By Joseph Kelly, Kelly Workplace Lawyers
Fixed term contracts are employment contracts that terminate at the end of a set period (for example, the contract ends on a set date or after a set period of time or after an agreed milestone).
In some industries, such as academia, employees can be offered new fixed term contracts at the start of each year. This can create uncertainty for staff because they never know if their employment will continue from year to year. In December 2023, new rules were introduced to get rid of this uncertainty.
What are the rules for offering another fixed term contract?
A fixed term contract for most workers can’t be for longer than two years. This includes any extensions or renewals. Any fixed term contract that purports to allow for a renewal or extension beyond 2 years would be in breach of the limitation provisions.
An employee can’t be offered a new fixed term contract if the first 3 points below all apply, and one or more of the scenarios in the 4th point applies.
- Their previous contract was also for a fixed term.
- Their previous contract and the new contract are for mainly the same work.
- There is substantial continuity in the employment relationship between the previous and new contracts, and
- Either:
- the previous contract contained an option to extend that was used
- the total period of employment for both the previous and new fixed term contract is more than 2 years
- the new fixed term contract contains an option to renew or extend, or
- there was an initial contract in place (before the previous contract):
- that was for a fixed term,
- that was for the same or similar work, and
- where there was substantial continuity in the employment relationship.
Protections for employees
Fixed term contracts are now subject to rules that impose:
- time limitations (2 years);
- renewal limitations (once); and
- consecutive contract limitations.
Employers can’t take certain actions to purposely avoid these rules.
These are called the anti-avoidance protections. These protections include:
- ending employment or not re-employing the employee for a period of time
- not re-engaging the employee and employing someone else to do the same or substantially similar work instead, or
- changing the type of work or tasks that an employee does or changing the employment relationship.
If an employer does any of these things, it may also be adverse action.
Exemptions
There are some types of employment arrangements to which the limitation to fixed term contracts do not apply. If you are in doubt, please contact us through our booking tab.
