It was a reform package that was announced as being about closing loopholes and enhancing protections. However, on 4 September 2023, the Government introduced a raft of reforms which go much further than that.
The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 has opened new fronts for debate and introduced new amendments which employers will have to grapple with in the coming months. This follows the last round of reforms some of which only commenced less than three months ago, on 6 June 2023.
Kingston Reid presents its first summary of the surprises the Government has included in its latest round of workplace relations reform. Stay tuned for our rolling coverage as Kingston Reid continues to analyse the Bill in depth over the coming days.
What We Thought It Would Be About: They said it was a return to an objective test for casual employment.
What It Is Actually About: What has been introduced is a new definition of casual employment, along with a new system of employee driven notifications to convert to full time or part time within as little as 6 months service (for employers who are not a small business).
This is despite the existence of a simple and sensible system for casual conversion initially introduced into Modern Awards by the Fair Work Commission and translated into the National Employment Standards.
How It Works: The Bill will insert a new definition of casual employment which requires the employment relationship to be characterised by the absence of a firm and advance commitment to continuing and indefinite work, and the employee to be entitled to a casual loading. A loading must be paid to all casual employees regardless of how senior they are or how much they are paid and even if they are not award or agreement covered.
The new definition is to be applied having regard to various indicia, having regard to the “substance, practical reality and true nature” of the employment relationship over time (that is, it is not assessed at the time of contracting as is currently the case).
However, employees will not automatically convert to casual if the nature of their engagement becomes such that they no longer meet the definition of a casual employee. Rather, this provides a new basis on which the employee can covert to permanent after 6 months’ employment.
The capacity of the employer to decline conversion is limited to where they consider the employee still meets the definition of casual employment, there are limitations in an industrial instrument making conversion impracticable, or conversion would result in non-compliance with recruitment obligations under law.
The Bill also includes:
- anti-avoidance measures and prohibitions on dismissing an employee to reengage them to perform the same or substantially the same work on a casual basis;
- prohibitions on misrepresenting a contract of employment as being casual in nature (with there being a defence that the employer reasonably believed the employee was in fact a casual); and
- the ability for the Commission to deal with disputes, including by arbitration.
“Same Job, Same Pay”
What We Thought It Would Be About: They said they would close the labour hire loophole.
What It Is Actually About: What has been introduced is a labour hire harmonisation system which effectively benchmarks labour hire entities to host employers and allows employees and unions the capacity to seek orders which introduce pay parity across operations. The only exemptions are for training arrangements and short-term engagements not exceeding 3 months. Conceivably, labour hire operators, consultants and contractors can be caught by the scheme.
Further, an anti-avoidance scheme has been included which recognises conduct that takes place from 4 September 2023 (being the day this Bill was introduced to Parliament).
That’s right, any arrangement entered into from 4 September 2023 until the Bill receives royal assent can be caught by the anti-avoidance provisions.
How It Works: One major change under the Bill is to create a new (and relatively complex) scheme for labour hire rates of pay.
Under this scheme, the Commission can make “Regulated Labour Hire Arrangement Orders” which set the minimum rates of pay a labour hire provider must pay to employees. This “protected rate of pay” is the full rate (that is, inclusive of loadings, penalties and allowances etc) payable to direct employees of the host under its enterprise agreement (or other relevant industrial instrument).
The Commission can decline to make such an order, if it is satisfied it is not fair and reasonable to do so, having regard to submissions on a range of issues, including as to the history of industrial arrangements, the relationship between the host and the employer, the terms and nature of the engagement, and other matters.
There is also an obligation on the host to provide information necessary for the labour hire provider to determine the protected rate of pay, along with a capacity for the Commission to deal with disputes (including by arbitration).
There are limited exceptions to this scheme (including for short term engagements, and to some extent, small businesses) and anti-avoidance provisions.
Gig Economy Workers
What We Thought It Would Be About: They said it was about supporting gig economy workers.
What It Is Actually About: What has been introduced is a system that extends to gig economy workers but in the same breath revives the Federal Government’s regulation of the road transport industry with new powers introduced to set minimum standards for the road transport industry and hear disputes about unfair contract terms and disputes.
The Bill also features a new test for determining a worker’s employment status, even though this did not initially form part of the Federal Government’s suite of proposed industrial relations reforms at the May 2022 federal election. This proposed amendment extends beyond application to workers in the gig economy and has the potential to impact other non-employment-based work relationships.
How It Works: The Bill will insert a statutory test for employment into the Fair Work Act, which will be applied looking at the “totality of the relationship”, to ascertain the “real substance, practical reality and true nature of the relationship”.
This amendment is targeted at changing the approach adopted by Courts and Tribunals to determining the status of a worker following the High Court judgments in Jamsek and Personnel Contracting in early 2022, reverting largely back to the approach adopted by Courts and Tribunals since the High Court’s previous landmark judgment in Hollis v Vabu Pty Ltd (2001) 207 CLR 21.
The most extensive aspect of the Bill, comprising almost half the text, relates to the regulation of employee-like and road transport work. These two streams are dealt with largely separately in the Bill, but the framework for each is similar.
Minimum Standards Orders and Guidelines
This includes powers for the Fair Work Commission to make minimum standards orders and guidelines relating to the performance of work by regulated workers (including on its own initiative).
For the employee-like stream, this can include workers (including where they provide their services through an incorporated entity) who:
- perform work under a services contract with the operator of a digital labour platform, or which was facilitated by a digital labour platform; and
- the worker has low bargaining power, or receives less remuneration than an employee performing comparable work, or has a low degree of authority over the way they perform work (other factors can be prescribed by regulation).
For the road transport industry, this includes workers (including where they provide their services through an incorporated entity) who perform work under a services contract in the road transport industry.
Minimum standards orders must include terms specifying coverage, and also a procedure for settling disputes.
Minimum standards orders can also include terms dealing with payment terms; deductions; working time; record-keeping; insurance; consultation; representation; delegates’ rights; and cost recovery.
There are certain matters which cannot be included in an order (primarily relating to matters that are of a commercial nature not affecting terms and conditions of engagement or would change the form of the engagement).
The Bill sets out a process for collective agreements to be made between digital labour platforms or road transport businesses and organisations representing the industrial interests of the employee-like workers, or road transport contractors, who will be covered by it.
This process is commenced by the giving of a notice of a consultation period, which specifies who the proposed collective agreement will cover and what it will deal with. This notice must also be given to the Fair Work Commission, which will publish it on its website, and also to workers to be covered by the proposed agreement. The agreement making parties must also agree on a process for giving a notice to the relevant workers to be covered by the proposed agreement.
The Fair Work Commission can assist in resolving disputes about the making of the agreement, but arbitration is not permitted. The Fair Work Commission is also responsible for registering a collective agreement, and also its termination (after the termination steps in the collective agreement have been completed).
Unfair deactivation and termination
The Bill also creates quasi-unfair dismissal rights in the Commission known as “Unfair Deactivation” in the case of the employee-like stream, or “unfair termination” in the road transport stream.
In each case, certain jurisdictional prerequisites apply (similarly to the unfair dismissal jurisdiction – including a contractor high income threshold) and the Commission will consider whether the deactivation or termination was unfair having regard to the existence or absence of a “valid reason”.
The minister also has the power to develop a code for each stream setting out other considerations, for example around fair deactivation or termination procedures.
In both streams, the Commission can order reactivation or reinstatement, and make orders for lost pay. However, orders for compensation in lieu of reinstatement are only available in the road safety stream.
What We Thought It Would Be About: They said it was about criminalising wage theft.
What It Is Actually About: The Bill establishes new wage theft offences which carry penalties of up to 10 years imprisonment, and financial penalties of up to $1,565,000 for an individual and $7,825,000 for a corporation, or 3 times the value of the underpayment, whichever is higher.
The Bill also abrogates the privilege against self- incrimination to allow employee records maintained and kept by an employer to be used in subsequent proceedings. As noted in the explanatory memorandum, if an employer is lawfully required to produce and keep (or issue) these documents and records, then it is not reasonable for their use in evidence to be prevented.
How It Works: It will be a criminal offence to intentionally underpay employee entitlements arising under the Fair Work Act, modern awards or enterprise agreements (although the new offence will not apply to superannuation underpayments).
Prosecutions may only be commenced by the Australian Federal Police or the Commonwealth Director of Public Prosecutions
It will be a defence to demonstrate honest mistake or that the underpayment was not the result of intentional conduct – demonstrating due diligence will be critical for employers relying on the defence of honest mistake.
Employers may avoid criminal (but not civil) liability by:
- self-reporting and entering a ‘Cooperation Agreement’ with the Fair Work Ombudsman; or
- complying with a yet-to-be-developed voluntary Small Business Wage Compliance Code.
What We Thought It Would Be About: They said it was about closing loopholes.
What It Is Actually About: What has been introduced is a new set of workplace rights for union delegates to be recognised in Modern Awards and Enterprise Agreements.
This is a new mandatory term in Enterprise Agreements with any less favourable terms seeing the Modern Award provision prevail.
How It Works: The Bill requires the Commission to include terms in modern awards dealing with union delegates’ rights, which prevail over any less beneficial delegates rights terms in enterprise agreements.
The Bill also enshrines stand-alone rights for delegates including to represent employees in disputes, reasonable communication with members (or eligible non-members) in relation to their industrial interests, reasonable access to the workplace and workplace facilities, and (other than for small business) access to paid time during normal working hours for training.
Unfair contract jurisdiction for independent contractors
What We Thought It Would Be About: They said it was about affordable access for independent contractors to enforce their rights.
What It Is Actually About: What has been introduced are new powers enabling the Fair Work Commission to deal with disputes about unfair terms in services contracts.
There have also been changes to the (existing) defence for misrepresenting employment as an independent contractor arrangement (known as ‘sham contracting’), from a subjective test of recklessness to an objective test of reasonableness, with the Courts having wide discretion to consider ‘any other relevant matters’ in assessing the reasonableness of the employer’s belief.
How It Works: The Fair Work Commission will have a new unfair contracts jurisdiction. This will enable independent contractors (or organisations representing their industrial interests) to seek orders varying or setting aside all or part of a contract if the Commission considers the contract to be “unfair”.
In determining unfairness, the Fair Work Commission will have regard to a range of factors including (but not limited to):
- the relative bargaining power between the independent contractor and the principal;
- whether the contract as a whole displays a significant imbalance of rights and obligations;
- whether the contract imposes a harsh, unjust or unreasonable requirement on a party; and
- whether the contract provides for total remuneration less than employees or regulated workers under minimum standards orders or guidelines.
Again, this is subject to an exclusion where the independent contractor earns above the contractor high income threshold (to be set by regulation).
Other changes include:
- Changes to the multi-employer bargaining framework:
- the Bill will modify the rules that regulate the interaction between enterprise agreements, with the effect that single-enterprise agreements will prevail over existing supported bargaining and single interest multi-employer enterprise agreements, even where those multi-employer agreements have not passed their nominal expiry date.
- However, this change is limited somewhat by the fact that in order for an employer to put a single-enterprise agreement to vote of a workforce covered by an “in-term” multi-employer agreement, the written agreement of an employee organisation is required (or otherwise a voting request order from the Fair Work Commission).
- In addition, under the Bill, when the single-enterprise agreement is assessed by the Commission to determine whether it passes the “better off overall test”, the terms of the multi-employer enterprise agreement is a relevant comparator.
- A new limitation on the existing small business exclusion on the obligation to make redundancy pay: under the Bill, this exclusion will not apply, in essence, where the employer became a small business due to insolvency;
- The inclusion of family and domestic violence as a protected attribute for anti-discrimination protections;
- An expansion of the affected member certificate regime to included cases of underpayment (meaning permit holders can seek approval from the Fair Work Commission to exercise right of entry without providing advance notice);
- Winding back the changes made to the de-amalgamation process for unions, which enabled this to occur when the relevant constituent part amalgamated more than 5 years prior; and
- Various changes to asbestos and work health and safety, including the introduction of a new industrial manslaughter offence in the Work Health and Safety Act 2011 (Cth) and increased penalties for Category 1 offences.