No more quick fixes for Australian Public Service?

In connection with those changes, the Public Service Regulations were also amended to insert restrictions on Agency Heads engaging non-ongoing employees in the APS. Some of those requirements are detailed, but we’ll summarise them.

In relation to a Senior Executive Service (SES) employee, an Agency Head may only engage an SES employee for a specified term if the Agency Head is reasonably satisfied that entering the contract would not contravene s. 333E. This may include relying on one of the statutory exceptions, including the high-income exception, but APS Guidance recommends seeking legal advice before doing so.

Regarding non-SES employees, the regulations are more complex. As with SES hires, Agency Heads must be reasonably satisfied that the engagement of a non-ongoing, non-SES employee would not contravene the new s. 333E(1) of the Fair Work Act. There are then a number of restrictions depending on whether the engagement is for a specified task, or a specified term. If those requirements are met, the Regulations add further requirements for the engagement of non-ongoing, non-SES employees about how long a specified term may be, which differs depending on the time the engagement occurs, and whether approval for an extension is gained.

So, when is a fixed-term employment arrangement allowed under s. 333E(1) of the Fair Work Act?

Restrictions under Fair Work Act

Section 333E of the Fair Work Act prohibits employment contracts that are stated to automatically end after a period of more than two years, or that provide for more than one right to renew or extend, unless the employee would genuinely be a casual employee, or the contract meets one of the exceptions within s. 333F. Consecutive contracts for substantially similar work are also not allowed where they total greater than two years or have an option for renewal or extension.

The Fair Work Act now also requires employers to give a Fixed Term Contractor Information Statement (FTCI) to any fixed- or maximum-term employees (including non-ongoing employees in the APS) at commencement. This applies even if the fixed-term arrangement is less than two years. So, essentially, all non-ongoing APS employees must be provided with this FTCI Statement. This is a civil remedy provision, so failing to give this Statement could result in civil penalties.  

There are also strong anti-avoidance provisions aimed at stopping employers from engaging another employee to perform substantially the same role, or from delaying or avoiding an employee’s re-engagement if the purpose is to avoid these prohibitions.

In addition to the risk of penalties for some breaches (such as failing to issue a FTCI Statement), or the risk of contravening the Public Service Act if an Agency Head does not meet all regulations specific to the engagement, there is also the risk that an arrangement that is intended to be non-ongoing will unintentionally become ongoing. 

That is, the Fair Work Act provides that a fixed- or maximum-term contract (e.g. for non-ongoing employment in the APS) will not end at the proposed end date if the contract otherwise contravenes these prohibitions. For example, if an employee is engaged on a non-ongoing contract for two years, which is then extended for a further year (total three years, being more than the Act allows), and none of the (limited) statutory exceptions apply, the term which says that the employment will end in one year will have no effect. 

So, that employee who was engaged on a non-ongoing basis may in practice become an ongoing employee. Unfortunately, this will have occurred without the Department or Agency undertaking the necessary merit selection process. That could be a difficult mess to untangle!

Maximum-term contracts

So, what are the exceptions? When will a fixed- or maximum-term contract be allowed?

The Act allows for fixed or maximum term contracts in some circumstances, which include:

• Employees engaged to perform only a distinct and identifiable task involving specialised skills.
• Training arrangements.
• Engagements for essential work during peak demand periods.
• Engagements for emergency work, or during the temporary absence of another employee.
• Employees who earn above the high-income threshold across the year (currently $175,000).
• Where permitted under a modern award covering the employee.
• Wholly or partially government funded work, where the funding is payable for a period of more than two years, and there are no reasonable prospects that the funding will be renewed.

The exceptions are deliberately limited, and if there is uncertainty, they are likely to be applied narrowly to give effect to the intention of the legislation. That is, to favour permanent employment over short-term.

Given the complexity and potential importance of the exceptions, the APSC’s guidance recommends seeking legal advice if you intend to rely on an exception for a non-ongoing employment contract.

If there is a dispute relating to a fixed- or maximum-term contract, the parties must first attempt to resolve the dispute through workplace level discussions. If that fails, either party may refer the dispute to the Fair Work Commission, which has a newly established jurisdiction to deal with these matters.

How departments or agencies with non-ongoing employees can adapt

The limitations have the potential to disrupt established recruitment practices, particularly for Departments or Agencies which rely heavily on non-ongoing employees to maintain their organisational capabilities.

APS employers should review their contract and engagement letter templates to ensure employees are not offering non-ongoing engagements for total periods exceeding two years, or with the possibility of further renewal if they have already been renewed, unless an exception applies. Contracts which contravene the limitations will otherwise be valid, with the non-compliant termination dates having no effect.

This could have the effect of converting those employees’ engagement from non-ongoing to ongoing and is not intended to be used to bypass merit-based recruitment requirements.

APS employers should also be cautious to issue a copy of the Fixed Term Contract Information Statement at the commencement of all new non-ongoing engagements.

Ryan Murphy is a Principal at McInnes Wilson in Sydney, specialising in employment law and industrial relations.