Closing Loopholes – the proposed third tranche of changes to the Fair Work Act 2009 (Cth)

On 4 September 2023, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 was introduced into Parliament and read for the first time. The Closing Loopholes Bill represents the proposed third tranche of changes to the Fair Work Act 2009 (Cth)(FW Act).[i]

Ahead of introducing the Bill to Parliament, the Hon Tony Bourke MP, Minister for Employment and Workplace Relations, explained in his speech to the National Press Club that the Bill “…deals with the loopholes that undercut wages and conditions and closes those loopholes”.

Whilst the Federal Government was hopeful that the legislation would be enacted by the end of the year, following second reading debates in the House of Representatives this week, it is unlikely changes will come into effect this year.

In the meantime, we outline in this bulletin the key amendments that all employers should be aware of.

Meaning of employee and employer in the FW Act

The proposed Bill will insert interpretive principles that apply when determining the ordinary meaning of an ‘employer’ and ‘employee’ requiring an assessment of the real substance, practical reality and true nature of the working relationship by considering the ‘totality’ of the relationship.

This will impact the determination of whether someone is considered an independent contractor, falling back to the ‘multi-factorial’ test previously applied by courts prior to the High Court decisions in Personnel Contracting[1] and Jamsek[2] where the principle of “contract is king” was established.

However, as this change would only apply to workers covered by the FW Act, discrepancies could arise in the law between State and National System employees.

Casual Employment

The proposed Bill will amend s15A of the FW Act which defines the meaning of a casual employee. This will allow an assessment of whether an employee is a casual to occur throughout the entirety of the employment relationship. Despite what is written in the employment contract, a casual will no longer be classified as a ‘casual’ if the principles of no firm advance commitment to continuing and indefinite work don’t continue to apply to the employment relationship.

The Bill includes a variety of indicia that can be considered when determining whether there is a firm advance commitment which includes, but is not limited to:

• the ability and actual practice of offering and accepting work

• whether continuing work is reasonably likely given the nature of the business

• whether part time or full-time employees are undertaking similar roles

• whether the employee has a regular pattern of work

The Bill also enshrines in the definition of casual employee the entitlement to a casual loading. 

Important to note:

The Bill includes a section titled ‘exceptions to the general rule' which specifies that if a contract of employment includes a term that provides that a contract will terminate at the end of an identifiable period, and the period does not refer to a specified season or the completion of the shift of work, then the employee is not a casual employee. This will mean that an employee on a fixed term contract for a specified season or an employee engaged on a shift by shift basis may be a casual employee if the requirements of no firm advance commitment as will be amended above are satisfied. 

Casual Conversion

The amendments will introduce new casual conversion provisions that will be all about employee choice.

The Bill includes a provision that states that casual employees who have worked for a period of 6 months (or 12 months in a small business) will be able to choose to notify their employer where their working arrangements have changed and, at that point in time they no longer meet the definition of a ‘casual employee.’

The Fair Work Commission (FWC) will also have the jurisdiction to hear and determine matters relating to casual conversion.

Casual conversion will therefore only occur if:

• the employee and employer agree to status change under pathways described in the FW Act

• the FWC resolves a dispute by ordering that the employee be treated as permanent

• the employee and employer agree to status change under processes set out in the instrument that sets terms and conditions of employment such as an enterprise agreement

• the employee and employer agree to status change outside of the pathways described in the Act.

Overall, the key take away is that if an employee wants to remain casual, then they can. Nothing can force them to become permanent.

Labour Hire

The Bill proposes to amend the FW Act to allow employees, unions and host employers to apply to the FWC for an order, known as a ‘regulated labour hire arrangement order’ that labour hire employees must be paid at least what they would receive under a host’s enterprise agreement or equivalent public sector determination.

The FWC must not make an order that is not fair and reasonable in the circumstances, which may include where work for a host is for the provision of a service rather than an arrangement that is only for the supply of labour. 

The proposal includes a default 3-month exemption period to minimise the impact on arrangements for surge work or where a short-term replacement worker is needed. The Commission will be able to hear from parties who wish to extend or shorten that exemption period, on a case-by-case basis.

The provisions will also not apply to hosts who are small businesses, independent contractors, or to training arrangements.

Gig-economy workers

The amendments will empower the FWC to set binding minimum standards for ‘employee-like’ workers performing digital platform work.

Who is an ‘employee-like worker?’

• Someone who satisfied one or more of the following characteristics:

  • low bargaining power

  • low authority over the performance of work

  • receives renumeration at or below the rate of employees performing comparable work.

Minimum standards order

Applications for minimum standards can be made by either:

1. A digital labour platform

2. A registered organisation representing digital labour platform workers or businesses

3. The Minister for Employment and Workplace relations

4. The FWC.

Minimum standards can either be binding orders or non-binding guidelines.

The amendment will also introduce a consent based collective agreements framework and access to dispute resolution for unfair deactivation from a digital platform.

Consent-based collective agreements

Registered organisations representing employee-like workers will have the ability to make collective agreements with digital labour platforms. Negotiating entities will have obligations to consult and explain the terms of the proposed agreements to the workers covered by the agreement. The agreements will be registered with the Commission.

Dispute resolution

Employee-like workers will have the ability to apply to the Commission for assistance if they consider they have been unfairly deactivated from a digital labour platform. This will be available for workers who have performed work on a digital labour platform under a services contract or a series of contracts, on a regular basis for at least 6 months.

Compliance and Enforcement

Independent contractors

The amendments to the FW Act propose to establish a new low cost, flexible, informal jurisdiction of the FWC for resolving disputes between independent contractors and principles about unfair contract terms in service contracts.

Independent contractors who earn below a nominated contractor high income threshold will be able to apply to the commission for dispute resolution in relation to unfair terms in service agreements. The dispute however must be about a contractual term for a contract where if the relationship was an employment relationship it would be classified as a workplace relations matter.

When considering if a contract term is unfair, the Commission would be able to consider:

• the relative bargaining power of the parties to the services contract

• whether the services contract as a whole displays a significant imbalance between the rights and obligations of the parties

• whether the contract term under consideration is reasonably necessary to protect the legitimate interests of a party to the contract

• whether the contract term under consideration imposes a harsh, unjust or unreasonable requirement on a party to the contract

• whether the services contract as a whole provides for a total remuneration for performing work that is less than that of comparable employees or independent contractors

• any other matters the Fair Work Commission considers relevant.

If the Commission finds that a contract term is unfair, it will be able to:

• change the terms of the contract; or

• ‘set aside’ (make ineffective), all or part of the contract.

Amendments to WHS Act

The amendments propose to increase the offences and penalties regime in the WHS Act to ‘promote compliance and make workplaces safer’.

The Bill proposes to include:

• an industrial manslaughter offence for the Commonwealth WHS jurisdiction with penalties of $18 million for a body corporate or 25 years imprisonment for an individual

• significant increases to Category 1 offence penalties being an increase from $3 million for a body corporate to $15 million, an increase from $60,000 to $3 million for a PCBU, and from $300,000 to $1.5 million for any other person

• a 39.03% increase to all other penalties in the WHS Act 2011

• introducing corporate, commonwealth and public authorities criminal liability.

An industrial manslaughter offence is where a PCBU or officer of a PCBU with a health and safety duty intentionally engages in conduct that breaches their health and safety duty that causes the death of an individual and they were reckless, or negligent. Causes has been defined as substantially contributing to the death.

Amendments to the Secure Jobs Better Pay – Single-enterprise bargaining stream

The amendments propose to allow common franchisees to voluntarily bargain together for a single enterprise agreement. This will be achieved by amending the current definition of a ‘related employer’ to allow franchisees to bargain together for a single enterprise agreement without needing an authorisation from the FWC.

Protections against discrimination, adverse action and harassment

The Bill proposes to include ‘subjection to family and domestic violence’ as part of the list of protected attributes. It will therefore make it unlawful for an employer to take adverse action against an employee or potential employee because they have or are being subject to family and domestic violence. It will also prohibit the inclusion of any terms in Enterprise Agreements and modern awards that discriminate against a person on the basis that they are subject to family and domestic violence.

Wage Theft

The Bill will insert a section in the FW Act that makes it an offence to intentionally fail to pay an employee. The penalty for an individual is a term of up to 10 years imprisonment or a fine of 5,000 penalty units. For a body corporate a fine of 25,000 penalty units. Employers who take reasonable steps to pay the correct amounts or make honest mistakes will not be criminally prosecuted.

Moving Forward

As the third tranche of changes to the FW Act will have significant effects to employers nation-wide if the current Bill is successful, employers should keep a keen eye out for changes to the legislation.

This is particularly critical for employers who engage resources through labour-hire companies, have a significant casual employee population, or high use of independent contractors; as well as those employers operating within the gig-economy.

Should you need any expert advice on how to prepare your business in readiness for the proposed changes, or would like updates on the progress of the Bill, feel free to contact us.

Authors: Shawn Skyring, Jessica Park and Giuliana Quibell