Fixed Term Contracts & Prohibiting Pay Secrecy – Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022

FIXED TERM CONTRACTS

The Bill proposes limiting the use of fixed term contracts for the same role beyond two years (including renewals) or two consecutive contracts, whichever is shorter, unless an exception applies.

Where a fixed term contract is made in breach of the provisions, any terms dealing with expiration of the contact (and employment relationship) would be of no effect and the employee would be considered a permanent employee with access to entitlements to notice of termination and redundancy pay and to proceedings because of dismissal (for example, unfair dismissal).

In the second reading speech, Minister for Employment and Workplace Relations, the Honourable Tony Burke advised the amendments were aimed at improving job security and general equality:

The number of workers on fixed term contracts has increased by over 50 per cent since 1998. More than half of all employees engaged on fixed term contracts are women; and more than 40 per cent of fixed term employees have been with their employer for two or more years.

This bill will limit the use of fixed term contracts for the same role beyond two years or two consecutive contracts, whichever is shorter, including renewals. If these rules are breached, the term of the contract that provides for its expiry on a set date will be of no effect, but otherwise the contract will be valid. The provisions allow employers to use fixed term contracts for legitimate purposes, while providing appropriate protections to employees.

The exceptions are important for each employer to consider. These include circumstances where:

• the employee is engaged to perform distinct and identifiable tasks involving specialised skills; or
• the employee is engaged under the contract in relation to a training arrangement; or
• the employee is engaged under the contract to undertake essential work during a peak demand period; or
• the employee is engaged under the contract to undertake work during emergency circumstances or during a temporary absence of another employee; or
• in the year the contract is entered into the amount of the employee’s earnings under the contract is above the high income threshold for that year (currently $162,000).

The provisions will apply to all new contracts of employment entered into on or after commencement of the legislation. Any contract that was in place prior to the legislation would be counted if a subsequent contract is entered into after the commencement of the legislation.

Employers wishing to engage employees on a fixed term basis will be required to provide the employee a ‘Fixed Term Contract Information Statement’ (similar to the Casual Employment Information Statement).

The Fair Work Commission will be empowered to deal with disputes about fixed term contracts that are not resolved at workplace level via conciliation, mediation or consent arbitration. The Federal and Family Circuit Court of Australia and Magistrates Courts will also be empowered to deal with disputes under the small claims procedure.

Employers should immediately review arrangements where fixed term contracts are in place.  It is important to understand why fixed term contracts have been used in the past, and if intended to continue or be made after the legislation takes effect, what changes (if any) should be put into place to support business strategies.

PROHIBITING PAY SECRECY

The Bill also proposes prohibiting pay secrecy clauses in employment contracts, so that employees who want to discuss their pay, will have a workplace right to do so. Employees would also be entitled to discuss any term or condition of employment that is reasonably necessary to determine renumeration outcomes (for example, hours of work). Equally, employees who do not wish to discuss their pay, will not be required to.

Employers will not be required to disclose employee remuneration details. Employers who continue to include pay secrecy clauses in written agreements and contracts will be liable to civil penalty. Any pay secrecy term would be void and of no effect.

Employers should at a minimum, review template contracts, agreements and handbooks to ensure that terms dealing with pay secrecy are removed.