Publication
Australian Arbitration Week 2024
Australian Arbitration Week took place between 13 – 18 October 2024 in Brisbane.
Australia | Publication | June 2024
This article was co-authored with Amy Moore.
On 7 December 2023, Parliament passed the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth), which introduced significant amendments to the Fair Work Act 2009 (Cth) (FW Act). Late last year, our Employment and Labour team published an article summarising the key changes that employers should familiarise themselves with, including those provisions aimed at ‘closing the labour hire loop hole’.
Earlier this year, Parliament further reformed Australia’s employment and industrial relations landscape by passing the Federal Government’s second tranche of the ‘Closing Loopholes’ legislation. The amendments introduced by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth) (Closing Loopholes No. 2) have either commenced or are set to commence between 27 February 2024 and 26 August 2025.
This article provides an overview of the key reforms contained in the Closing Loopholes No 2 that will affect how relationships between employers, employees and independent contractors are defined and regulated, and what this may mean for your organisation.
Closing Loopholes No 2 introduces a new definition of ‘casual employee’ into s15A of the FW Act, which contains the following elements:
The new definition places emphasis on the totality of the relationship, demonstrating a significant departure from the current definition, which was introduced following the High Court decision in WorkPac Pty Ltd v Rossato [2021] HCA 23 to give primacy to the terms of the contract.
Academic staff who are covered by an applicable modern award and engaged under a fixed-term contract will be exempt from the s15A definition of casual employment.
Employees who are engaged on a casual basis will remain so until any of the following events occur:
Closing Loopholes No 2 establishes a new pathway for casual employees to initiate change to their employment status. The existing casual conversion procedure, which comprised of two streams – employer offers and employee requests – is repealed. Under the new regime, employer offers are no longer required, and casual employees are given a choice as to whether they wish to notify their employer about converting their employment to full-time or part-time.
An employee will be eligible to bring a notification for casual conversion if that employee:
Where an employee makes a casual conversion notification, an employer must consult with the employee and respond in writing within 21 days.
If notification is accepted, the employer must specify in its response:
The employer may reject the notification on any one of the following grounds (and must detail these reasons to the employee in its response):
New protections are also being introduced to prevent the intentional misclassification of casual employment. Under these protections, an employer must not:
An employer and employee must first attempt to resolve casual conversion disputes at the workplace level.
If unsuccessful, the dispute may then be referred to the FWC, who will first attempt to resolve the dispute by informal means (such as mediation and conciliation) before dealing with the dispute by arbitration.
Employers are currently required to provide a Casual Employment Information Sheet (CEIS) to all new casual employees at the commencement of employment.
Closing Loopholes No 2 creates an additional requirement that the CEIS be provided again after the employee has completed 6 months of employment with a non-small business employer and every subsequent employment period of 6 months (or every 12 months for small business employers).
From 26 August 2024 new “ordinary meaning” definitions of employee and employer will be included in s15AA of the FW Act, which require the real substance, practical reality and true nature of the working relationship between the parties to be considered when characterising the employment relationship. Under the new s15AA(2), this must be ascertained by considering the following factors:
The new s15AA has the effect of overriding the ‘contract-centric’ approach taken by the High Court in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations v Jamsek [2022] HCA 2, which gave primacy to the written terms of a contract in determining whether an individual was an employee or independent contractor, rather than considering the real substance and practical reality of the relationship.
Closing Loopholes No 2 also inserts a provision at s15AB of the FW Act enabling individuals earning above the contractor high income threshold (a newly established amount to be determined by the regulations) (Contractor High Income Threshold) to ‘opt-out’ of the new s15AA definitions by providing a written ‘opt-out notice’ to the person who may become their employer as a result of the new ‘employer’ and ‘employee’ definitions.
Section 15AB commenced on 27 February 2024 and importantly, the opt-out notice must be provided before s15AA comes into operation on 26 August 2024.
This provision enables an individual to preserve their status as an independent contractor if they consider that the relationship may, upon the commencement of the s15AA definitions, become an employer/employee relationship.
An individual has the right to revoke an opt-out notice at any time by giving written notice to the principal.
Closing Loopholes No 2 establishes an unfair contract terms framework in the FW Act, which gives the FWC jurisdiction to deal with disputes in relation to unfair contract terms of services contracts.
When determining whether a contract term is unfair the FWC will have regard to a number of prescribed matters, including:
Independent contractors earning less than the Contractor High Income Threshold may apply to the FWC for an order to set aside, amend or vary all or part of the services contract. Independent contractors with income above the Contractor High Income Threshold can continue to access the existing unfair contracts jurisdiction under the Independent Contractors Act 2006 (Cth).
The FWC may make an order in relation to a services contract if it is satisfied that it includes one or more unfair contract terms which, in an employment relationship, would relate to ‘workplace relations matters’.
A ‘workplace relations matter’ is defined under the FW Act to include matters such as:
As these changes are set to take effect on 26 August 2024, employers who engage casual employees and independent contractors need to consider and understand how these reforms will impact upon their operations.
Employers may consider preparing for the new regime by taking the following steps:
If you would like to discuss these upcoming changes in more detail or require assistance in reviewing your agreements and arrangements, please contact our Employment & Labour Team.
Publication
Australian Arbitration Week took place between 13 – 18 October 2024 in Brisbane.
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