Naughty or Nice? Closing Loopholes reforms have arrived…

At the beginning of 2023, we wrote that the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (SJBP Act) (which was passed in December 2022) represented the “most substantial reforms to workplace legislation in over a decade”. That statement may have been premature.

On 7 December 2023, the Government passed several parts of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill), which includes significant labour hire reforms, expanded union delegate rights and the introduction of a federal wage (and superannuation) theft offence, amongst other changes. These changes will result in a significant change for many businesses. Some of these changes will come into effect almost immediately.

In this insight, the Kingston Reid team take a closer look at each of the key areas of reform that have been passed and what they mean for employers.


Same Job, Same Pay

Regulated labour hire arrangement orders

The new labour hire provisions create a right for various parties to apply to the Fair Work Commission (FWC) for a regulated labour hire arrangement order (RLHAO).

The FWC must make a RLHAO if:

  1. an employer supplies or will supply, either directly or indirectly, one or more employees of the employer to a host to perform work for the host;
  2. a ‘covered employment instrument’ – generally an enterprise agreement – that applies to the host would apply to the employees if the host employed the employees directly to perform work of that kind; and
  3. the host is not a small business employer.

If a RLHAO is made by the FWC, the employer cannot, subject to limited exceptions, pay its employees less than the relevant rate of pay which would apply to the employee under the host’s covered employment instrument. The rate of pay is the full rate (including bonuses, loadings, allowances, overtime and penalty rates).

RLHAOs can take effect on or after 1 November 2024.

A host employer must give notice of the RLHAO to any employer covered by an RLHAO and must, at the request of the employer, provide information to the employer to enable the employer to determine the rate of pay to be paid.

Where an enterprise agreement that is the subject of an RLHAO is replaced, or a new labour hire employer is engaged, the host must apply to the FWC for a variation of the RLHAO to apply in those new circumstances.

Some exceptions apply

Employers will not need to comply with RLHAO to the extent it captures employees to whom training arrangements are in place. Employees performing work for the host for less than 3 months will also fall outside the scope of a RLHAO.

Hosts, employers, employees and unions can apply to the FWC for extended exemption periods and can also apply for the exemption periods to be reduced (even down to no exemption period applying). These applications will only be granted if the FWC is satisfied that there are exceptional circumstances that justify making a variation to the general 3 month exemption.

RLHAO must be fair and reasonable in the circumstances

The FWC must not make a RLHAO if it is not satisfied that it is fair and reasonable in all the circumstances to make a RLHAO. There are a variety of matters for the FWC to consider, including:

  • pay arrangements;
  • the nature and scope of the host’s covered employment instrument;
  • the history of industrial instruments applying to the host and employer;
  • the terms and nature of the arrangement under which the work will be performed (including duration of the arrangement, location where the work is being performed, number of employees performing the work, and industry where the work is being performed); and
  • any other matter the FWC considers relevant.

Service based contractors

The saving grace of the recent amendment package relates to service-based contractors. Such entities are excluded from the RLHAO regime, however a party relying on such an exclusion would need to satisfy the FWC that the arrangement is one for the provision of a service, and not the supply of labour.

In order for the exemption to apply, the following will be considered:

  • the involvement of the employer in matters relating to the performance of the work;
  • the extent to which, in practice, the employer or a person acting on behalf of the employer directs, supervises or controls (or will direct, supervise or control) the regulated employees when they perform the work, including by managing rosters, assigning tasks or reviewing the quality of the work;
  • the extent to which the regulated employees use or will use systems, plant or structures of the employer to perform the work;
  • the extent to which either the employer or another person is or will be subject to industry or professional standards or responsibilities in relation to the regulated employees;
  • the extent to which the work is of a specialist or expert nature.

It will be important that employer assess their work arrangements against this criteria to consider whether they are exempt from the labour hire scheme.

Alternative Protected Rate of Pay Orders

If the FWC makes a RLHAO, or a party has applied to the FWC for a RLHAO, a second application can be made for an alternative protected rate of pay order (APRPO).

The effect of an APRPO is that instead of applying the rates of pay in the host’s covered industrial instrument (which would cover the employees if they were employed by the host), the FWC can order that the rates payable are the rates that exist in an industrial instrument (again, generally an enterprise agreement) that applies to:

  1. a related entity of the host and would apply to a person employed by the related entity to perform the relevant work; or
  2. the host and would apply to a person employed by the host to perform the relevant work in circumstances that do not apply to the employees covered by the RLHAO.

The FWC will be empowered to deal with disputes about RLHAOs, including by arbitration. Before the FWC gets involved, parties to the dispute must attempt to resolve the dispute at a workplace level.

Anti-avoidance provisions

Anti-avoidance provisions have been included centring around arrangements and schemes being entered into which preclude or restrict the FWC’s ability to make RLHAOs, whether or not those schemes would otherwise be enforceable.

An employer must not try to enliven the exemption that an RLHAO will not apply to work of less than 3 months by engaging different employees to perform the same or similar work, while a host must not enter into such short-term arrangements where different people perform the same or substantially the same work in order to avoid the requirement of the employer to pay the required rate of pay. Employees should not be terminated and reengaged as independent contractor in order to avoid the provisions.

The anti-avoidance provisions apply retrospectively from the date the Bill was introduced. That is, from 4 September 2023. This means that employers or hosts should not be taking steps to try any avoid the operation of the labour hire provisions.

Key takeaways

  • One of the requirements the FWC must be satisfied of before making a RLHAO is that the ‘employer supplies or will supply, either directly or indirectly, one or more employees of the employer to a regulated host to perform work for the regulated host…’

Where an application for a RLHAO is made, a party will have to actively resist an application for a RLHAO if the employer is providing a service, rather than labour to the host.

At this stage, there is no scope for the employer to make or be notified of an application for an RLHAO. It is yet to be seen the scope of their involvement as a respondent or someone named in the RLHAO, however, it is likely that the employer in some, if not all cases, will need to be involved in the process to ensure that the FWC is appropriately appraised of all the matters that go towards whether or not the RLHAO should be made.

  • The ability for the FWC in making a APRPO to import rates from the host’s other agreements is concerning. The proposed provisions would allow the FWC to enforce the rates of pay payable to the host’s employees in completely separate geographically locations, where market rates are much higher and wage expectations are different.
  • The anti-avoidance provisions are retrospective, backdated to 4 September 2023. Employers and hosts should be cautious to ensure that they are not entering into arrangements to avoid the application of an RLHAO.


Wage and Superannuation Theft

The Bill introduces a new criminal offence of intentional wage and superannuation theft (wage theft) which will take effect from 1 January 2025.

Not all instances of underpayment will be regarded wage theft.  Wage theft will occur where an employer intentionally engages in conduct that results in the failure to pay an employee their minimum statutory entitlements (that is, entitlements arising under the Fair Work Act 2009 (Cth) (FW Act), or a fair work instrument such as a modern award or enterprise agreement) – defined in the Bill as “required amounts”.

Standard of Proof

Given the seriousness of a finding that wage theft has occurred, for a prosecution of a wage theft offence to be successful, fault must be proved to the requisite criminal standard – being “beyond reasonable doubt”. To that end, intention must be proven in relation to the conduct elements – that is, that there is proof beyond reasonable doubt that the employer intended for their conduct to result in the non-payment of the required amount.

For example, if an employer mistakenly misclassifies an employee under a modern award, or makes an inadvertent payroll error, they will not be guilty of an offence, even though the misclassification has resulted in the employee receiving less than they ought to have. On the other hand, if an employer deliberately misclassified an employee in order to pay them a lower rate, it would be an offence under the Bill.


Penalties include a term of up to 10 years imprisonment, or a fine up to the greater of 3 times the underpayment amount (being the difference between the required amount and the amount actually paid to the employee) and 5,000 penalty units (currently $1,565,000) for an individual or 25,000 penalty units (currently $7,825,000) for a body corporate.

Where a person is guilty of committing two or more offences and the aggregated offences arose out of a course of conduct by the person, the person is taken to have been found guilty of a single offence.

Related Offences

The Bill also includes penalties for “related offences” includes offences which are associated with a failure to pay a required amount, such as:

  • being an accessory after the fact;
  • attempting to commit the offence;
  • being complicit;
  • joint commission;
  • procuring another person to commit the offence;
  • inciting the commission of an offence; and
  • conspiracy to commit an offence.

The Voluntary Small Business Wage Compliance Code

It is proposed that a Voluntary Small Business Wage Compliance Code may be developed.  If a small business employer complies with the Compliance Code in rectifying an underpayment that has occurred, the Fair Work Ombudsman (FWO) will be precluded from referring conduct resulting in the failure to pay a required amount to the DPP for prosecution as wage theft or entering into a cooperation agreement with the employer.

Cooperation Agreements

The FWO will be able to enter “cooperation agreements” with a person which relates to conduct engaged which may amount to an offence if that person has reported that conduct to the FWO. The effect of the cooperation agreement is that the FWO cannot refer the conduct to the Australian Federal Police or Director of Public Prosecutions whilst the agreement is in place.

Key Takeaways

  • A new criminal offence applies to employers in relation to intentional underpayments. Employees, officers and agents of employer may be implicated by the “related offences’ provisions.
  • Genuine mistake such as an inadvertent payroll error does not constitute an offence under the Bill.
  • Significant penalties will apply but small businesses that rectify underpayments in accordance with the Voluntary Small Business Wage Compliance Code should avoid prosecution and penalties.


Work Health & Safety

There are a range of work health and safety (WHS) changes contained within the Bill. We’ve summarised the key changes below.

Industrial Manslaughter Offence

The Bill also includes significant WHS reforms. In particular, the amendments pose major changes to criminal liability under the Commonwealth Work Health and Safety Act 2011 (WHS Act) by introducing:

  • a new offence of industrial manslaughter; and
  • increasing increase all penalties in the WHS Act by nearly 40 per cent and provide for future indexing.

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.

Notably, the federal WHS legislation will now mirror the Victorian state legislation, while a maximum penalty of 20 years imprisonment for individuals is currently imposed in Queensland, Western Australia and the ACT.

Proposed section 30A provides an offence of industrial manslaughter is committed where a person is conducting a business or undertaking (PCBU), or is an officer of a PCBU and:

  • the person has a health and safety duty;
  • the person intentionally engages in conduct;
  • the conduct breaches the health and safety duty;
  • the conduct causes the death of an individual (including where conduct substantially contributes to the death);
  • the person was reckless, or negligent, as to whether the conduct would cause the death of an individual.

If the offence does not meet the threshold for industrial manslaughter, an alternative verdict can be decided following a hearing for industrial manslaughter and defendants are at risk of being found guilty of a Category 1 or 2 offence. The changes further clarify that Category 1 offences apply to officers of persons conducting a business undertaking. There is no limitation period for industrial manslaughter or Category 1 and 2 offences.

Corporate Criminal Liability

Another big change in respect of work health and safety are the changes which amend criminal liability provisions for bodies corporate, the Commonwealth and public authorities.

A corporation will be taken to have committed the physical elements of the offence if, it can be established that the board of directors, officers, employees or agents engaged in the in conduct through express or implied authorisation.

The mental state or fault component of an offense—excluding negligence—will be attributed to the corporation if:

  • the board or an officer, employee or agent of the corporation had the relevant state of mind or expressly, tacitly or impliedly authorised or permitted the relevant conduct;
  • a corporate culture exists that directed, encouraged, tolerated or led to the conduct constituting the offence.

Broadly, corporate culture may be a summation of one or more attitudes, policies, rules, courses of conduct or practices existing within the corporation generally or in the part of the corporation in which the relevant activity takes place; and

  • with respect to conduct of officers, employees or agents, if the corporation is unable to establish it took all ‘reasonable precautions’ to prevent the conduct or the relevant authorisation or permission.

Organisations captured by the federal WHS Act will need to review their corporate WHS strategy and mechanisms of accountability to ensure adequate management of officers, employees and agents to ensure they are able to demonstrate the existence of a corporate culture that prioritises the health, safety and wellbeing of its workforce – actively led from the C-suite – and that all reasonable precautions are taken consistently.

Asbestos and Silica Safety and Eradication Agency

The key changes introduced by the Bill are to rename the Agency to refer to silica (as well as asbestos), to align to its broadened functions of coordinated action at a national level in relation to silica safety and silica-related diseases.

The rebadged Agency will act as a national coordination mechanism, intended to better align efforts across Australian states and territories in relation to preventing, controlling and managing occupational dust diseases (including silicosis) in Australia, as well as having responsibility for silica coordination, awareness raising, research, reporting and advising the Government in relation to silica.

The Agency will also take over responsibility for the Silica National Strategic Plan, (from the Department of Health and Aged Care).


Workers Compensation and Comcare

First Responders and PTSD Reforms

Amendments have been made to the Safety, Rehabilitation and Compensation Act 1988 (SRC Act) which will mean that first responders who sustain post-traumatic stress disorder (PTSD) will not have to prove their employment significantly contributed to their PTSD for the purpose of their workers’ compensation claim.

The changes have introduced a reverse onus of proof for first responders with PTSD, to increase accessibility to recovery support and rehabilitation.

This will establish a rebuttable presumption that unless there is compelling contrarian evidence, the PTSD endured by ambulance officers, paramedics, emergency services communications operators, firefighters, the Australian Federal Police and members of the Australian Border Force, is presumed to have been significantly influenced by their occupational duties.

Comcare Guide for Arranging Rehabilitation Assessments and Requiring Examinations

The changes further insert a new section 57A to the SRC Act, which requires Comcare to develop a document called the “Guide for Arranging Rehabilitation Assessments and Requiring Examinations” (Guide).

The purpose of the Guide is to ensure accountable decision making in relation to arranging a rehabilitation assessment or requiring an employee to undergo an independent medical examination.

Section 57A requires a set of prescriptions for the development of the Guide, aimed at limiting the overuse of independent assessments which has been criticised for the downplaying of medical issues on the basis of a short assessment being completed by a practitioner that is unfamiliar with the patient taking precedence over medical advice from the patient’s long-standing practitioner.


Other Changes

Workplace Delegates’ Rights

There are also important changes to the rights of workplace delegates (a person appointed or elected in accordance with the rules of a union to be a delegate or representative for members who work in a particular enterprise). These changes operate at the Award, enterprise agreement and individual rights level for a workplace delegate.

At the Award level…

At the Award level, the FWC, in addition to the other work it is carrying out in reviewing Awards in response to a request from the Minister in September 2023, will be required by 30 June 2024 to have included within all Awards a “delegate’s rights” term.

These terms must ensure that a workplace delegate is entitled to:

  • reasonable communication with members and persons eligible to be members in relation to their industrial interests;
  • reasonable access to the workplace and workplace facilities for the purpose of representing member and potential members interests; and
  • unless the business is a small business, reasonable access to paid training during normal working hours for the purpose of their role as a workplace delegate.

Whilst the availability of workplace delegates training for the purpose of dispute resolution training is a feature currently of some Awards, it is not generally a feature across the Award system. Nor are the new “delegate’s rights” concerning reasonable access to facilities and communication with members and potential members.

Such entitlements were more commonly reflected in the terms of enterprise agreements with highly unionised workforces. In the area of enterprise agreements there are also some important changes.

At the enterprise agreement level…

At the enterprise agreement level, all enterprise agreements commence their access period from 1 July 2024 (that is the employer has asked employees to vote on the enterprise agreement before that date), need to have a “delegate’s rights” clause that is at least as favourable as the clause within any Award that would otherwise apply to the employee.

If there is no term in the proposed enterprise agreement, or the term is not as favourable as any aspect of the Award clause, then the Award clause applies as a term of the enterprise agreement.

At an individual delegate’s rights level…

At an individual delegate’s rights level, there are new “workplace rights” under the banner of “industrial activities” defined for workplace delegates. An employer of a workplace delegate must not:

  • unreasonably fail or refuse to deal with the workplace delegate;
  • knowingly or recklessly make a false or misleading representation to the workplace delegate; or
  • unreasonably hinder, obstruct or prevent the exercise of the rights of the workplace delegate (i.e. the right to reasonable communication, reasonable access to facilities and reasonable access to training for their role as a delegate).

It can be expected that these new “delegate’s rights” will form a basis for new general protections claims agitated by Unions not only as delegates seek to test the limits of these new privileges, but also one could expect that they find their way into the strategies that Unions might adopt for traditional industrial disputes and those that arise in bargaining.

Small Business redundancy exemption

The small business redundancy exemption is intended to remove the redundancy pay carve out for small businesses for circumstances where a larger business incrementally downsizes to become a ‘small business employer’ (with 15 or less employees) due to insolvency. Employees of small business employers are not generally entitled to redundancy pay.

When a business incrementally downsizes in the lead up to liquidation or bankruptcy, the residual employees who are helping with the winding-up of the business (e.g., payroll and bookkeeping staff) can lose their entitlement to redundancy pay due, notwithstanding that the employees who were made redundant before the employer was a ‘small business employer’ did receive redundancy pay.

Strengthening protections against discrimination for employees subjected to family and domestic violence

These changes extend existing anti-discrimination provisions within the FW Act to offer better protection for employees who have been, or continue to be, subjected to family and domestic violence (FDV), in the following ways:

  • prohibit the creation and enforcement of ‘discriminatory’ terms within modern awards and enterprise agreements that discriminate against an employee on the basis of FDV or reasons relating to FDV;
  • include subjection to FDV as a matter that the FWC must take into account when performing its functions or exercising powers; and
  • expressly making subjection to FDV a ‘protected attribute’ (for the purposes of the FW Act’s general protections provisions), to offer more express protection for employees (and prospective employees) against adverse action (and unlawful termination) because they have, or are currently, being subjected to FDV.

These changes follow on from the changes introduced early this year (under both the SJBP Act and the subsequent Fair Work Legislation Amendment (Protecting Worker Entitlements) Act 2023 (Cth) reforms), which introduced:

  • paid FDV leave for employees experiencing FDV (including casual employees);
  • confidentiality requirements in relation to notice and evidence that may be requested in relation to taking such leave;
  • specific requirements to ensure FDV leave is not recorded on payslips; and
  • the ability for affected employees to request flexible working arrangements due to subjection to FDV.

Amendments regarding (bargaining) mediation and conciliation conference orders

Earlier this year, the SJBP Act introduced new provisions requiring bargaining parties to attend a FWC facilitated conference in attempt to resolve issues before industrial action occurs.

The provisions operate so that where the FWC makes a protected action ballot order in relation to a proposed enterprise agreement, it must also make an order directing the bargaining representatives to attend a mediation conference which must occur either before, or on the day on which voting on the protected action ballot, closes.

However, in a decision[1] earlier this year, the Full Bench identified a significant flaw – an employee bargaining representative’s non-compliance with an order to attend a FWC facilitated conference could render any subsequent employee claim action unprotected – not just for those represented by the non-complying bargaining representative, but for all others participating in the action.

These changes address this issue by clarifying exactly who is required to attend a conciliation conference in order for any subsequent employee claim action to be protected.


What’s coming in 2024?

Whilst the Government has succeeded in delivering itself an early Christmas present with the passing of this first section of the Bill, the first few months of next year will continue to present as a period for further change as the Senate Committee inquiring into the Bill provides its report (due on or before 1 February 2024), and those aspects of the Bill which were not passed in December come back up for debate and resolution.

Some of those key areas of potential change are:

  • changes to the definition of casual employment as well as the casual conversion provisions to allow for employee initiated conversion;
  • new provisions aimed at providing protections for regulated workers – including road transport industry and digital platform ‘gig economy workers’;
  • independent contractors and the defence to “sham contracting”; and
  • changes to the multi-employer bargaining framework,

amongst others.

For further commentary on the key areas of reform that will be revisited by Parliament in the new year, please check out the guidance previously published by Kingston Reid which can be accessed here.

Additional changes

Members of the Senate are also likely to push their own changed agenda in exchange for providing support to the Government to have the residual aspects of the Bill passed.

In this respect, there are two notable areas of change which have already been tabled by the Greens, in relation to the intractable bargaining provisions, and also the “right to disconnect”. These proposals have the potential to profoundly change employer rights and obligations.

In relation to the Greens’ intractable bargaining proposal, if the FWC is called on to arbitrate an intractable bargaining dispute, any determination made by the FWC cannot result in any term in the determination being less favourable for an employee or any union than the terms of an enterprise agreement that applies to the employees, prior to the determination.

Effectively, once the FWC is arbitrating an “intractable bargaining dispute”, employees and the union cannot lose – they get to keep everything they currently have, and any changes can only be to improve existing conditions.

Finally, Minister Burke has signalled a willingness to discuss the Greens’ “right to disconnect” proposal in the new year, which revives the Fair Work Amendment (Right to Disconnect) Bill 2023 tabled by the Greens in March 2023 and contains a prohibition on employers contacting employees outside of their hours of work (including during leave), except in certain limited circumstances.

Stay tuned for further updates by the Kingston Reid team, and don’t hesitate to contact us if you require advice about the implications of these changes for your organisation.

[1] CEPU v Nilsen (NSW) Pty Ltd [2023] FWCFB 134


Michael Mead
+61 2 9169 8428
[email protected]
Duncan Fletcher
+61 8 6381 7050
[email protected]
Liam Fraser
+61 7 3071 3113
[email protected]
Katie Sweatman
+61 3 9958 9605
[email protected]
Emily Baxter
Special Counsel
+61 2 9169 8411
[email protected]
James Parkinson
Special Counsel
+61 8 6381 7053
[email protected]
Xavier Burton
+61 8 6381 7068
[email protected]
Beth Silverman
+61 3 9958 9603
[email protected]
Emma McCarthy
+61 2 9169 8422
[email protected]
Jane Silcock
Executive Counsel – Knowledge
+61 2 9169 8419
[email protected]
Frank Daly
+61 8 6381 7051
[email protected]
Krystina Sader
+61 8 6381 7072
[email protected]