The introduction of the Secure Jobs, Better Pay Act 2022 (Cth) signifies substantial changes aimed at curbing the use of fixed-term contracts and promoting permanent employment.

The Act imposes limitations on the use of fixed-term contracts for the same role (or substantially similar work), allowing for only two consecutive contracts or a maximum duration of two years, subject to specific exceptions. The Act also converts fixed-term contracts into permanent employment contracts under certain circumstances. These regulations apply to both fixed-term and outer-limit contracts, which are contracts with an expiry date but a general right to terminate before that date. 

The Act restricts the use of these contract types in several scenarios, including when the contract duration exceeds two years, includes an option to renew or extend the contract more than once, or when an employee has been engaged in consecutive fixed-term contracts resulting in a total engagement exceeding two years. 

For two contracts to be considered consecutive, the employee must perform the same or substantially similar work with substantial continuity in the employment relationship. 

The Act provides exceptions to these prohibitions for tasks requiring specialised skills, essential work during peak demand periods or emergencies, training arrangements or government funding of up to two years where there is no reasonable prospect that the funding will be renewed, employment above the high-income threshold (currently $167,500 per annum), governance positions with time limits, or wholly or partly government-funded contracts with no reasonable prospect of renewal. 

Employers will be obligated to furnish employees with a fixed-term contract information statement before or immediately after the contract begins. The Fair Work Commission (FWC) has the authority to introduce further exceptions through modern awards. Employers relying on exceptions must provide evidence to prove their eligibility, as unsubstantiated claims can lead to the contract being deemed continuous and a breach of the Fair Work Act 2009 (Cth). 

Impact on employers 

Employers should assess their workforce structure, review the circumstances in which fixed-term contracts are used, identify relevant exceptions, establish guidelines for offering and terminating such contracts, and ensure compliance with any contract templates in the business. Contracts with the potential for multiple renewals should be revised. Employers should also evaluate contract durations and differentiate between renewals and variations of existing contracts. 

For contracts deemed prohibited under the Act, they will be converted into permanent employment contracts, obliging employers to consider notice of termination, redundancy pay and the possibility of unfair dismissal claims. Breaches involve a civil remedy provision meaning that employers may also be required to pay monetary penalties. The FWC can resolve disputes related to fixed-term contracts and, where agreed to by the parties, may also arbitrate. Employees may instead seek court orders through the existing small claims procedure to address their employment status. 

Employers should be aware of anti-avoidance provisions within the Act, which prevent attempts to circumvent the prohibition, such as delaying rehiring or altering an employee's assigned tasks artificially. 

Our Employee Relations Advice Centre is also available to respond to your questions on (08) 9365 7660 or via [email protected].