29 Aug 2024
Libby Pallot, Ben Tallboys, Anthony Massaro, Mandi Xu, Walter MacCallum, Abbey Burns, Kelly Ralph, Ashleigh Warren, Morgan Smithe, Shi Jing Wong, Harrison Gray, Emily Tang, Molly Lawlor, Jack Kneale, Sarah Newman and Emily Aforozis
In late August 2024, the Federal Government published the Fair Work Amendment (Contractor High Income Threshold) Regulations 2024 (Cth) (Regulations) which prescribes the contractor high income threshold as $175,000 per annum for the year commencing on 1 July 2024.
The New Statutory Definition of Employee
On Monday 26 August 2024, the Fair Work Legislation Amendment (Closing Loopholes No.2) Act 2023 (Cth) (Closing Loopholes No. 2) introduced a new section 15AA ‘employee definition test’ into the Fair Work Act. This new section was discussed in our previous alert.
To determine whether a worker is an employee or independent contractor, this new section will require the parties to consider the “real substance, practical reality and true nature” of their relationship. In considering the ‘totality of the relationship’, the parties will need to engage in a ‘multifactorial assessment’ that not only looks at the written terms of the contract between them, but also how it is performed in practice.
Opting Out of the New Definition
Closing Loopholes No. 2 also introduces a new section 15AB into the Fair Work Act. This section was discussed in a separate alert.
If an independent contractor’s earnings for the work performed under their relationship with the entity which engages them exceeds the contractor high income threshold, which is currently prescribed as $175,000 for the year commencing 1 July 2024, the contractor can opt out of the new definition of employee by providing the entity which engages them with an Opt Out Notice. The Notice must state that the individual considers that their earnings for work performed exceed the threshold when the notice is given.
Effect of an Opt Out Notice
If an Opt Out notice is given to an engaging entity the relationship will be classified based off the terms of the written contract, as set out in the High Court decisions discussed in our previous alert.
If an Opt Out notice is given before 26 August 2024, then the new definition of employee in section 15AA does not start to apply to the relationship on that date.
If it is given after the commencement of section 15AA of the Fair Work Act, the new section will not apply to the relationship on the day the opt out notice is given and does not apply to the relationship on or after that day, unless the opt out notice is revoked.
How we can help
Russell Kennedy can assist businesses with providing advice on whether an Opt Out Notice is available to contractors they engage, and providing a template Opt Out Notice.
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