More loopholes are closing: explaining the next tranche of workplace relations changes

In December 2022, the passing of the Fair Work Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) marked the commencement of a complete overhaul of Australia’s industrial relations landscape. And since then, the Federal Government has followed through on its promise to continue what it’s started.

The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (First Bill) was first tabled by the Federal Government in September 2023, comprising multiple substantial changes across the breadth of workplace relations. However, following a deal reached with the Albanese Government and the crossbench, the Federal Government has split the Bill in two, passing the first tranche of changes on 7 December 2023 which received Royal Assent and became law on 14 December 2023.

On 12 February 2024, the Federal Parliament passed the Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023 (Second Bill), which comprises the next tranche of the changes.

In this article, we dive into all the changes arising from both the First and Second Bill and explain what these new laws mean for businesses in easy-to-understand language.

Unpacking the first tranche of changes

The First Bill includes the key changes of the Same Job, Same Pay measure, the introduction of a Federal wage theft offence, expanded workplace delegate rights, small business redundancy exemption, stronger discrimination protections, and the introduction of an industrial manslaughter offence.

1. Same Job, Same Pay measure

The Same Job, Same Pay measure provides a pathway for employees of labour-hire businesses to be paid following the industrial arrangements of the host employer they are working for, subject to an order of the Fair Work Commission (FWC). Interested parties will now have a right to apply to the FWC for what is called a regulated labour-hire arrangement order (RLHAO).

A RLHAO can take effect from 1 November 2024 and must be fair and reasonable.

2. Wage theft offence

There’s now a new Federal criminal offence of intentional wage and superannuation theft (wage theft) which will take effect from 1 January 2025.

An employer will commit wage theft in circumstances where they intentionally engage in conduct that fails to pay an employee their minimum statutory entitlements arising from the FW Act or an industrial instrument such as a modern award or enterprise agreement. Unintentional failure to pay employees their required amounts won’t be considered wage theft.

The wage theft provisions will be incorporated into the Commonwealth Criminal Code (the CC Code).

3. Workplace delegate rights

A workplace delegate is a person who is appointed or elected following the rules of a union to be a delegate or representative for members who work in a particular enterprise. A workplace delegate is entitled to represent the industrial interests of those members, and any other persons eligible to be such members, including in disputes with their employer.

The First Bill has introduced significant changes to workplace delegate rights at the award, enterprise agreement, and individual level.

A workplace delegate will have the right to:

1. reasonable communication with those members, and any other persons eligible to be such members, concerning their industrial interests; and
2. to represent those interests:
3. reasonable access to the workplace and workplace facilities where the enterprise is being carried on; and
4. unless the employer of the workplace delegate is a small business employer—reasonable access to paid time, during normal working hours, for related training

4. Small business redundancy exemption

A small business employer, that is an employer who employs less than 15 employees, is exempt from being required to pay redundancy pay. The small business redundancy exemption is intended to remove this exemption for small businesses in circumstances where a larger business incrementally downsizes to become a ‘small business employer’ due to insolvency.

For example, if an employer is winding up operations and payroll and finance employees are retained for processing redundancy payments, when it comes time for their employment to be terminated for reasons of redundancy, the employer isn’t obliged to pay redundancy pay because, at the time that the employment relationship ended, they had fewer than 15 employees. The amendments address the inequitable outcomes that are produced by this exemption.

5. Increased discrimination protections

The anti-discrimination provisions in the FW Act will now offer better protection for employees who have been or continue to be, subjected to family and domestic violence. The extra protections include:

1. the prohibition of the creation and enforcement of discriminatory terms within modern awards and enterprise agreements that discriminate against an employee based on family and domestic violence; and
2. including family and domestic violence as a protected attribute for the FW Act’s general protections provisions.

These changes build on the recent changes to family and domestic violence becoming a form of paid leave an employee may utilise. This highlights the Government’s focus on taking family and domestic violence as a serious issue that requires societal addressing.

6. Industrial manslaughter offence

The First Bill also makes significant amendments to the Work Health and Safety Act 2011 (WHS Act) by making industrial manslaughter a criminal offence and increasing all penalties in the WHS Act. This means an increase in potential jail time for workplace deaths of up to a maximum of 25 years imprisonment for individuals, or a fine of up to $18 million for companies.

This amendment to the Commonwealth jurisdiction brings the legislation in line with the recently amended model framework and the Queensland and ACT jurisdictions.

Unpacking the second tranche of changes

The changes that have recently passed Federal Parliament under the Second Bill include changes to the regulation of the gig economy, changes to the definition of and conversion process for casual employees, amendments to the determination of contractor versus employee consideration, and the right to disconnect.

1. Gig economy

The Second Bill introduces a minimum set of standards for employee-like workers and regulated road transport contractors. A person will be an employee-like worker if they perform work under a services contract through a digital platform.

The FWC will be empowered to make either binding minimum standards or non-binding minimum standards for workers that could include payment terms, deductions, working time, record-keeping, insurance, consultation, representation, delegates’ rights, and/or cost recovery.

The Second Bill has specifically clarified that a worker covered by a minimum standard order concerning digital platform work isn’t an employee of any person concerning that work. This ensures that such employee-like workers can continue to be classified as independent contractors.

This change is significant because first-time workers who aren’t employees will potentially be captured by extensive regulation that sets out the minimum terms and conditions of their engagement.

2. Casual employees

New definition:

The existing definition of ‘casual employee’ will be replaced with a new definition that aligns more closely with the approach adopted in the Full Federal Court decisions in Skene and Rossato.

While the current legislation, and the High Court decision in Rossato, provide that it’s the contract that determines the nature of the employment, the amendments will require consideration of other matters. The definition focuses on whether there’s an absence (or presence) of a firm advance commitment to continuing and indefinite work, which is similar to the current definition. The definition, however, will also consider several factors designed to interrogate the substance, practical reality and true nature of the post-contractual employment relationship.

It has been clarified that casual employees will be able to be engaged on a fixed-term contract.

Casual conversion

The existing requirement for businesses to offer conversion or the ability for an employee to request conversion will be repealed and instead, there’ll be one single legislated pathway for casual conversion – the employee choice pathway.

The employee choice pathway is based on the employee notifying their employer of their belief that they no longer meet the definition of a casual employee. This will hopefully relieve the existing administrative burden on employers and simplify the process by which an employee can seek to convert to permanency.

Employers are required to respond within 21 days after the notification is given by an employee. Before responding, employers are required to consult with the employee about the notification. If the employer accepts the notification, the employer must discuss whether the employee is changing to full-time or part-time employment, the hours of work, and the day that the change takes effect.

If the employer doesn’t accept a notification, they must, within 21 days, provide a written response outlining in detail the reasons for the rejection.

The new casual provisions will commence on 1 July 2024. It is critical to remember that the existing provisions, particularly the casual conversion obligations, will continue to operate until at least that date.  Additionally, for employers operating under enterprise agreements with existing casual conversion provisions, you will likely need to adopt a “best of both worlds” approach.

3. Definition of “employment”

The definition of ‘employee’ and ‘employer will be decided by reference to the real substance, practical reality, and true nature of the relationship between the parties.

Like the changes proposed for the casual definition, this new definition of ‘employment’ will require the ‘totality’ of the relationship between the parties, including not only the terms of the contract governing the relationship but also the manner of performance of the contract, to be considered when characterising a relationship as one of employment or one of principal and contractor.

This amendment responds to and will change, the High Court’s decisions in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (Jamsek). Those rulings determined that the rights and obligations of parties under the contract were what characterised the relationship between a principal and a contractor, i.e.: a contract is king.

The Second Bill proposes a return to the ‘multi-factorial’ test that existed before these rulings. The “multi-factorial” test looks at several “indicia” regarding whether a person is an employee or an independent contractor. There’s no exhaustive list of indicia. While this is intended to create flexibility in the application of the law, there’s also potential for uncertainty between businesses and their independent contractors given the diverse nature of the way independent contractor relationships can occur in practice.

4. The right to disconnect

A change arose from the Green’s proposal, is that an employee will now have a right to disconnect from work. That is, employees may refuse to monitor, read, or respond to contact, or attempted contact, from their employer (or a third party if the contact or attempted contact relates to their work) outside of the employee’s working hours, unless the refusal is unreasonable.

The right to disconnect amendments won’t apply to an employer that’s classified as a small business (that is, an employer who employs less than 15 employees) or an employee of such employer until 12 months after the commencement of the amendments to the FW Act.

About our authors

Amanda Curatore is a qualified Senior Associate at Citation Legal and Citation HR. Amanda is highly experienced in providing workplace relations advice and assistance to clients in a wide range of matters including employment contracts, modern award interpretation, managing performance, bullying and harassment, terminations and managing risk.

Nick Tindley is a Partner at Citation Legal and the Executive Manager of HR Consulting and Advisory Services at Citation HR. Based in our Melbourne office, he has over 19 years’ experience in providing industrial relations and employment law advice, with particular expertise in the retail industry. In his role as Executive Manager, Nick supervises both the consulting and advisory teams at Citation HR and is responsible for managing a number of key client relationships.