From Wednesday 6 December 2023, the fixed term restrictions introduced as part of the Secure Jobs, Better Pay reform package will come into force. As a recap, these rules are designed to restrict an employer’s ability to engage employees on fixed/maximum term contracts by preventing the hiring of employees on contracts with terms exceeding two years, and by preventing the renewal or extension of contracts for a period of more than 2 years. The restrictions also prevent the engagement of employees on multiple fixed term contracts for the same or similar work.
Section 333F of the incoming amended Act contains exemptions to the restrictions in section 333E and permits the use of fixed term contracts in specific circumstances, sectors and roles. They include permitting the use of fixed term contracts for specific tasks involving specialised skills, training arrangements, to fill temporary absences or cover emergency work, to cover essential work during peak demand periods, high income employees, and positions dependant on certain funding arrangements.
The Fair Work Amendment (Fixed Term Contracts) Regulations 2023 package amends the Fair Work Regulations to expand the scope and operation of these exemptions. These new regulations will commence at the same time as the fixed term restrictions in the Act on 6 December 2023 and will:
- Clarify the further sources of funding, in addition to already legislated sources, that apply for the purposes of the exemption contained in subsection 333F(1)(f)(i) of the Fair Work Act;
- Provide for further exemptions for the purposes of subsection 333F(1)(i) in relation to organised sports, high performance international sporting events, the live performance sector, and the higher education sector; and
- Confirm the method of calculating the high-income threshold for the purpose of subsection 333F(2) for employees who work only part of the year.
Additional funding sources: Philanthropic entities
Incoming section 333F(1)(f) of the Fair Work Act provides an exemption to the fixed term restrictions where the position is funded by government or ‘funded by a kind of funding permitted by the regulations’. This funding must be payable for more than two years and there must be no reasonable prospects that the funding will be renewed.
Incoming regulation 2.15(7) will expand the funding sources permitted by the Act by exempting positions funded by ‘philanthropic entities’. The Regulations define this as funding that is:
- provided by an entity (a philanthropic entity) registered under the Australian Charities and Not for profits Commission Act 2012; or
- provided as a testamentary gift or testamentary contribution to a philanthropic entity for a charitable purpose (within the meaning of the Charities Act 2013) of the philanthropic entity.
The person who entered into the funding arrangement with the employee cannot be an associated entity of the ‘philanthropic entity’ and this exemption only applies to contracts entered into on or after 6 December 2023 and before 1 July 2024.
New sectors exempted: Organised sports, high performance international sporting events, the live performance sector, and the higher education industry
Section 333F(i) allows the regulations to provide for additional categories of contracts that are exempt. The Government has decided to expand the categories of employees exempt from the fixed term restrictions following concerns raised about the impact of the restrictions on professional sporting codes, elite international sporting events, the live performance sector and the higher education industry.
These sectors have traditionally relied on fixed term engagements to meet their staffing needs, which are unique to the timeframes and work schedules in their particular industry. These unique requirements may include the need to contract elite athletes or coaches for multiple seasons, contract musicians and support staff for extended tours and prepare for elite international sporting events that may take years to prepare and plan for. This type of work requires staff for specified periods that exceed 2 years but do not necessarily provide for indefinite and ongoing work.
Based on this feedback, the new regulations now temporarily exempt the following employees from the fixed term restrictions at section 333E of the Act:
- Employees engaged to primarily perform in an organised sport as either an athlete, coach for an athlete, match official, or a performance support professional (excluding administrative or management roles or non-player facing roles);
- Employees engaged to directly support the administration or organisation of an international event for a high-performance (elite) sport where the employer is either the international organising body or the Australian organising body for the international event;
- Live performance sector employees covered by the Live Performance Award 2020 where the contract is not for a period of greater than 12 months; and
- Higher education industry employees covered by either the Higher Education Industry – Academic Staff – Award 2020, or the Higher Education Industry – General Staff – Award 2020.
The exemptions above only apply to contracts entered into on or after 6 December 2023 and before 1 July 2024.
High income threshold exemption
Section 333F(1)(e) provides an exemption where the employee’s contracted earnings exceed the high income threshold. Section 333F(2)(e) provides that the Regulations will set out the method of calculation for the high income threshold where the employee is only required to work for part of the year. This method for calculating the high income threshold for employees who only work a part-year is now provided in regulation 2.14 as follows:
- begin with the number of hours that the engaged employee is required to work in that year;
- divide that number of hours by the number of hours that a full‑time employee ‘would work’ in that year;
- multiply the result of paragraph (b) by the high income threshold, for the financial year in which the contract is entered into.
To determine the number of hours that a full time employee ‘would work’ in that year, the incoming regulations specify that the hours worked by a full time employee under any applicable enterprise agreement or modern award should be used, or if no enterprise agreement or modern award applies, then the number of hours of work of any other full‑time employees of the employer employed in the same position (or in a position that is comparable), should be used. If none applies, the figure of 38 hours per week should be used.
Key takes for employers
The detail and scope of the amendments above are just one indicator of the complexity of navigating the incoming fixed term restrictions.
The employer bears the evidential burden for proving any exemption under section 333F applies, and there is now a dedicated dispute resolution procedure at section 333L of the Act in relation to fixed term contracts. These two factors alone underscore the need for employers to have a proper understanding of how these new provisions (and exemptions) apply to their existing contracting arrangements.
Employers should be aware significant and increased civil penalties apply for breaching the fixed term restrictions in the Fair Work Act, so staying on top of any amendments or developments in relation to the incoming fixed term contract restrictions is critical.