Third Maximum Term Contract Not Substantially Similar: What SME Owners Need to Know About the Fair Work Act Changes

If you’re running a small business and hire staff on fixed-term or maximum-term contracts, it’s important to understand recent changes to the Fair Work Act — or you could unknowingly create a permanent employment relationship.

A recent case, Ong v Victorian Energy Safety Commission [2025], is a timely reminder.

What happened?

An employee worked under three back-to-back term contracts, with her job title changing slightly each time:

1. HR Business Partner (April 2023–March 2024)
   
2. HR Business Partner again (Feb 2024–June 2024)
   
3. Senior HR Business Partner (July 2024–Dec 2024)

When her last contract ended, the employer said her job ended automatically — they didn’t “dismiss” her. But the employee claimed that her job should be considered ongoing and that she was unfairly dismissed. Why? Because the roles were similar and her employment had been continuous.

What the Commission found

Yes, the work was continuous — no breaks between contracts.

But, the final role was significantly more senior, with management and strategic duties. That made it substantially different from her previous roles, which were more administrative.

So, the Commission ruled that the employer didn’t breach the rules on consecutive contracts, and the employee was not unfairly dismissed.

What SME owners need to know

Changes to the Fair Work Act now limit the use of rolling term contracts. If you give an employee multiple term contracts for the same or similar work, the law may treat them as a permanent employee — even if you intended otherwise.

Avoid these common traps:

• Ending employment for a short time before rehiring the same person.
  
• Slightly changing job titles but keeping the same duties.
  
• Hiring someone new to do essentially the same job the previous contract worker did.
  
• Rewording the contract to make it “look” different without actually changing the work.
  

The takeaway?

If you’re using term contracts, keep clear records and be sure each role is genuinely different — not just on paper. If you’re unsure, it’s worth getting advice. Mistakes here can lead to unexpected liabilities or claims of unfair dismissal.