The second of the Labor government’s Closing Loopholes Acts has passed, ushering in a raft of changes to employment and industrial relations laws.
The Act follows the first round of amendments to the Fair Work Act that passed in December 2023, making wage and superannuation theft a crime, strengthening the rights of labour hire workers, and creating other new workplace protections (learn more about those changes in our earlier post)
The second bill creates a new definition of employment, changes the definition of casual employment, establishes minimum standards for “gig economy” workers, and creates a new right for employees to disconnect outside work hours.
There’s a lot to this bill and every business in Australia will need to understand and comply with changes as they are introduced over the next year, so let’s take a close look at the most important ones for SME employers.
New definition of employment
The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act creates a new statutory definition of employment that factors in “the real substance, practical reality, and true nature” of the employment relationship.
This will include weighing up both the terms of any written contract and how the relationship works in practice after the contract is entered into.
The current common law test to determine whether a worker is an employee or an independent contractor gives primacy to the terms of the contract.
High income earning contractors (those earning above a new contractor high-income threshold) will be able to opt out of having the new definition apply to their work arrangements.
Under other changes, contractors earning less than the high-income threshold will be able to take a dispute about unfair contract terms to the Fair Work Commission (FWC) and the FWC will have power to set contracts aside.
Timing: These changes start on 26 August 2024, or an earlier date set by the federal government.
“Gig economy” workers
Under new regulations, gig economy workers - such as rideshare and food delivery drivers - will be considered "employee-like" if they meet two or more of these criteria:
- They are engaged under a services contract.
- They perform digital platform work.
- They have low bargaining power.
- They have low authority over their work.
- They receive pay at or below the rates of comparable employees.
Gig workers (or organisations representing them) will then be able to apply to the FWC for orders for minimum standards, similar to that of a modern award, e.g. on pay and payment terms, penalty rates, leave, superannuation, insurance, and consultation.
Employee-like workers will also be able to make an unfair deactivation claim (similar to an unfair dismissal claim) if their access to the digital labour platform is removed.
Timing: To start on 26 August 2024.
Casual workers
Definition of casual employee
Closing Loopholes No. 2 amends the definition of casual employee in the Fair Work Act. An employee will only be a casual if:
- the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and
- the employee would be entitled to a casual loading or a specific rate of pay for casual employees (under a fair work instrument or employment contract).
A range of factors will determine whether there is an absence of a firm advance commitment, including the practical reality and true nature of the employment relationship, and the terms of an employment contract or mutual understanding (or expectation) between the employee and employer.
Casual conversion
The latest Act removes the current requirement (introduced in September 2021) for employers to offer conversion, and instead creates a single avenue for casual workers to choose to convert to permanent employment.
Casual employees will be eligible to ask for conversion after a period of 6 months (or 12 months if they work for a small business) if they believe they no longer meet the definition of a casual employee.
Employers will be able to refuse a request for conversion on “fair and reasonable operational grounds” and must respond within 21 days. The FWC will have power to deal with disputes.
Anti-avoidance provisions
The Act introduces anti-avoidance provisions to ensure employers don’t act improperly to make or persuade an employee to switch to or enter into a contract for casual employment to perform the same, or substantially the same, work.
This includes dismissing, or threatening to dismiss, an employee in order to employ them as a casual.
Casual Employment Information Statement (CEIS)
The existing requirement to provide a casual employee with a CEIS when they start work has been amended.
Employers will now be required to provide the CEIS as soon as practicable after the employee has been employed for a period of 12 months, to remind workers of their rights.
Employers who are not small businesses will also have to provide the CEIS after 6 months’ employment, and after each period of 12 months' employment.
Timing: Changes to casual employment start on 26 August 2024.
The “right to disconnect”
Under new rules, employees will be able to reasonably refuse to monitor, read or respond to contact (or attempted contact) outside of ordinary working hours, and will be able to raise a complaint about unreasonable out-of-hours contact with their employer.
The onus is on the employee and employer to resolve any issue at workplace level, but employees will be able to apply to the Fair Work Commission for an order to stop the employer’s contact if the matter is unresolved.
Employers who fail to adhere to a stop order could be fined.
Contact from an employer will be considered reasonable if:
- The worker is paid to be on-call or their job description requires it.
- The contact is during an emergency or to change conditions of work, e.g. location or hours.
Timings:
- From 26 August 2024 for non-small business employers (more than 15 employees).
- From 26 August 2025 for small business employers (fewer than 15 employees).
Increase in civil penalties
Civil penalties for some contraventions of the Fair Work Act will increase significantly, including penalties for breaching the National Employment Standards, awards, enterprise agreements, pay frequency, and employee records.
The new maximum penalties for a body corporate will be $469,500 or up to $4,695,000 for "serious contraventions". Note: These penalties will only apply to enterprises that have more than 15 employees.
Maximum penalties for underpayment will also increase, up to three times the underpaid amount for employers who intentionally underpay employees.
Timings:
- From 27 February 2024 for civil penalties and serious contraventions.
- No earlier than 1 January 2025 for wage-underpayment penalties.
Road transport conditions
The bill gives the FWC the power to set minimum standards for the road transport industry, including the charge-out rates of independent contractor owner-drivers, their rate of pay, and payment terms.
A regulated road transport contractor will be able to bring an unfair termination claim if their contract is terminated.
The bill also requires the establishment of a majority owner drivers subcommittee to advise the Fair Work Commission on road transport minimum standards.
Timing: To start on 26 August 2024, or an earlier date set by the federal Government.
Sham contracting
The bill amends the rules around defending a claim of “sham contracting” (misrepresenting an employment contract as an independent contracting arrangement), so that the onus will be on the employer to prove they reasonably believed they engaged the person as an independent contractor.
The current defence under the Fair Work Act requires an employer to prove that they did not know and were not reckless as to whether the contract was an employment contract rather than a contract for services.
In determining whether the employer's belief was “reasonable” a court will need to consider the size and nature of the employer's enterprise and other relevant matters (e.g. the employer’s skills, experience, and time operating, the industry they operate in, whether there are dedicated HR specialists or expertise in the business, and whether the employer sought and followed professional advice).
The maximum penalty for sham contracting is $18,780 for individuals and $93,900 for corporations, per contravention.
Timing: From 27 February 2024.
Our advice
There’s a lot to digest in this tranche of reforms, especially for organisations that employ casual workers, use independent contractors, or regularly contact their people outside work hours.
If you need any assistance understanding the changes or the way they will affect your business, please contact MyHR.
