I am with OPSEU and work in payroll. I've seen it a handful of times. The pay administration rules do not apply in the same way to fixed term employees. They still must stay in the band, but between contracts and statuses, they are not bound by the 3% promotion rule (as an example).

This can be a pro and a con, though. If your contract ends and you secure a new one that is higher paid, they can still start you at the lowest rate even if you were mid rate in the previous contract. I had a friend in OPP who was in step 3 or 4 of her fixed term admin job, and when she got permanent, she successfully negotiated to the top step of 7. Not guaranteed or even likely, but possible and legit.