The Federal Government has tabled the Closing Loopholes Bill
07 September 2023
With the introduction of the Secure Jobs Better Pay Bill and Respect@Work Bill in late 2022, you’d think any extensive industrial relations reform would be off the table – but think again – on 4 September 2023, the Federal Government tabled the Fair Work Amendment (Closing loopholes) Bill 2023 (Bill) into Parliament. And, in comparison to the recent law changes mentioned above, this proposed Bill is much larger and is set to have significant and substantial impacts on all workplaces across the country.
In this article, we highlight the key proposed changes arising from the Bill and explain them in easy-to-understand language.
1. Casual employment
Change to casual definition
The Bill proposes to replace the existing definition of ‘casual employee’ with a new definition that aligns with the approach adopted in the Full Federal Court decisions in Skene and Rossato. While the current legislation, and the High Court decision in Rossato, provide that it’s the contract that determines the nature of the employment, the proposed amendments will require consideration of other matters. The proposed definition focuses on whether there’s an absence (or presence) of a firm advance commitment to continuing and indefinite work, which is similar to the current definition. The proposed definition, however, also takes into account a number of factors designed to interrogate the substance, practical reality and true nature of the post-contractual employment relationship.
In essence, the changes will move the definition away from one that focuses on the terms of the offer and acceptance in a contract (as is the current definition), to now consider the post-contractual conduct in assessing the relationship. Such factors will include:
- whether there is a mutual understanding or expectation between the employer and employee;
- whether the employee can elect to accept or reject work;
- the future availability of continuing work;
- whether there are other employees performing the same work who are part-time or full-time employees; or
- whether there is a regular pattern of work.
The Bill also proposes to provide casual employees with two pathways to change their employment status to permanent employment:
- by exercising a choice via new a notification procedure; or
- through the existing casual conversion procedure.
The new notification process differs from the current provisions in that it’s available to employees after six months (12 months for an employee of a small business), and is based on the employee notifying their employer of their belief that they no longer meet the definition of a casual employee and provides more limited grounds for an employer not to accept the notification (and therefore the conversion to permanent employment).
The Fair Work Commission (FWC) will be given powers to determine, by mandatory arbitration, whether an employer had reasonable grounds to refuse to make an offer or decline a request for casual conversion.
Changes to the requirement to issue the Casual Employment Information Statement:
Employers will be required to provide casual employees with the Casual Employment Information Statement (CEIS) at the start of their employment and as well as at 12 months.
2. Same Job, Same Pay
The same job, same pay measure provides a pathway for employees of labour-hire businesses to be paid in accordance with the industrial arrangements of the host employer they’re working for, subject to an order of the FWC. Where there’s a regulated labour-hire arrangement order from the FWC relating to a host site with an existing covered employment instrument, the full rate of pay under that instrument will apply to the labour-hire workers. The exceptions to the FWC ordering a labour-hire arrangement order include:
- short-term placements of three months or less;
- where a training arrangement applies to an employee; and
- where the host is a small business employer as defined in the Fair Work Act 2009.
What is the process of the FWC ordering a labour-hire arrangement order?
The Bill proposes to allow employees and organisations entitled to represent their industrial interests to apply to the FWC for a regulated labour-hire arrangement order.
The FWC must, on application, make an order if satisfied that:
- an 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; and
- a covered employment instrument that applies to the regulated host would apply to the employees if the regulated host were to employ the employees to perform work of that kind (any work that is substantially of that kind); and
- the regulated host is not a small business employer.
The FWC won’t be required to make an order if satisfied that it was not fair and reasonable, having regard to submissions from affected businesses and employees. In making that determination the FWC may consider:
- the pay arrangements that apply to employees of the regulated host and the regulated employees;
- whether the performance of the work is or will be wholly or principally for the provision of a service, rather than the supply of labour, to the regulated host;
- the history of industrial arrangements applying to the regulated host and the employer;
- the relationship between the regulated host and the employer, including whether they are related bodies corporate or engaged in a joint venture or common enterprise;
- the terms and nature of the arrangement under which the work will be performed; and
- any other matter the FWC considers relevant.
If the FWC makes a labour hire arrangement order, then labour hire employees will be required to pay no less than entitlements that exist under host business’ enterprise agreement (or other employment instrument) if the employee were directly employed by the host. The provisions require labour hire employers to match the full rate of pay under the client’s employment instrument, including allowances, penalty rates, loadings, and other separately identifiable entitlements.
Host businesses will be required to provide certain information to labour hire providers on request to assist them in meeting their payment obligations.
The Bill includes an anti-avoidance framework to prevent businesses from evading their obligations.
The FWC will be able to resolve disputes about the operation of regulated labour hire arrangement orders, including by mandatory arbitration, and may determine an alternative protected rate of pay for a labour hire employee where it would be unreasonable for an employer to pay the employee the protected rate.
3. Criminal sanctions for wage underpayment
The Bill introduces a new criminal offence for wage theft, which will only apply to intentional conduct.
The Bill proposes the Fair Work Ombudsman (FWO) publish a compliance and enforcement policy, including guidelines relating to the circumstances in which the FWO will or will not accept or consider undertakings.
As a protection for small businesses, the Minister may declare a Voluntary Small Business Wage Compliance Code. The Code would allow small businesses to avoid prosecution under the criminal regime if they can demonstrate compliance with the Code.
4. Sham contracting
The Bill proposes to change the defence to misrepresenting employment as an independent contracting arrangement, known as sham contracting, from a test of recklessness to one of reasonableness.
The new test would provide that an employer wouldn’t contravene the prohibition on sham contracting if the employer reasonably believed that the contract was a contract for services.
5. Definition of employment
The Bill proposes to insert a new section in the Fair Work Act (Cth) 2009 that defines the meanings of employee and employer by reference to the real substance, practical reality and true nature of the relationship between the parties.
Similar to the changes proposed for casual definition, this new definition of employment will require the totality of the relationship between the parties, including not only the terms of the contract governing the relationship but also the manner of performance of the contract, to be considered when characterising a relationship as one of employment or one of principal and contractor.
This amendment responds to, and will change, the High Court’s decisions in CFMMEU v Personnel Contracting Pty Ltd  HCA 1 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek  HCA 2 (Jamsek). Those rulings determined that the rights and obligations of parties under the contract were what characterised the relationship between a principal and a contractor i.e., contract is king.
The Bill proposes a return to the multi-factorial test that existed prior to these rulings.
6. Unfair contracts
The Bill seeks to introduce the ability for the FWC to deal with applications in relation to independent contracting arrangements where it is alleged that a term of the contract is unfair. The FWC would have the capacity to set aside or amend all or part of the contract that is held to be unfair.
7. Gig workers
The Bill proposes to introduce minimum set of standards for employee-like workers and regulated road transport contractors. The FWC will be empowered to make either binding minimum standards or non-binding minimum standards minimum standards for workers which could include payment terms, deductions, working time, record-keeping, insurance, consultation, representation, delegates’ rights, and/or cost recovery.
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