Final reminder – important changes to the Fair Work Act 2009 (Cth) take effect next week (6 and 7 December 2023)

Employers are reminded of the upcoming changes to the Fair Work Act 2009 (Cth) (FW Act) in respect of the use of fixed-term contracts (effective 6 December 2023) and the sunsetting of ‘zombie’ agreements (effective 7 December 2023).

Fixed-term contracts

From 6 December 2023, unless an exception applies (refer to our 29 November 2022 legal alert here), an employer will contravene the FW Act’s provisions if one of the following applies:

• The fixed-term period of a contract is for longer than 2 years. This includes new contracts and existing contracts extended or renewed.
• The sum of the fixed term period and any other period for which the contract may be extended or renewed is greater than 2 years OR the contract provides for an option or right to extend or renew the contract more than once.
• If the contract comes into effect after another contract (the previous contract) and:
• The previous contract included a term that provided that the contract would end at the end of a fixed period; and
• The previous contract was for the employee to perform the same, or substantially similar, work for the person as the employee is required to perform under the new contract; and
• There is substantial continuity of employment between the employer and the employee during the period between the previous contract terminating and the new contract coming into effect; and
• One or more of the following applies:
  • The sum of the period for which the previous contract was in effect and the fixed term period for the new contract is greater than 2 years;
  • The current contract contains an option for renewal or extension;
  • The previous contract contained an option for extension that has been exercised;
  • The previous contract came into effect after another contract (the initial contract) that was for a fixed term and was for the same or substantially similar work and there was substantial continuity of the employment relationship between the employer and the employee during the period between the initial contract ending and the previous contract coming into effect.

From 6 December 2023, employees on fixed-term contracts must be issued with the Fixed-Term Contract Information Statement (to be available on the Fair Work Ombudsman’s website from 6 December 2023).

The limitations don’t apply to fixed-term contracts entered into before 6 December 2023. However, any contract made before 6 December 2023 will need to be considered in respect of any further period of employment offered after that date.

Contravention of the FW Act’s provisions will expose employers to significant civil penalties. Further, if a contract doesn’t meet these new rules, the contract would be void, meaning the employee’s employment would be rendered and treated for all purposes as permanent.

EMA Legal can assist employers with advice regarding these impending changes.

Sunsetting of zombie agreements

As per our previous legal alerts on 15 February 2023 (accessible here) and 18 May 2023 (accessible here), effective from 7 December 2023, ‘zombie agreements’ will automatically terminate (‘sunset’) unless:

• the Fair Work Commission (Commission) has approved to extend the ‘default period’ beyond 7 December 2023; or
• the Commission has not yet decided whether or not to extend the agreement.

Once a zombie agreement is sunsetted:

• the agreement ceases to cover any employees, employers or other persons; and
• the legal minimum pay and terms and conditions of employment for employees that were covered by the agreement are likely to change and a modern award (or awards) is or are likely to apply.

Failure to apply the terms and conditions of a modern award/s that apply to employees will expose employers to penalties.

Employers intending to extend the default period for a zombie agreement must act now. Extension applications must be made to the Commission before 7 December 2023. EMA Legal can provide advice and assist employers with applications for extension and bargaining for a new agreement.