A shake-up of the Federal industrial relations scheme: The proposed amendments in the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023

The second tranche of industrial relations reform promised by the Federal Government has arrived.

The amendments to the Fair Work Act 2009 (Cth) (FW Act) resulting from the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) introduced into the House of Representatives on 4 September 2023 has garnered significant media attention for the slew of changes it proposes to a wide range of areas in the Federal industrial relations scheme.

In this article, we summarise some key aspects of the Bill that we identified as significant and relevant for both employers and employees.

Key Changes

Definition of ‘employer’ and ‘employee’

The Bill introduces a new method for determining whether an individual is an employer or employee by ascertaining the ‘real substance, practical reality and true nature of the relationship between the individual and the person’. The proposed changes require consideration of the totality of the relationship between the parties, going beyond the terms of the employment contract to other factors such as how the contract is performed in practice. The introduction of these considerations is a direct response to the decisions of the High Court of Australia in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] 26 HCA 2 which emphasised the primacy of contracts in determining the nature of an employment relationship.

Who is a ‘casual employee’?

The Bill proposes to update the definition of a casual employee. While a casual employment relationship will remain ‘characterised by an absence of a firm advance commitment to continuing and indefinite work’, identifying the nature of that relationship will no longer be limited to the terms of the contract but will extend to the ‘real substance, practical reality and true nature’ of the employment relationship, similar to the new test to ascertain who is an ‘employer’ and ‘employee’. The proposed change reverts the definition of casual employment back to the common law approach before the High Court’s decision in WorkPac Pty Ltd v Rossato [2021] HCA 23.

Casual conversion and other changes to casual employment

The Bill proposes to introduce an additional right for employees to request casual conversion after 6 months of employment (12 months for small business employers). These changes are in addition to the existing requirement for employers to offer eligible casual employees the option to convert to part-time or full-time employment after 12 months.

These new changes will enable employees to give their employer written notification if they think their employment relationship no longer meets the definition of casual employment. Employers must respond within 21 days of receiving the notification to either accept the employee’s notification or provide detailed reasons why the employer does not accept that the employee’s employment is no longer casual in nature. Prior to providing their response, the employer must consult with the employee about the notification.

If the parties are unable to resolve a dispute regarding the notification, the employee may apply to the Fair Work Commission (FWC) to deal with the dispute.

Regulated labour hire arrangement orders

The Bill gives the FWC the power upon application by an employee or union to make a ‘regulated labour hire arrangement order’ which would ensure labour hire workers be paid no less than if they were employed directly by the employer, subject to exceptions for apprentices, small business, or employees engaged for less than 3 months.

Essentially, companies with more than 15 workers will be required to pay labour hire staff the same wages (including base rates, penalty rates, bonuses, overtime and allowances) as those employees engaged under an enterprise agreement, as long as it is fair and reasonable in all the circumstances to do so.

The gig economy

Under the Bill, greater protection will be afforded to certain ‘employee-like workers’ (for example, workers in the gig economy) or regulated road transport contractors.

For a worker to be ‘employee like’ they must be

• be party to a services contract;
• perform work through a digital labour platform; and
• not perform services under the services contract as an employee,

and must either have low bargaining power, be low paid compared with an employee doing the same job or have a low level of control over their work.

The protections to be provided to employee-like workers include:

• the power for the FWC to make minimum standards order, which are ‘award-like’ orders that may cover (among other things) payment terms, deductions, and record-keeping. However, a minimum standards order cannot include terms about certain matters such as overtime rates, rostering arrangements, or matters of a primarily commercial nature;
• enabling the creation of ‘collective agreements’ (smaller than enterprise agreements) between workers, businesses, and employee organisations;
• enabling the FWC to deal with disputes where an employee-like worker is deregistered from a digital labour platform; and
• enabling contractors to dispute unfair contract terms in the FWC.

Applications for a minimum standards order can be made by the representative of a regulated worker, a regulated business, or the Minister for Employment and Workplace Relations.

Wage Theft

The Bill introduces a new criminal offence for intentional wage theft. There must be an intention to act (or omission to act) in failing to pay the employee an amount that they are entitled to under the FW Act or an applicable industrial instrument. This does not apply to unintentional underpayment or payment of incorrect amounts, or the failure to make a superannuation contribution.

The Bill also increases penalties for an underpayment. Penalties for an individual in breach of this provision will be up to 10 years imprisonment or a fine that is the greater of three times the underpayment amount (if able to be calculated) and $1.5 million dollars. For a body corporate, the maximum penalty is the greater of three times the underpayment amount (if able to be calculated) and $7.8 million dollars.

Other Changes

Other changes proposed in the Bill include:

• the introduction of a new protected attribute to protect workers who have been, or who continue to be, subjected to family and domestic violence;
• the introduction of a new offence of industrial manslaughter where a person engages in conduct causing the death of an individual and was reckless or negligent as to whether their conduct would cause the death;
• increased power for union officials to obtain exemption certificates from the FWC to conduct snap inspections of members’ pay records without notice if they suspect underpayment; and
• increasing rights and protections for workplace delegates.

Take home messages

While the Bill is yet to pass through Parliament, all businesses in the Federal jurisdiction, particularly those who engage casual employees, independent contractors, or labour hire workers, should give these reforms immediate attention. These changes will not come into effect until next year at the earliest, with the deadline for the Senate's report into the Bill set for February 2024.

We will keep you updated as the Bill passes through Parliament and can assist with any queries you may have about the applicability of the Bill to your workplace.

For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au or Lincoln Smith on +61 8 8210 1203 or lsmith@normans.com.au.