two of this series we will summarise the main aspects of the changes.

A further article, Part Three, will discuss the major exemptions from the new law (i.e., those instances or circumstances where employers can continue to use "fixed term contracts" that do not comply with the limitations the new law prescribes).

These initiatives were supported by the Fair Work Ombudsman publishing the "Fair Work Fixed Term Contract Information Statement" (FTC Information Statement) that all employers are required to give employees when offering a new contract falling within the definition of a "fixed term contract"³.

"Headline" changes in the law

Briefly these are the main effects of the changes:

1. From 6 December 2023 onwards, an employer cannot employ someone on a fixed term contract that is either:

2. a) More than two years in duration;

   b) More than two years when its identifiable period plus any period by which it might be extended are added together;

   c) One that has an option within it for more than one extension; or

   d) Is one of consecutive contracts that together will be more than two years in duration

UNLESS the contract falls within one of the exceptions that the legislation and the regulations allows (as to which, see below).

2. If a fixed term contract is entered into on or after the date of commencement of the legislation (6 December 2023) and that contract contravenes the legislation, then the term of the contract that provides that the contract will terminate at the end of the identifiable period is taken to have no effect, but the balance of the contract, without that term, remains in effect.
3. Any dispute about the operation of the new statutory provisions may be taken by either party to the Fair Work Commission (FWC) for conciliation.
4. Any employee offered a fixed term contract that falls within the scope of the new legislation must be given the FTC Information Statement whether the contract falls within an exception or not.

Before looking at the main exceptions to the operation of these provisions, two general observations also need to made:

First, the legislation does capture some situations where an employee who has a fixed term contract that was entered into prior to the legislation taking effect (6 December 2023) then enters into another such contract with the same employer that date. The situations to which this apply is dealt with in Sub sections (4) and (5) of Section 333E⁴. While there a few different situations that are covered, one simple example is as follows: if an employee had a fixed term contract for a two year period that started before 6 December 2023 and expired after that date, the employee cannot be offered another fixed term contract by the same employer after that date if the contract is for substantially the same work and there is substantial continuity of employment between the two contracts⁵.