The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth) (Closing Loopholes No.2) introduced a number of key reforms that came into effect on 26 August 2024 and it is important for employers to revisit these updates to the Fair Work Act 2009 (Cth) (FW Act) to ensure they remain compliant.
1. "Employee" and "employer" definition
What's changed?
A significant update in the FW Act is the introduction of section 15AA, which establishes a new statutory interpretative principle for defining "employee" and "employer".
Traditionally, the interpretation of these terms has relied heavily on common law principles. Until recently, courts in Australia considered the totality of the relationship between the worker and the principal, by reference to various indicators of the day-to-day relationship to determine the nature of the relationship. That changed following the High Court's decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd and ZG Operations Australia Pty Ltd v Jamsek, which benched the prevailing approach in favour of one that focused primarily on the terms of the contract between the parties.
The introduction of section 15AA effectively "reverses" the High Court's rulings, which once again puts the focus primarily on the real substance, practical reality, and true nature of the relationship between the parties. Section 15AA provides a statutory guideline that courts and the Fair Work Commission (FWC) must consider when interpreting these terms.
How this impacts employers
Misclassification can lead to significant legal and financial repercussions, including penalties, back payments of entitlements and potential litigation. It's crucial to review your employment contracts and ensure that your categorisation of workers aligns with the new interpretative framework.
Section 15AA will only apply to interpretation of employee and employer for the purposes of the FW Act, and will not apply when determining the meaning of those terms for the purposes of other employment-related statutes such as the Superannuation Guarantee (Administration) Act 1992 (Cth).
The new laws provide for high earning contractors to opt out of the application of the interpretation principle, such that their contractor status is retained. This update also reminds businesses to keep accurate records and maintain transparent employment practices in compliance with the FW Act and any relevant legislation. If you are unsure or unclear about how your workers are categorised in light of the new legislative changes, our Workplace Relations & Safety team can provide guidance and advice.
2. 'Right to disconnect' for employees
What's changed?
New sections 333M and 333N of the FW Act preserves an employee's right to refuse to respond to employment-related communications outside working hours, unless refusal is unreasonable.
In an era where remote work and digital communication blur the boundaries between work and personal life, this change reflects a growing trend of the need to protect employees' time outside of work.
How this impacts employers
If your business relies on employees being available outside of standard working hours, you may need to renegotiate terms or provide compensatory arrangements.
Policies will need to be updated to reflect this new right, and managers must be trained to respect these boundaries. Additionally, businesses should prepare for potential disputes and familiarise themselves with the new resolution processes outlined in the FW Act.
Ensuring compliance not only helps avoid legal repercussions but can also improve employee morale and reduce burnout, potentially leading to higher productivity and retention.
3. Definition of casual employee and casual conversion rights
What's changed?
The definition of a casual employee in section 15A of the FW Act is being amended, along with alterations to the existing casual conversion and dispute resolution mechanisms. These changes are designed to provide greater clarity and fairness in how casual employment is managed.
The amendment redefines what constitutes casual employment and reinforces the rights of casual employees to request conversion to permanent employment under certain conditions. The dispute resolution mechanisms are being updated to ensure that disagreements regarding casual status and conversion are handled more efficiently.
How this impacts employers
The amended definition may require your business to revisit and possibly revise how it classifies casual employees. It's important to ensure that your contracts and employment practices reflect this new definition to avoid risks of misclassification.
Businesses should prepare for an increase in conversion requests. It is advisable to have clear policies and communication strategies in place to manage these requests and ensure they are handled in compliance with the new requirements.
Employers should also be prepared to engage in the updated dispute resolution mechanisms and consider the potential need for legal support to navigate more complex cases.
4. Unfair contract regime for independent contractors
What's changed?
A new unfair contract regime is being introduced in Part 3A-5 of the FW Act, targeting independent contractors who earn under a high-income threshold. This will allow contractors to apply to the FWC to vary or set aside a services contract if it is deemed unfair.
How this impacts employers
Contracts that were previously considered enforceable might now be subject to scrutiny under the new regime.
Employers should review all existing contracts with independent contractors to ensure they meet the new fairness standards. Considerations might include the balance of power between the parties, the clarity and transparency of contract terms and whether the contract imposes undue disadvantage on the contractor.
Failure to adjust could result in contracts being set aside or varied by the FWC, which could disrupt your business operations and lead to unforeseen costs.
5. 'Employee-like workers' in digital platform work
What's changed?
A new Chapter 3A of the FW Act introduces regulations for 'employee-like workers', particularly those engaged in digital platform work, such as UberEATS and DoorDash. This includes provisions enabling such workers to apply to the FWC to challenge unfair deactivations and allowing the FWC to set minimum standards and register collective agreements for these workers.
This update reflects the growing gig economy and the need to protect vulnerable workers who do not attract the protections afforded to employees.
How this impacts employers
The regulation of 'employee-like workers' means that businesses must now consider the legal status and rights of these workers more carefully.
The ability of these workers to challenge unfair deactivations and the establishment of minimum standards may require businesses to revise their operational policies and contract terms. Moreover, businesses might need to engage with these workers collectively, which could lead to changes in wage structures, work conditions, and dispute resolution processes.
To stay ahead, consider conducting an audit of your current practices related to digital platform workers, ensuring they comply with the new requirements and that you are prepared to navigate potential challenges brought to the FWC.
Steps for employers to stay ahead of the curve
The updates to the FW Act present both challenges and opportunities for employers. While compliance is mandatory, proactive adaptation can also enhance your business's operational efficiency and employee relations.
To ensure your business is fully prepared for these changes, it is essential to:
- conduct thorough reviews of existing contracts, particularly for independent contractors and casual employees
- update your policies to reflect new rights, such as the right to disconnect and the fair treatment of employee-like workers
- engage with legal and HR professionals to navigate the complexities of these updates and ensure all aspects of your business are compliant.
By staying informed and taking proactive steps, you can avoid potential legal pitfalls and position your business as a leader in fair and forward-thinking employment practices.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.