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Express Newsletter: Closing Loopholes No 2 reforms commence today

A tranche of reforms brought about by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 will commence today, 26 August 2024, including:

• changes to the definition of who is a contractor and who is an employee including ‘opt out’ arrangements;
• changes to the definition of casual employment and the casual conversion pathway;
• independent contractor ‘unfair contracts’ disputes;
• the right to disconnect;
• provisions for ’employee-like’ workers and the road transport industry; and
• collective agreements and workplace delegates rights for regulated workers.

Contractor merry-go-round returns

The introduction of a new ‘ordinary meaning’ definition of who is an employee and an employer for the purposes of the Fair Work Act 2009 (Cth) (FW Act) will determine whether a person is genuinely an employee or a contractor. This new definition will be tied to the common law meaning, and the question will be determined by ‘ascertaining the real substance, practical reality, and true nature of the relationship’ between the individual and the purported employer.

Persons found to be employees will then have access to all rights under the Act and other legislation. The exception to this is for contractors being paid above the contractor-high income threshold, which was revealed last week to be $175,000 per year who can give a written ‘opt out’ notice.

This new definition re-introduces the risk of workers being found to be employees not contractors, bringing with it all of the risks this has typically attracted except now with exponentially higher fines (up to $4,695,000 for serious contraventions of awards, enterprise agreements, the National Employment Standards etc.,)

Unfair contract claims in the Fair Work Commission

These changes occur in circumstances where contractors will now be able to bring ‘unfair contract term’ claims in the Fair Work Commission (FWC), where they can have the terms of their contract varied considering fairness between the parties. The FWC may order that all or part of the contract be set aside (such as by changing payment terms, rate of remuneration and notice of termination, amongst other things). A union can bring an application for a contractor under these laws, with contractors earning the contractor high-income threshold being excluded (but who can bring a substantially similar claim under other legislation).

Employers should act now to get advice and revise their arrangement with contractors before these laws come into effect and consider which ‘high risk’ contractors ought to be made employees.

To read more about this ‘opt out’ arrangement and the contractor high-income threshold, read our most recent newsletter here: https://www.oreillyworkplacelaw.com.au/latest-workplace-news-5/

Changes to casual employment

From today, 26 August, the new, narrowed definition of casual employment will commence meaning that fewer employees will be able to remain employed on a casual basis. This will significantly affect industries with a large casual workforce.

Previously, the Act defined casual employment on the basis of whether the offer of employment involves ‘no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person’. 

The new definition will, however, characterise casual employees by ‘an absence of a firm advance commitment to continuing and indefinite work’ and that the employee is entitled under a fair work instrument or contract of employment to a casual loading or specific pay rate for casuals.

But this will, similar to the new ‘employee v contractor’ test, be determined on the basis of:

• the ‘real substance, practical reality and true nature of the working relationship’, rather than the terms of the employment contract; and
• consideration of the totality of the relationship and the degree of control, remuneration, and who decides the hours worked by the employees.

Another significant change is to casuals’ pathways to permanent employment. Employers will now no longer need to follow the previous process on the 12 month employment anniversary. Instead, this process is replaced by a single pathway for casual conversion at the employee’s request. Casual employees may now give written notification they would like to change their employment to part-time or full-time after 6 months’ employment (or 12 months for small business employers). Employers must respond after 21 days, with a range of form, content and notice requirements. This request, if rejected, maybe re-made by the employee every 6 months.

The right to disconnect

From today there will also be a new “right” for workers to disconnect outside of paid hours for non-small business employers. However, this right will not commence until 26 August 2025 for small business employers.

Specifically, employees will have a right to refuse to respond to unreasonable out of hours contact from their employer or third parties (such as clients). The right to disconnect permits an employee to refuse to monitor, read or respond to contact, or attempted contact, from an employer or third-party outside the employee’s working hours unless the refusal is unreasonable.

Whether the contact is unreasonable will turn on:

• the reason for the attempted contact;
• the method of contact (and the ‘level of disruption’ it causes);
• the extent that the employee is compensated to be available to work during the period in which the contract is made;
• the extent to which the employee is compensated of working outside ordinary hours;
• the nature of the employee’s role and the level of responsibility;
• the employee’s personal circumstances (including any family and caring responsibilities); and
• whether the contact is required under a law of the Commonwealth, State or Territory.

This will be a protected right for the purposes of the general protections, and accordingly, disciplinary action against employees who have failed to respond outside of work hours will need to be approached cautiously given the risk of a general protections claim this will generate. This may generate greater issues for particular categories of employees – such as for part time employees with caring responsibilities who may be contacted on days off, employers with offices in varying time-zones, or whose operations run 24/7 such as in emergency services, mining, construction, etc.

Employers should review their employment contracts and or put in place policies to address any requirement for outside of hours contact, and dealing with compensation for such required availability.

Labour regulation for the road transport industry and ’employee-like’ workers

The reforms will also bring about significant changes to the road transport industry, and for ‘employee-like workers’ in the gig-economy. This includes creating laws that apply to particular road transport contractors and to gig-economy workers to provide employee-like protections.

These changes include:

• giving the Commission powers to make minimum standards orders for these two categories of contractors, including to set minimum pay standards, penalty rates and other minimum entitlements;
• giving the Commission powers to make ‘collective agreements’ (like enterprise agreements) for these workers, and giving unions a right to represent them and be involved in bargaining;
• giving the Commission powers to make ‘road transport contractual chain orders’ under which it can set minimum standards for ‘road transport employee-like workers’. This will be akin to making instruments that are like ‘awards’ but that apply to particular types of contractor workers in the road transport industry;
• the introduction of ‘unfair termination’ laws under which particular road transport contractors can challenge their dismissal in the Commission on the basis it was unfair (akin to unfair dismissal laws). Reinstatement and compensation will be potential outcomes; and
• the introduction on ‘unfair deactivation’ laws enabling gig-economy workers to claim in the Commission that their deactivation was unfair (also akin to unfair dismissal laws). Here the Commission can order reactivation only (compensation is not available).

This is a significant shift for the FW Act to regulate non-employee workers and give to them rights and protections usually only afforded to direct employees.

What should employers do?

In light of all the reforms commencing today, 26 August 2024, employers should get on the front foot and seek legal advice to ensure they are compliant especially in circumstances where fines for companies are now $469,500 per breach for (even inadvertent) breaches of awards, enterprise agreements and key provisions of the Act (and to $4,695,000 for ‘serious contraventions’). For individuals (directors and managers), fines increase to $93,900 per breach or $939,000 for ‘serious contraventions’.

To learn more about the reforms commencing, read our previous Closing Loopholes No 2 newsletter here: https://www.oreillyworkplacelaw.com.au/special-edition-closing-loopholes-reforms-far-reaching-impacts-and-risks-for-employers/

Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.  It should not be relied upon and specific legal advice always be sought before taking any action. For more information on this or other Workplace Law topics please get in touch.