"Closing Loopholes" or Redefining Employment Law?

“Closing Loopholes” or Redefining Employment Law?

“Closing Loopholes” or Redefining Employment Law? The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Cth)

1. On 4 September 2023, the Albanese Government introduced the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Cth) (the Bill) to the House of Representatives, seeking to introduce changes which would effectively redefine the employment landscape.

2. The Bill’s potential changes are not as pressing as first thought; the Senate’s report is not due until February 2024. Further, we anticipate significant amendments to the bill over the course of its journey through the House of Representatives and the Senate. However, given the likely significant impact of the proposed Bill, it is important that employers are aware of the proposed changes.

4. This article provides a broad overview of the Bill. We will provide a comprehensive analysis of the final legislation upon its passing.

Redefining Employment, Casual Employment, and – “Employee-Like Work”?

5. Arguably the most significant (and likely controversial) amendment is the Bill’s proposed defining of ‘employees’, ‘casual employees’, and “employee-like work”.

6. These changes will largely do away with recent decisions of the High Court including Personnel Contracting, Jamsek, and Rossato.

7. The Bill seeks to revert to determining whether a worker is an employee via a multifactorial assessment of the totality of the employment relationship: a well-defined test established in Hollis v Vabu. Similarly, the Bill proposes to determine whether an employee is a casual employee by consideration of the totality of the employment relationship.

8. Employees’ determination as casual will ultimately decide their access to an “employee choice” framework facilitating casual conversion after 6 months of employment and increased access to the small claims jurisdiction.

9. “Employee-like workers” will encompass those operating within the “gig economy”, primarily those performing work via platforms and apps, alongside new and emerging forms of gig work in areas including disability support. These employee-like workers, alongside road transport workers, will be conferred minimum standards, protection from unfair termination (or “deactivation” from the app) and a system of collective bargaining.

10. In a similar vein, the FWC will be given jurisdiction to deal with disputes brought by independent contractors concerning unfair contract terms in service contracts under which they are engaged.

11. The impact of these changes will vary across workplaces. We suggest employers again conduct an analysis of their workforce, particularly as it relates to the manner in which they engage casuals who are not genuinely ad hoc and/or temporary (which, in our experience, is many of them).

Same Job Same Pay: Closing the “Labour Hire Loophole”

12. Motivated in part by the high profile “outsourcing” dispute involving Qantas (recently finalised by the High Court) the Bill takes its namesake from its proposed commitment to closing the “labour hire loophole’.

13. Under the Bill, FWC would be empowered to order employers to pay labour hire workers a rate of pay that is no less than the rate of pay which would apply under a relevant enterprise agreement if the workers were engaged to perform the work as employees.

14. A union or individual would be able to apply to the FWC for a Regulated Labour Hire Arrangement Order (RLHAO) that would govern these pay arrangements. The FWC would be required to make a RLHAO where:

a. a labour hire arrangement is in place;
b. the host employer is not a small business employer;
c. the supplied employee(s) would be covered by an industrial instrument if they were direct employees of the host; and
d. it is fair and reasonable to do so.

15. The current Bill also proposes carve-outs where a RLHAO cannot be made:

a. where the employees are apprentices or trainees;
b. where the employees are engaged for up to three months; and/or
c. where the FWC issues an exemption.

It remains to be seen whether further “carve-outs” are negotiated during the passage of the Bill through Parliament.

16. Further, the Bill proposes what lawyers call “anti-avoidance” provisions, which would effectively make it unlawful for a company to restructure and/or engage contractors to avoid an RLHAO. The extent to which a company is then prevented from genuinely restructuring and/or engaging contractors (when an RLHAO is in place) will likely remain a vexed question.

17. These changes are complicated and afford the FWC significant discretion. Anti-avoidance provisions (at least in employment law) are largely unprecedented. Consequently, it remains to be seen whether this particular proposal makes it through Parliament unscathed.

18. Having said that, the recent High Court decision in Qantas and the significant negative publicity around “labour hire” generally will likely assist with the passage of the “RLHAO” changes (at least in some form) through Parliament.

An Enterprise Bargaining Change (Again)

19. The Bill proposes changes to the current Enterprise Bargaining process and streams. Again.

20. This includes the that the FWC will determine new model flexibility, consultation and dispute resolution terms based on ‘best practice work relations’ to replace those currently in place. These model terms will be incorporated into enterprise agreements which fail to include a compliant term.

21. Limits will be placed upon employers’ ability to return to the single enterprise bargaining stream from the multi-employer enterprise bargaining stream. Furthermore, the FWC may only approve a single enterprise agreement where the employees it covers would be better off overall under it than under an applicable multi-employer agreement.

22. The Bill will also enable franchisees the ability to bargain under the single enterprise or multi-enterprise streams; however, we presume this will be largely dictated by support determinations.

23. It will be interesting to see whether (and to what extent) these changes make it through Parliament. The ink is barely dry on the significant enterprise bargaining changes from earlier this year. Admittedly, this most recent round of changes is not so much a “reinvention” but rather a “tidy up” – but many employers continue to struggle to keep up with the bargaining changes which, although likely well intentioned, are complex.

Cracking Down on Underpayments and Work Health & Safety Breaches

24. A long discussed (and now likely) change is deterring underpayments and Commonwealth work health & safety (WHS) breaches, by introducing a raft of serious consequences for contraventions and strengthening deterrence mechanisms (for both “wage-theft” and WHS compliance).

25. In terms of “wage-theft”, the Bill seeks to impose criminal sanctions against employers who deliberately underpay their workers. A maximum term of 10 years imprisonment may be imposed against individuals, and a maximum fine of $7.8 million against corporations, where the employer has knowingly and intentionally cheated employees.

26. In terms of Commonwealth WHS, the penalties will be roughly doubled for PCBUs who are found guilty of the proposed new offence of industrial manslaughter where their gross negligence or recklessness leads to a workplace death. Individuals convicted of this offence can face a maximum of 25 years imprisonment, with body corporates set to face up to a maximum fine of $18 million.

27. Other proposed reforms in this space include higher civil penalties, a reduction in the bar for “serious contraventions”, snap rights of entry rights for allegations of underpayment, increased maximum penalties for WHS breaches, an increased focus upon silica related diseases, and the facilitation of access to workers’ compensation for first responders suffering from PTSD.

Backing Support for Employees Suffering Domestic Violence

28. The Bill also introduces a general protection against adverse action for those who access the new domestic violence leave entitlements, encouraging employees suffering domestic violence to seek support.

Exceptions for Small Business

29. Whilst some of the Bill’s proposed reforms may cause uncertainty and/or concern for employers moving forward, employers operating small businesses (under 15 employees) can likely breathe a sigh of relief.

30. The Bill considers the significant financial, operational and compliance implications it will undoubtedly have for employers, which would disproportionately impact small businesses (under 15 employees) but for its introduction of several concessions.

31. Small businesses will be entitled to:

a. an exemption from the “Closing the labour hire loophole” pay obligations;
b. an extended 12-month service period before employees may access the new employee choice pathway to convert to permanent;
c. the development of a Voluntary Small Business Compliance Code to provide greater certainty for those who accidentally commit underpayments, ensuring only intentional wage theft is punished; and
d. an exemption from the requirement to provide workplace delegates with paid time for training.

32. Small businesses will remain exempt from making redundancy payments, although large businesses which become small businesses through the process of liquidation or bankruptcy will be carved out of this exemption.

Moving Forward …. Again

33. Despite the significant changes, employers have time to get their proverbial ‘ducks in a row’. The Senate’s report is not due to be delivered until February 2024 and (as best we can speculate for now) the changes will likely commence in two tranches: on commencement of the Act (likely in February/March 2024) and later in that same year (likely October/November 2024).

34. Please do not hesitate to reach out to a member of our senior Employment team if you wish to discuss the reforms or what proactive measures can be taken to prepare for them.