The government has introduced its closing loopholes industrial relations bill, but what changes will this mean for employers?
The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 is the result of extensive government consultation with Australian Business Lawyers and Advisors, The Australian Chamber of Commerce and Industry, Australian Business Industrial, and Business NSW. It aims to close loopholes that undermine pay and conditions and to improve work health and safety laws in the Commonwealth jurisdiction.
Casual Employment Changes
The Closing Loopholes Bill will introduce a new definition of casual employment into the Act.
Commencing 1 July 2024, under a new s 15A of the Act, an employee is a casual employee of an employer only if:
(a) The employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and
(b) The employee would be entitled to a casual loading or a specific rate of pay for casual employees under the terms of a fair work instrument if the employee were a casual employee, or the employee is entitled to such loading or rate of pay under the contract of employment.
This new definition of casual employment means that the law will look beyond any written contract, making an independent assessment of the ‘real substance, practical reality and true nature of the employment relationship’ to determine employment status.
Casual to Permanent Employment Conversion
The proposed bill makes allowances for the changing nature of employment, recognising that the nature of the employment relationship could potentially change over time from a casual to a permanent employee. The Closing Loopholes Bill contains a new conversion process, where casual employees remain so until the occurrence of a ‘specified event’.
This process is in addition to existing casual conversion laws which require employers to notify employees of their rights to convert.
A specified event occurs when the employee elects to change or convert their employment to a permanent status. Casual employees will be able to give written notification that they believe they no longer meet the requirements set out in the casual employment definition (for small business employees after 12 months, for other employees 6 months) and if they have not previously refused an offer to convert and meet other eligibility criteria discussed further below.
This part of the Bill is intended to protect ‘employee choice’, such that no employee will be forced to convert from casual employment unless they choose to.
New Definitions of Employment
The Closing Loopholes Bill will also introduce a new definition of employment into the Act.
Commencing from Royal Assent, as a new section15AA, the ordinary meaning of employee and employer will be defined as follows:
- for the purposes of this Act, whether an individual is an employee of a person within the ordinary meaning of that expression or whether the person is an employer of a person within the ordinary meaning of that expression is to be determined by ascertaining the real substance, practical reality and true nature of the relationship between the individual and the person
- for the purposes of ascertaining the real substance, practical reality and true nature of the relationship between the individual and the person:
- the totality of the relationship between the individual and the person must be considered; and
- in considering the totality of the relationship between the individual and the person regard must be had not only to the terms of the contract but also to other factors relating to the totality of the relationship including but not limited to how the contract is performed in practice.
This means that to determine whether a person is an employee or a contractor, it will no longer be enough to simply look at the terms of the written contract.
This will likely have the effect of ‘reviving’ the traditional approach to how the ‘multifactorial’ test for determining whether a person is an employee or independent contractor used to be applied.
The transitional provisions contained in the reforms indicate that ‘Back-pay’ for unpaid entitlements will not arise for those workers who were contractors under the old version of the Act and will change in status to employees because of the new amendment. However, for such workers, employment liabilities will commence accruing on the commencement of the new provisions.
Regulation of the “Gig Economy”
From 1 July 2024, the Closing Loopholes Bill will introduce new powers for the Fair Work Commission to regulate Employee-like Workers and the ‘Gig Economy’.
The new ‘employee-like’ jurisdiction will regulate ‘Employee-like workers’ performing ‘services contracts’ for ‘digital labour platform operators’.
The regulatory changes will apply to areas like app-based meal delivery or driving that processes the payments in-app, but not forums that do not process payments, like Facebook Marketplace.
Gig Economy regulation will allow the Fair Work Commission to apply Minimum Standards Orders and Guidelines to digital labour platforms and resolve disputes.
Road Transport Reform
Closing Loopholes Bill will also change the Fair Work Act 2009 (Cth) (Act) for road transport workers, defined as the industries covered by:
- the Road Transport and Distribution Award 2020
- the Road Transport (Long Distance) Award 2020
- the Waste Management Award 2020
- the Transport (Cash in Transit) Award 2020
- the Passenger Vehicle Transportation Award 2020,
- any other industry (however described) prescribed by the regulations.
- It will introduce new powers for the FairWork Commission to regulate road transport contractors – workers who have not traditionally fallen within their jurisdiction.
The changes will apply to workers who are either:
- an individual who is party to a services contract;
- if a body corporate (i.e., Pty Ltd company) is the party to the services contract, an individual who is a director of the body corporate or family member of a directors and who perform work under the contract;
- if a trustee is a party to a services contract in their capacity as a trustee, an individual who is a trustee of the same trust and performs work under the contract; or
- If a partner in a partnership is party to a services contract, an individual who is a partner in the same partnership and performs work under the contract.
This aims to capture workers like traditional ‘owner-drivers’ within the category of work regulated by Chapter Six of the Industrial Relations Act 1996 (NSW).