Closing loopholes No. 2 passes both houses receives royal assent

All employees will have a right to refuse to monitor, read or respond to contact from an employer outside their working hours - unless that refusal is unreasonable . This right extends to contact from customers or clients. Without limiting the matters to take into account, the Amendment Act lists these factors that must be considered in determining whether an employee's refusal to be contacted is unreasonable:

• the reason for the contact;

• the form of contact and the level of disruption it causes the employee;

• the extent of the employee’s compensation to perform work outside of their ordinary working hours;

• the nature of the employee’s role and responsibilities;

• the employee’s personal circumstances (including family or caring responsibilities); and

• whether or not the relevant contact is required by law or was for the reason of “emergency or a genuine welfare matter”.

Attempts to resolve a dispute about an employee’s right to disconnect must first be made at the workplace level between the employer and employee. If unresolved, an application may be made by the employer or the employee to the  Fair Work Commission (Commission), who may make an order to prevent the employee from continuing to unreasonably refuse to monitor or to stop the employer requiring a response to contact attempts.

Any breach of such orders can result in a civil penalty being imposed.

Timing:

These changes will be effective on 26 August 2024 for non-small business employers and from 26 August 2025 for small business employers (employers and associated entities with less than 15 employees).

Importantly, employers will not automatically contravene the Fair Work Act by contacting an employee outside of their working hours. However, the employer would be prohibited from dismissing (or taking other adverse action against) an employee who reasonably refuses to respond to out-of-hours contact.

Further, all modern awards will be required to include a right to disconnect term, which will essentially enable the right to be tailored to different industries.

Recommendations for employers:

Where an employer determines that some level of out of hours contact is inevitable, they should consider:

• any applicable modern award and any tailored right to disconnect terms (once they are published);

• whether relevant employees are remunerated in a way that takes this expectation into account; 

• whether employment contracts should be updated to make that expectation of out of hours contract explicit and that their remuneration takes into account this expectation; and

• how this out of hours contact impacts the obligation to provide, so far as is reasonably practicable, a healthy and safe workplace (including psychologically and in the context of job design that is mindful of psychosocial hazards more generally).

The Fair Work Act will include new statutory definitions of “employee” and “employer”, prompting a return to ascertaining the “real substance, practical reality and true nature of the relationship” when determining whether a worker is an independent contractor or employee.

These definitions will reverse the position established by the High Court decisions in 2022 in Personnel Contracting and Jamsek — which had given primacy to the contract when determining the nature of the relationship. These reforms mark the return to the multi-factorial approach, where the reality of how the contract is performed in practice must be accounted for to consider the totality of the relationship between parties.

Independent contractors who earn over a specified high-income threshold may “opt out” of the new employee definition, whether their principal has asked them to opt-out or not.  This contractor high income threshold will be prescribed by the Fair Work Regulations 2009  (Cth) at a later date.

Timing:

These changes to the definitions of employee and employer will be effective on 26 August 2024. A principal may, from 26 February 2024, request an independent contractor to issue an opt-out notice.

Recommendations for employers:

• Employers will need to carefully consider which individuals are independent contractors or employees by recognising the differences between written contracts and how they play out in practice.

• Identify those highly paid independent contractors (once the high income threshold is prescribed) and consider whether it would be appropriate for those contractors to utilise the opt out mechanism. Noting, the opt-out mechanism may have limited benefit for a principal, considering that an independent contractor may retract their opt-out notice at any time.

The Amendment Act introduces a new definition of a casual employee, which provides that casual employment is where there is:

• an absence of a firm advance commitment to continuing and indefinite work; and

• the employee is entitled to a causal loading or specific rate of pay.

The Amendment Act outlines criteria to determine whether there is an absence of firm advance commitment to continuing employment, including having regard to, the “real substance, practical reality and true nature of the relationship”. Similar to the tests for contractors - this is a further step away of the emphasis given to the contract in earlier High Court decisions - with an emphasis now on the relationship in practice.

Under a new “employee choice” process:

• a casual employee may notify their employer that they believe they no longer meet the above definition of a casual employee;

• if the employer accepts the notification, the employee's employment status changes to permanent employment;

• the onus is on the employee to request the change to their employment status after 6 months (or 12 months for small businesses); and

• the employer may refuse the employee’s request on fair and reasonable grounds (see below).

If the employer does not accept the notification, they must advise that they do not accept the notification on one or more of the following grounds:

• the employer believes the employee is correctly classified as a casual employee;

• there are fair and reasonable operational grounds for not accepting the notification;

• a change of employment status would not comply with a recruitment or selection process required by a Federal or State / Territory law.

Disputes about casual conversion may also be dealt with by the Commission.

Timing:

These changes will be effective on 26 August 2024.

Recommendations for employers:

• Review their current casual employees to determine their status under the new definition.

• Review template casual employment contracts to ensure they reflect the recent changes to the law. 

• Consider whether existing casual conversion processes will comply with the new laws (noting the onus is now on casual employees to request to change their employment status, rather than on the employer.

The first tranche of the Federal Government’s Closing Loopholes reforms introduced significant changes relating to underpayment of employee entitlements, including a new criminal wage theft offence. Under this new offence, employers who intentionally (rather than accidentally or inadvertently) underpay staff could face a penalty of up to 10 years in prison and a maximum fine of up to $7.825 million, or three times the underpaid amount (if it exceeds the cap).

This new criminal offence will start on the later of 1 January 2025 and when the Commission's Voluntary Small Business Wage Compliance Code starts.

The Amendment Act will allow trade unions to enter workplaces without notice to investigate suspected contraventions of the Fair Work Act in respect of members, including underpayments. Trade unions must obtain an exemption certificate from the Commission so that the usual 24-hour notice is not required.

An exemption certificate must be issued if the Commission is satisfied that by giving an employer advance notice of the entry, this might result in destruction of evidence or an effective investigation being hindered.

Timing:

The new right of entry for suspected underpayments provisions will come into effect on 1 July 2024.

Recommendations for employers:

Employers should be reviewing their current right of entry protocols and training for managers to ensure the business and each site is adequately prepared for entry by trade unions under these new provisions, without out prior notice. 

The first tranche of the Closing Loophole reforms empowered the Commission to determine Minimum Standard Orders (MSOs) to protect individuals who perform work on “digital labour platforms” and “employee-like workers”. MSOs could incorporate factors such as payment terms, insurance, and record-keeping in relation to specific matters or cost recovery.

The Amendment Act expands on this framework to:

• enable the Commission to make “contractual chain orders” that will apply to the supply chain in the road transport industry; and

• require the Commission to be satisfied there are no adverse public interest consequences when approving any collective agreement to cover “employee-like” gig economy workers or road transport workers that the agreement is not contrary to the public interest.

Timing:

These changes will be effective from 26 August 2024.

Recommendations for employers:

Employers in these industries should consider the impact of the framework possibly applying, particularly in relation to increases on labour costs.

The Amendment Act has made amendments to the bargaining framework for franchises by enabling multiple franchisees to make a single-enterprise agreement. Notably this means that employees of franchisees could also obtain a majority support determination where a majority of employees who would be covered by the proposed agreement wish to bargain, without the requirement to establish that each employer has at least 20 employees.

Timing:

These changes will be effective from 27 February 2024.

Recommendations for employers:

Franchisees and franchisors should consider the impact of these changes, particularly in industries typically covered by enterprise agreements, including fast food and retail.