The second Closing Loopholes Bill to come into law

The Second of the Government’s Closing Loopholes Bills has passed by Parliament on 12 February 2024. 

This second Bill was expected and further amends the Fair Work Legislation. The legislative provisions that passed include:

• Casual employment, including definitions and “conversion” provisions;
• The “right to disconnect”;
• The definition of employment for the purposes of the Fair Work Act 2009 (Cth);
• Increases to civil penalties, particularly for civil underpayments; and
• The impact the new intractable bargaining determination provisions may have on bargaining strategy.

Top to bottom – Which reforms do I need to know about?

A statutory definition of employee (to start 6 months after Royal Assent or earlier by proclamation)

There will be a new definition of employee and employer in the Fair Work Act. Under the new definition the ‘real substance, practical reality and true nature of the relationship’ between the parties will be assessed. This is a return to the ‘totality and true nature of the relationship’ which will consider the terms of the contract and other factors including how the contract is performed in reality. 

This change in the Act will overrides the approach adopted by the High Court in the Personnel Contracting and Jamsek Subcontractor decisions – and takes us back to the multi-factorial approach that applied previously. The old ‘if it walks like a duck etc; it’s a duck assessment’. 

Employers / principal contractors will need to monitor how engagement operates after a contract commences. Considering questions like – is this worker being directed as an employee? 

The impact being that businesses may engage an individual with the understanding that they are hired as an independent contractor, but later could be found to be an employee – with a number of employee related entitlements, like leave or the prospect of an unfair dismissal claim.

Contractors

(to start the day after Royal Assent)

Where you already engage a subcontractor when the changes commence, and who earn over a currently unspecified high income threshold for contractors, will be able ‘opt out’ of the definition. 

There is a complex notification and record keeping regime attached to this process. Further, the subcontractor will also have a right of revocation.

For subcontractors earning below this high income threshold they will be able to dispute allegedly unfair contract terms in the FWC. Rather than going through the courts system – which does have potential benefit for both parties as court proceedings are costly. 

The Independent Contractors Act 2006 will continue to apply in respect of independent contractors paid above the new contractor high income threshold to challenge their contract terms. This legal approach to disputing terms is not commonly used.

Casual employees

(to start 6 months after Royal Assent)

There will be a new definition of casual employee inserted into in the Fair Work Act. To date, a ‘common law’ definition of what it means to be casual has been applied and this has resulted in some costly legal proceedings in the High Court for Workpac in recent years. 

In general, casual employment will be:

• there is no firm advance commitment to continuing and indefinite work; and
• the employee is entitled to a casual loading or a specific rate of pay for casual employees (under an award/EBA or contract of employment).

There are tests for assessing this concept of a ‘firm advance commitment’. This will include ‘the real substance, practical reality and true nature of the relationship’. The employment contract can be one of these relevant factors, although others will still need to be considered.

Keen employment law observers will recall that there is already a casual conversion provision in the National Employment Standards. These existing conversion provisions will cease to operate and the onus will be on the casual employee to make a request to change their employment status. Differences will still apply to those employers that are small businesses. However, this won’t be an exclusion any longer as the employee needs to have been employed for at least 6 months before requesting (or 12 months for small business employers).

An employer can refuse an employee’s request on slightly broader ‘fair and reasonable operational grounds’. In practice it would be fair and reasonable to not accept a request if substantial changes would be required to the way in which work in the employer’s enterprise is organised. 

This does, however, bring with it new workplace rights and this gives rise to potential general protection claims. Of course there will be notifications, responses and offers required by the parties.

• Fixed term contracts: the capacity for employers to engage casual employees on fixed term contracts has been broadened to assist on-hire / recruitment companies offering temporary contracts. (exclusions apply for the higher education sector academic).
• Casual information statement: employers will have to provide casuals with a Casual Employment Information Statement more often – commencement, after 6 months (excluding small business employers) and 12 months (all employers).

If you have not considered your use of casual labour recently, now is the time to consider how these changes impact your workforce.

Right to disconnect

(to start 6 months after Royal Assent; 18 months after Royal Assent for small businesses)

A new right to disconnect will be included in the Fair Work Act. There are quite a few caveats to this right that should be noted.

While employees will have the right to refuse to monitor, read or respond to contact (or attempted contact) from an employer outside of their working hours; they cannot do so if that refusal is unreasonable. 

The right also extends to contact (or attempted contact) outside of the employee’s working hours from a third party if work related (e.g. from customers or clients).

However, for those wondering if on-call rosters will become illegal; that is not the case. The following factors must be considered in determining whether an employee’s refusal to be contacted is unreasonable:

• the reason for the contact or attempted contact;
• how the contact or attempted contact is made and the level of disruption the contact or attempted contact causes the employee;
• the extent to which the employee is compensated (including non-monetary compensation) to remain available to perform work or be contacted, or for working additional hours, outside of ordinary working hours;
• the nature of the employee’s role and the employee’s level of responsibility; and
• the employee’s personal circumstances (including family or caring responsibilities).

Further, if there is a dispute regarding the employee’s right to disconnect, the parties must first attempt to resolve it at the workplace level. If unsuccessful, parties can apply to the FWC to make an order to stop refusing contact, to stop taking certain actions, or to otherwise deal with the dispute. Penalties can be imposed if an order is breached.

The right to disconnect will also be a workplace right for the purposes of the general protection regime under the Fair Work Act. All modern awards will also be required to include a right to disconnect clause.

Underpayments 

(amended penalties to start later of day after Royal Assent or when (but not before) the Wage Compliance Code comes into effect; exemption certificate changes start 1 July 2024)

There were changes to include a new criminal wage theft offence in December 2023 Bill 

No 2 includes a new provision to allow unions to obtain an exemption certificate from the FWC to waive the minimum 24 hours’ notice requirement for exercising right of entry. That is, if they reasonably suspect their member has been or is being underpaid wages. Before issuing a certificate, the FWC must be satisfied that advance notice of entry into a workplace would hinder an effective investigation. 

Penalties associated with an underpayment will be significantly increased under these latest reforms – for the first time a penalty could be ordered which is proportionate to the extent of the underpayment. 

Employers who intentionally (rather than dishonestly) underpay staff will face a penalty of up to 10 years in prison and a maximum fine of up to $7.825 million, or three times the underpaid amount (if it exceeds the cap).

Intractable bargaining disputes

(to start the day after Royal Assent)

There has been some tweaking to the intractable bargaining disputes which can be made by a single bargaining representative. If an intractable bargaining declaration is made, the FWC Commission must make a workplace determination as quickly as possible. Under Closing Loopholes No. 2 Bill, that workplace determination, other than in respect of wage increases and agreed terms, must not be less favourable to employees than corresponding terms in existing enterprise agreements. 

Regulated workers 

(employee-like ‘gig economy’ digital platform workers / road transport industry) (to start 6 months after Royal Assent or earlier by proclamation)

Likely of least impact to the electrical contracting industry are the changes that introduce a series of protections for workers in the road transport industry and employee-like gig economy / digital platform workers. These are set to give the FWC power to also set minimum standards for persons in a ‘road transport contractual chain’.

MEA will continue to update members with more information on each provision so that they may prepare for those terms as they reach their operative dates. 

However, it is our recommendation that businesses now consider their use of long term subcontracting arrangements and casual employees in particular to best prepare for these changes.

Should you have any questions regarding the changes passed to date please contact the Employer Advice Team on 1300 889 198.