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Changes to Australia’s workplace relations laws continue – Closing loopholes or creating uncertainties?

Libby Pallot, Walter MacCallum, Anthony Massaro, Rima Newman, Ben Tallboys, Mandi Xu, Abbey Burns, Kelly Ralph, Ashleigh Warren, Morgan Smithe, Shi Jing Wong, Harrison Gray & Emily Tang

On 4 September 2023, the Labor Government introduced the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 into Parliament. This is the third tranche of significant workplace law reforms introduced by the Labor Government (please see our previous articles on the first tranche and second tranche of legislative changes).

While the objective is to ‘close loopholes’, the proposed reforms are complex with potentially far-reaching implications, some of which will create challenges and uncertainties for businesses.

Businesses across Australia will now have more time prepare for these changes as the Senate has delayed the reporting date on the Bill to 1 February 2024. This will provide time for more consultation and scrutiny of the proposed reforms, before the Senate votes on whether the Bill should become law.

This alert addresses key aspects of the proposed reforms that businesses should consider as this Bill faces Senate Committee inquiry.

New definition of “casual employee”

The Bill proposes to amend section 15A of the Act (which was inserted into the Fair Work Act 2009 (Cth) in March 2021) to include a new revised definition of ‘casual employee’, which reflects the common law approach that applied before the 2021 changes. When determining whether an employee is a casual under the proposed laws, Courts will look at the substance of the relationship in all of the circumstances, and not just the way it is described. This means that the question of whether an employee is a casual or a permanent employee is more open to argument.

Casual conversion and related changes

There are currently two pathways for casual employees to convert to permanent employment. Casuals (other than those working for ‘small business employers’) with at least 12 months’ service and have worked a regular pattern of hours for the last 6 months have an entitlement to be offered casual conversion by their employer if they meet certain criteria. Alternatively, casuals (including those employed by ‘small business employers’) may make a request to their employer for casual conversion subject to meeting certain eligibility criteria.

The Bill seeks to provide greater ability for employees to choose their employment status by introducing new notification procedures that allow casuals with at least 6 months’ service (or 12 months’ service if working for a ‘small business employer’) to notify their employer in writing if they believe their status no longer meets the definition of ‘casual employee’ and want to change to permanent employment. The employer will then have obligations to respond and consult on the casual conversion notification.

Under the proposed amendments, the Fair Work Commission will be empowered to deal with disputes arising under the new casual conversion provisions by mandatory arbitration. There will also be prohibitions on sham casual arrangements, misrepresentation of employment relationships as casual, and dismissals of permanent employees to re-engage them as casuals to perform the same (or substantially the same) work.

New statutory definitions for the contractor/employee dichotomy

The Bill proposes to insert a new section 15AA in the Act with new statutory definitions of “employee” and “employer”, which will see a return to the traditional common law ‘multi-factorial’ and ‘totality of relationship’ tests for determining whether a worker is an employee or independent contractor – again, bringing the focus to the substance of the relationship, rather than the way it is described on paper. The proposed changes effectively overturn two High Court decisions in 2022 which determined that if the parties had committed to a complete written contract, the subsequent behaviour of the parties was not an appropriate consideration.

Under the proposed amendments, in order to successfully defend a ‘sham contracting’ claim employers will need to prove they ‘reasonably believed’ that the worker was an independent contractor. Under the current laws, an employer merely has to demonstrate that they were not reckless as to whether a worker was an employee.

Gig economy and road transport workers

Approximately 250,000 Australians are part of the gig economy, which has grown 9-fold since 2015.1 Gig workers do not generally fall neatly within the common law meaning of “employee”, and as such, are not afforded the same entitlements and workplace protections as employees.

The Bill aims to close this gap and enable the Fair Work Commission to set minimum pay and other conditions for workers who are “employee-like performing digital platform work” and certain workers in the road transport industry, and to deal with ‘unfair’ termination/deactivation disputes involving these workers. Intermediate categories like this exist in Canada, Italy, Spain, the United Kingdom, and (for contractor drivers) in New South Wales.

In one sense this closes a loophole, by granting some employment rights to a category of workers who are vulnerable to exploitation. At this same time, it may create new uncertainties. One certainty is that it will lead to an increase in operating and compliance costs for businesses in these industries – which may ultimately be passed to consumers.

Labour hire arrangement orders

Under the Bill, Labour hire employees (and their union representatives) will have the ability to seek a regulated labour hire arrangement order from the Commission. These orders will provide pay protection to labour hire employees so that they are paid no less than if they had been directly employed by the host business pursuant to an enterprise agreement or other employment instrument.

Certain exemptions will be built into this new framework, including where the host is a small business employer, for short term labour hire arrangements for up to 3 months, or for labour hire employees on training arrangements.

Wage theft and new criminal offence

Underpayments continue to be a focus area, and the Bill proposes tougher penalties for non-compliance.

The most controversial aspect is the new criminal offence aimed at deterring deliberate ‘wage theft’, underpayment of employee entitlements, and exploitation of workers. The maximum penalty for this new criminal offence is 10 years’ imprisonment and fines of up to $7.825 million for a corporation (or $1.565 million for an individual) or three times the value of the underpayment.

The Bill offers some reprieve to employers, for example, the Fair Work Ombudsman will not refer ‘wage theft’ to criminal prosecution where small businesses comply with the voluntary small business wage compliance code, or where businesses enter into cooperation agreements.

It will be interesting to see the extent to which criminal penalties will be imposed, considering that only serious intentional conduct involving underpayments will be caught by these new provisions and the available ‘safe harbours’ from potential criminal prosecution.

New protection against domestic violence discrimination

Subjection to family and domestic violence will be a new ‘protected attribute’ and employees subjected to such violence will be protected from dismissal and other ‘adverse action’. This new protection is designed to complement the recent introduction of 10 days’ paid family and domestic violence leave for eligible employees (see our previous article on those changes).

Work health and safety changes

The Bill proposes to amend the Work Health and Safety Act 2011 (Cth) to introduce a new industrial manslaughter offence. The offence involves intentional conduct which breaches a health and safety duty and causes the death of an individual, where the accused was reckless or negligent as to whether the conduct would cause death. The maximum penalty is up to 25 years imprisonment, or up to $18 million.

This new offence only applies to the Commonwealth and its public service, and to a small number of companies who are self-insured licensees under the Commonwealth workers’ compensation scheme. However, industrial manslaughter laws now exist in the Australian Capital Territory, Northern Territory, Queensland, Victoria and Western Australia, and a bill is in Parliament in South Australia. The New South Wales Labor party attempted to introduce industrial manslaughter laws when it was in opposition in 2021, so it may well make a second attempt now that it is in government.

How can we help

For advice regarding how the Bill may affect your business and what steps you can take to prepare for these changes, please contact a member from our Workplace Relations, Employment and Safety team.

If you would like to stay up-to-date with Alerts and Insights from our Workplace Relations, Employment and Safety team, you can subscribe to our mailing list here.

This article was prepared with the assistance of Law Graduate, Rachel Harris and Paralegal, Sara Ibrahim.

Endnotes

  1. The Actuaries Institute’s December 2020 Green Paper on ‘The Rise of the Gig Economy and its impact on Australian Workforce.

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