Secure Jobs, Better Pay Bill: Limiting the use of fixed term contracts
In an attempt to promote secure and permanent employment, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 seeks to introduce some significant changes to fixed term contracts in Australia.
While fixed term contracts will still be legitimate in a variety of circumstances, including some seasonal and task related jobs, the changes seek will limit the use of rolling fixed term contracts which can disadvantage employees. Here, Trent Hancock outlines what those proposed changes are and how they will impact employees.
What are fixed term contracts?
A fixed term contract is an agreement for an employee to work for a clearly identified period. The exact length of a fixed term contract can vary, from a few weeks to 12 months or more depending on the nature of the work or project. They are often used in industries where there is seasonal work, for example horticulture, agriculture, and tourism, or to cover a project or period of leave such as maternity cover.
Fixed term employees have most of the same rights as permanent employees with regards to hours and leave entitlements and allowances.
What is going to change?
A new section 333E will render it unlawful to enter into a fixed term employment contract in certain circumstances. This will be a civil remedy provision meaning a penalty can be imposed. The circumstances in which a fixed term contract will be prohibited include:
(a) where the contract is for more than two years;
(b) contains provisions allowing for an extension or renewal for a total period of more than two years or provides for an option or right to extend or renew the contract more than once; and
(c) where consecutive contracts are used for the same or substantially similar work, with substantial continuity and the total period is more than two years or contains an option for renewal or extension.
There will be series of exceptions to this prohibition in a new section 333F including:
- work for a distinct and identifiable task involving specialised skills;
- training arrangements;
- essential work during a peak demand period;
- work during emergency circumstances or during a temporary absence of another employee;
- where the employee earns above the high-income threshold during the year the contract is entered into;
- a position that is funded by government or funding of a prescribed kind for more than two years with no reasonable prospect it will be renewed after the end of that period;
- a governance position that has a time limit under the governing rules;
- where a modern award allows it; or
- where the contract is a prescribed kind.
A new section 334G will render any unlawful fixed term as having no effect but does not affect the validity of any other terms of the contract.
Section 333H will also prohibit a person from terminating an employee, delaying the re-engagement of an employee, changing the nature of their work or otherwise altering an employment relationship in order to avoid any right or prohibition relating to unlawful fixed terms. This creates some important consequences for general protections claims under Part 3-1 of the FWA.
Another new section 333K will require employers to provide fixed term employees with a new Fixed Term Contract Information Statement to be prepared by the Fair Work Ombudsman. While new section 333L will allow the FWC to deal with disputes, it can only arbitrate a dispute by consent, which is a significant and unfortunate limitation in the dispute resolution process.
As noted in the Explanatory Memorandum, these amendments limit the use of fixed term contracts, subject to limited exceptions. While fixed term contracts continue to have a legitimate purpose, their ongoing use for some employees has become another form of insecure work. Fixed term contracts help businesses to source workers to perform discrete tasks for a fixed period and can be used genuinely for many purposes. However, fixed term contracts exacerbate job insecurity for employees when they are used for the same role over an extended period, or where employees are subject to rolling contract renewals for jobs that would otherwise be ongoing. The amendments would limit fixed term contracts for the same role to two consecutive contracts or a maximum duration of two years, while preserving the legitimate use of fixed term contracts in certain circumstances.
Disclaimer: This article should not be construed as legal advice and is not intended as such. If readers wish to obtain advice about anything contained in this article, they should speak with a lawyer and discuss their individual circumstances.