By Dr Laura Sowden, Partner, and Annabel Cheung, Lawyer

Background

On 12 February 2024, the Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023 was passed in both Houses.

On 26 February 2024, the Fair Work Legislation Amendment (Closing Loopholes No.2) Act 2024 (Cth) (No. 2 Act) was assented to.

The No. 2 Act makes significant amendments to the Fair Work Act 2009 (Cth) (the FW Act) and notably:

1. Changes to the definition of employee and employer;
2. Contractors and the new “opt-out” regime;
3. Changes to the definition of casual employee;
4. Changes to the right to convert to permanent employment;
5. Increased maximum penalties for contraventions of civil remedy provisions;
6. Increased maximum penalties for underpayments;
7. Changes to right of entry for suspected underpayments;
8. Changes to intractable bargaining disputes;
9. Introduction to a series of protections for regulated workers; and
10. A new statutory right for employees to disconnect outside of work hours.

We provide a summary of the key changes to be aware of.

(1) Changes to the definition of employee and employer

Commencement: 26 August 2024 or earlier by proclamation.

• The changed definition of employee and employers under the FW Act will be determined by “ascertaining the real substance, practical reality and true nature of the relationship” between parties.
• This means that there must be consideration of the totality and true nature of the employment relationship. This includes having regard to the terms of the contract as well as how the contract is performed in practice.
• This unwinds the recent High Court authority which giving primacy to the written terms of the contract when considering whether a person in an employee or contractor,
• It is therefore important for employers and principal contractors to consider that the conduct of the parties in practice. As this will be a determining factor in understanding the true nature of the relationship.

(2) Contractors and the new “opt-out” regime

Commencement: 27 February 2024 – it is currently in effect. 

• Independent contractors who earn over the new contractor high income threshold will have the right to issue “opt-out” notices to persons who could become their employer.
• The “opt- out” notice records their election that the new employee definition does not apply to them with respect to the relationship. This will preserve their status as an independent contractor for the period that the “opt-out” notice is in effect.
• Individuals will also be able to revoke the opt out notice but can only do so once during the relationship.
• The No. 2 Act will also enable independent contractors earning below the specified contractor high income threshold to dispute any allegedly unfair contract terms in the Fair Work Commission (FWC).

(3) Definition of casual employees

Commencement: 26 August 2024

• The No. 2 Act also introduces a new definition of casual employee into s 15A of the FW Act.
• Currently, a person is a casual employee if they accept a job offer from an employer knowing that there is no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.
• Under the new definition an employee is a casual employee if:

• There is no firm advance commitment to continuing and indefinite work; and
• The employee is paid a casual loading or a specific rate of pay for casual employees.

• Determining no firm advance commitment to continuing and indefinite work, requires a consideration of the “real substance, practical reality and true nature of the employment relationship”.
• Meaning that there will be consideration of the totality of the employment relationship not just the terms of the contract of employment.

(4) Converting from casual to permanent employment

Commencement: 26 August 2024

• The No. 2 Act seeks to address employer concerns regarding any uncertainty that existed under previous casual employment regimes when casual employees merged into full time of part time employees at some time during employment.
• Now, the onus is on the casual employee to request a change to their employment status.
• The obligation on employers to offer casual conversion has been repealed.
• Therefore, once the casual employee has met certain thresholds, including that they have been employed for at least six months or for twelve months for small business employers, they can request a change to their employment status.
• The grounds on which an employer can refuse such a request must be on “fair and reasonable” operational grounds. For example, it would not be fair and reasonable if the conversion would involve substantial changes to the way in which the employer is organised)
• Of note, any notification, response and offers regarding employment conversion will be workplace rights under the FW Act’s general protection scheme.

(5) Serious contraventions of a civil remedy provision of the FW Act

Commencement: 27 February 2024 – it is currently in effect.

 Lowered serious contravention threshold

• The No. 2 Act lowers the current threshold, providing that a serious contravention will occur if:

• the person knowingly contravened the civil remedy provision; and
• the person was reckless as to whether the contravention would occur.

• A person is considered reckless if they are aware of a substantial risk that the contravention would occur and that is further unjustifiable to take such risk when having considering the circumstances known to the person.
• The test is now whether the employer was reckless as to whether the contravention would occur. Departing from whether the contravention formed part of a systemic pattern of conduct.

Increase in civil penalties

• The No. 2 Act proposes to significantly increase civil remedy provisions for contraventions of the FW Act.
• The maximum civil pecuniary penalties will increase by at least five times to:

• 300 penalty units ($93,900) for individuals;
• 1,500 penalty units ($469,500) for body corporates;
• 3000 penalty units ($939,000) for individuals for serious contraventions;
• 15,000 penalty units ($4,695,000) for body corporates for serious contraventions;

• For the following contraventions:

• s 44 – breach of the NES;
• s 45 – breach of a modern award;
• 50 – breach of an enterprise agreement;
• s 280 – breach of a workplace determination;
• s 293 – breach of a national minimum wage order;
• s 305 – breach of an equal remuneration order;
• s 323 – breach of the method and frequency of payment;
• s 325 – unreasonable requirement to spend or pay an amount;
• s 328 – breach of an employer’s obligations in relation to guarantees of annual earnings;
• ss 535 and 536 – breach of the employer’s obligations in relation to employee records and pay slips;
• s 757BA – breach of the obligation in relation to pay slips for paid family and domestic violence leave (if it commences under the Secure Jobs, Better Pay Act)

(6) Increased maximum penalties for underpayment

Commencement: 27 February 2024 – it is currently in effect.

• The civil penalties noted above, do not apply for contraventions related to underpayment.
• For the first time, a penalty could be ordered which is proportionate to the extent of the underpayment.
• An underpayment contravention occurs when:

• The employer is required to pay an amount to, on behalf of, or for the benefit of an employee
• The employer does an act or omits to perform an act;
• The act or omission results in a failure to pay an amount to, on behalf of, or to the benefit of an employee in full on or before the day when the required amount is due for payment; and
• The failure is related to the contravention

• The No. 2 Act outlines that the maximum pecuniary penalty for such contravention is the higher of:

• the ordinary penalty for the contravention as set out above; or
• three times the ‘underpayment amount’.

(7) Changes to right of entry for suspected underpayments

Commencement: 1 July 2024

• The No. 2 Act empowers the FWC to issue an exemption certificate upon being satisfied of suspected contraventions involving underpayment of wages or other monetary entitlements of a member of the organisation (eg. a union), when it has a reasonable belief that advance notice of the entry given by an entry notice would hinder an effective investigation into the suspected contraventions.
• This waives the minimum 24 hours’ notice requirement for entry.
• The purpose of such is to enhance the ability of unions to effectively investigate any suspected contraventions involving underpayment of wages or monetary entitlements.
• This will require employers to review their existing right of entry procedures and ensure management are appropriately trained in these changes.

(8) Intractable bargaining disputes

Commencement: 27 February 2024 – it is currently in effect.

• The No. 2 Act clarifies the nature of the terms to be included in an intractable bargaining workplace determination.
• The No. 2 Act outlines that a “non-agreed” term included in an intractable bargaining workplace determination must not be less favourable to employees or employee organisations than corresponding terms in existing enterprise agreements.
• The requirement that terms be “no less favourable” does not apply to terms that provide for a wage increase.
• This is a very significant change as it eliminates the risk of employees going backwards on any term that appears in an existing enterprise agreement as a result of the intractable bargaining process.
• This removes a critical point of leverage for employers in negotiations.

(9) Regulated workers

Commencement: 26 August 2024 or earlier by proclamation.

• The No. 2 Act introduces a series of protections for regulated workers and empowers the Fair Work Commission to set minimum standards for workers in the following industries:

• Employee-like “gig economy” digital platform workers
• Road transport industry

Gig economy digital platform workers

• A minimum standards order ordered by the FWC may cover:

• Payment terms
• Deductions
• Record-keeping in relation to specified matters
• Insurance
• Consultation
• Representation
• Delegates’ right
• Cost recovery

• However, matters that are primarily of a commercial nature cannot be included in a minimum standards order. For example, overtime rates and rostering arrangements.
• Employee-like “gig economy” digital platform workers are eligible to make an unfair deactivation claim (similar to an unfair dismissal claim) in the event that their access to the digital labour platform is deactivated if:

• they have been performing work on a regular basis through a digital labour platform for a period of at least six months; and
• they earn less than the “contractor high income threshold”

Road transport industry workers

• A minimum standards order ordered by the FWC may cover:

• Payment terms
• Deductions
• Record-keeping in relation to specified matters
• Insurance
• Consultation
• Representation
• Delegates’ right
• Cost recovery

• The FWC is also empowered to make orders regarding the supply chain in the road transport industry. This may include terms about the following:

• Payment times
• Fuel levies
• Rate reviews
• Termination
• Cost recovery

• The No. 2 Act also provides a mechanism for certain road transport contractors to challenge unfair termination if their services contract is terminated.

(10) Right to Disconnect

Commencement: 26 August 2024 or 26 August 2025 for small businesses

• We previously detailed this legislative change this legislative change here
• The No. 2 Act introduces a statutory right for employees to disconnect outside of work hours.
• Therefore, employees will have a new right to refuse to monitor, read or respond to contact from an employer outside of their usual working hours, unless the refusal is unreasonable. This new right also extends to contact from a third party (eg. customers or clients) outside of the employee’s working hours.
• Employees are therefore entitled to ignore calls and emails from their employers without penalty. It is not a general prohibition on employers from unreasonably contacting employees after hours. It is a prohibition on expecting or demanding a response.
• In determining whether an employee’s refusal to be contact is unreasonable, the following will be considered:

• The reason for contacting the employee;
• How the contact was made and the extent of disruption the contact caused the employee;
• The extent that the employee is compensated:

(i) to remain available to perform work during the period in which the contact is made; or

(ii) for working additional hours outside the employee’s ordinary hours of work

• The nature of the employee’s role and their level of responsibility; and
• The employee’s personal circumstances (such as family or caring responsibilities)