The second part of the Federal Government's "Closing Loopholes" reforms passed Parliament on 12 February 2024. The Bill received Royal Assent on 26 February 2024, and largely comes into effect on 26 August 2024.
Below we provide a brief overview of some of the important changes to the Fair Work Act (FWA) coming into effect on 26 August 2024; but for more detailed information tailored to the needs of your business, get in touch with our highly experienced Workplace Team.
1. Definition of 'Employment' and 'Casual Employee'
Definition of 'employment'
It is imperative that your business is able to clearly discern whether workers are 'independent contractors' or 'employees' in the eyes of the law, since this vastly alters your rights and obligations under the FWA.
The new section 15AA of the FWA introduces a definition of employment whereby the meaning of "employee" and "employer" is determined by reference to the "real substance, practical reality and true nature of the relationship between parties." In practice, this requires a multi-factorial approach when characterising a relationship of employment.
Importantly, this provision overturns the effect of recent High Court decisions which placed focus solely on the written terms of the contract in determining if a worker was an employee or a contractor.*
This multi-factorial approach means that the substance of the relationship, and the post-contractual conduct of parties will once again be greatly significant in defining whether a worker is an employee or a contractor. As such, employers and principals ought to be cautious of relying solely on the terms of a written contract.
Definition of 'casual employee'
A new definition of "casual employee" will also be included in the FWA at section 15A. Similar to above, the current primacy given to the terms upon which the employee accepted the offer of employment will be replaced by a two-pronged definition:
- The employment relationship is characterised by no firm advanced commitment to continuing and indefinite work; and
- The employee is entitled to a casual loading, or specific casual rate of pay, under a fair work instrument or contract.
Whether the first element under s 15A(1) exists depends on a range of factors, including the "basis of the real substance, practical reality and true nature of the employment." The amendment includes references to a range of other indicia that will be relevant to the assessment.
With the reduced emphasis on the employment contract, employers need to discern whether an employee is encapsulated by the new definition, and if necessary alter the substance of the employment relationship.
2. Casual Conversion Process
The amendment also inserts Subdivision B, 'Employee choice about casual employment' into the FWA.
In essence, this new provision aligns with a new focus on 'employee choice', whereby an eligible casual employee can give an employer written notification that they wish to convert to permanency. This amendment shifts the onus off the employer to offer, to a qualifying employee, a conversion to permanent employment.
However, an employer must give the employee a written response to a notification within 21 days, which must include certain information set out in the provision.
As such, employers ought to communicate this shift of onus, from them, to the employee to request permanency, and may need to implement internal policies or processes to facilitate responses thereto.
3. Right to Disconnect
Lastly, the somewhat controversial 'right to disconnect' arises from new insertions into the FWA. Note that for small businesses (a business with less than 15 people), the right commences on 26 August 2025.
Broadly, an employee may refuse to monitor, read or respond to contact, or attempted contact, from an employer outside of the employee's working hours, unless the refusal is 'unreasonable'.
Whether contact from an employer is 'unreasonable' depends on a range of factors, for example, the reason for contact; the level of disruption; and the nature of the employee's role.
The insertion of the provisions creates both a new legal right for the employee, and also a new limitation for the employer since they are prohibited from taking adverse action against an employee exercising the new right.
The upshot is significant for employers who communicate with employees outside of agreed working hours; they will now have less control regarding when they can expect responses.
To accommodate the new right to disconnect, employers ought to be proactive in:
- preparing policies regarding the use of work technology outside of agreed working hours;
- gathering information regarding activity outside of agreed working hours;
- encouraging respect of employees' boundaries;
- providing training for managerial employees who may expect responses outside of agreed working hours;
- explaining the new right to employees;
- ensuring the employer does not take action against employees who are exercising their new right; and
- encouraging open communication where employees feel the need to work outside of agreed working hours.
Conclusion
Please contact our experienced team of workplace lawyers to help you navigate the above changes to the FWA – to ensure your business is not exposed to unnecessary risk of contravention.
*CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1; ZG Operations Australia Pty Ltd vJamsek [2022] HCA
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.