Part 1: “Closing Loopholes” — the key amendments

Posted by May 29, 2024 | Articles | No Comments

The first of our series looks at the recently passed ‘Closing Loopholes’ legislation. The changes take effect at different times between now and 2025.

Labour hire employees

Employees, unions and host employers can apply to the Fair Work Commission (FWC) for an order that labour hire employers must pay their employees — who are supplied to a host employer — at least the same rate they would receive under that host employer’s enterprise agreement (or other relevant workplace instrument).

The exceptions to this include:

  1. if such an order is not fair and reasonable (assessed against a range of listed factors such as pay arrangements of the host, history of industrial arrangements of the host, whether the host is in a joint venture and the nature, period and location of the arrangement under which they work);
  2. if the host employer is a small business; or
  3. if the arrangements are for a service to be provided (rather than the supply of labour to a host employer).

Any orders of the FWC will not come into effect until 1 November 2024, although there are already applications lodged with the FWC.

Criminalisation of wage theft

It is important for all employers to be aware that from 1 January 2025, intentional wage and superannuation theft will be criminalised. These crimes will attract potential prison sentences up to a maximum of 10 years and fines of:

  1. up to three times the amount of the underpayment (if the court can calculate this) or $7.825 million (whichever is greater) for corporations; and
  2. up to three times the amount of the underpayment (if the court can calculate this) or $1.565 million (whichever is greater) for individuals.

The new laws are aimed at encouraging employers to audit and self-disclose underpayments to avoid being referred to the Fair Work Ombudsman for investigation and possible criminal prosecution.

Protection against discrimination based on Family and Domestic Violence (FDV)

Currently in place are new protections for workers who experience family and domestic violence, protecting workers from discrimination and adverse action on the basis of FDV.

Protecting employees — small business redundancy payments

Employees will no longer be disadvantaged with a lack of entitlement to redundancy pay due to the employer having fewer than 15 employees in circumstances where they are made redundant in a downsizing process in which the business previously had 15 or more employees.

In these circumstances, affected employees will be entitled to a National Employment Standards (NES) redundancy payment.

Industrial manslaughter

Of serious importance to employers, especially in manufacturing, resources and other industries prone to accidents, from 1 July 2024,  a new criminal offence of industrial manslaughter is introduced for Commonwealth Government bodies and employers insured under the Comcover scheme.

From 1 July 2024, there will be an offence with maximum penalties of $18 million for a body corporate and 25 years’ imprisonment for an individual. There will also be higher penalties for breaching work health and safety duties.

Asbestos Safety and Eradication Agency Act 2013 (Cth)

This Act has been amended to extend the operation of the Asbestos Safety and Eradication Agency to include matters relating to respirable crystalline and silica-related diseases.

The agency will be renamed the Asbestos and Silica Safety and Eradication Agency to reflect its new silica-related functions.

Safety, Rehabilitation and Compensation Act 1988 (Cth)

This Act has been amended to introduce a rebuttable presumption that diagnosed post-traumatic stress disorder in first responders was contributed to, by a significant degree, their employment.

Accordingly, first responders will not be required to prove that their employment significantly contributed to their health condition when making a workers’ compensation claim. Instead, the burden of proof will be on the employer to show the injury was not caused by their employment.

Statutory definition of ‘employee’ and ‘employer’

A very significant change is that from 26 August 2024 there will be a new definition of employee and employer in the Fair Work Act 2009 (FWA).

The new meaning of an employee and employer is to be determined by ascertaining:

  1. the real substance, practical reality and true nature of the relationship between the parties; and
  2. the totality of the relationship between the parties — which includes the written terms of any employment contract and how the contract is performed in practice.

The new approach overrides the approach adopted in the High Court decisions of Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 — which had regard to the primacy of the written terms of the contract.

The new statutory definition reverts to the multi-factorial approach in assessing the employee vs contractor relationship. So, it will be important for employers and principal contractors to consider the conduct of parties to an engagement in practice.

Independent contractors

If an independent contractor earns above a ‘contractor high-income threshold’ — which is yet to be specified — they can ‘opt out’ of the employee/employer definition through a notification process.

Independent contractors earning below the contractor high-income threshold can dispute unfair contract terms in the FWC. Independent contractors earning above this ‘contractor high-income threshold’ can still challenge contract terms through the courts.

Minimum standards for ‘employee-like workers’

From 26 August 2024 the FWC can set binding minimum standards, make guidelines and deal with disputes on the unfair deactivation of ‘employee-like’ workers performing digital platform work.

Who falls within ‘employee-like’ workers is the subject of a lengthy definition in the Act. It includes someone who:

  1. performs all or a significant majority of the work under the services contract; and
  2. the work performed is digital platform work; and
  3. has low bargaining power;
  4. has low authority over the performance of work; and/or
  5. receives remuneration at or below the rate of employees performing comparable work.

Sham contracting

The FWA already prohibits sham contracting — being employment arrangements disguised as independent contractor relationships.

Previously, employers could defend liability for sham contracting on the basis that they did not know and were not reckless as to whether a contract was a contract of employment rather than a contract for services.

The amendment to the FWA will change the employer’s defence to instead require an employer to prove that it reasonably believed the contract was a contract for services.

New definition of ‘casual employee’

From 26 August 2024 there is a new definition of casual employee.

A casual employment relationship exists if:

  1. there is no firm advance commitment to continuing and indefinite work; and
  2. the employee is entitled to a casual loading or a specific pay rate for casuals.

This replaces the previous definition that a casual employment relationship existed if the person accepted an offer made on the basis of an absence of commitment to ongoing employment and they became an employee as a result of that acceptance.

New anti-avoidance provisions have also been introduced prohibiting an employer from:

  1. dismissing, or threatening to dismiss, an employee in order to engage them as a casual employee to perform the same or substantially the same work; and
  2. making false representations to persuade or influence a permanent employee to enter into a contract for casual employment under which they will perform the same or substantially the same work.

New route to casual conversion

Previously employers had an obligation to offer a casual a conversion to permanency after a year of regular employment. The onus will now be on the casual employee to make a request to change their employment status. Casual employees can notify their employer of their intention to change to permanent employment if the employee has been employed for at least six months (12 months if working for a small business employer), and they believe they no longer meet the requirements of the new definition of casual employment.

Employers must consult with the employee on the casual conversion notification and respond in writing within 21 days advising of whether the proposed change is accepted or refused.

An employer can refuse a casual conversion request if the employee still meets the definition of a casual employee or on ‘fair and reasonable operational grounds’.

If a dispute about casual conversion cannot be resolved at the workplace level, the FWC can arbitrate the dispute.

The right to disconnect

Also a significant change, and in keeping with broader changes in employment law in many countries, is the introduction of laws providing the right for employees to disconnect from work, so that for example they are not required to take calls or respond to emails or texts outside normal working hours.

From 26 August 2024 for non-small businesses and from 26 August 2025 for small businesses, eligible employees have the ‘right to disconnect’ outside of work hours.

Employees will have the right to refuse to monitor, read or respond to contact from an employer or a third party outside of their work hours, unless that refusal is unreasonable.

Whether an employee’s refusal is unreasonable depends on:

  1. the reason for the contact;
  2. how the contact is made, and level of disruption caused;
  3. the extent to which the employee is compensated to remain available to perform work outside of hours;
  4. the nature of the employee’s role and level of responsibility; and
  5. the employee’s personal circumstances including family and caring responsibilities.

If there is a dispute about the right to disconnect, the employee or employer can apply to the FWC to deal with the dispute. The FWC has the power to make an order to stop the employee refusing the contact or to stop certain actions from the employer. It can also order penalties for breach of orders.

The right to disconnect will also be a workplace right under the general protections provisions of the FWA.

Minimum standards for the road transport industry

From 26 August 2024 the FWC can, subject to certain requirements, set minimum standards for the road transport industry, including road transport contractors and businesses who hire them and persons in road transport contract chains.

Standards may be in the form of orders or non-binding guidelines and can cover matters such as payment terms or costs recovery. Standards cannot include terms about overtime rates, rostering arrangements, the form of engagement of workers or work health and safety matters otherwise dealt with by legislation.

The FWC will also be able to deal with disputes over the unfair termination of a road transport contractor’s services, provided the contractor earns under the contractor high income threshold and has been performing work in the industry for at least six months.

Further advice

For employers, it is essential to be across these important changes to Australian workplace laws and understand how they may impact your workforce and your obligations as employer. They also impact on individuals such as directors, executives and managers who are involved in decision making, not only in facing the risk of fines, but in the case of accidents and wage theft, possible prison time.

MDC Legal is a specialist employment law firm providing advice on all aspects of employment law, including understanding and compliance with the Closing Loopholes amendments.

Get in touch with one of our lawyers today for assistance with understanding these new changes.

Part 2 of our employment law update covers the key amendments under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022.