Parliament Passes the Second Half of the Closing Loopholes Bill

Following the split of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, which passed both houses late last year (see our EMA Note here), Parliament has now passed the second half of the Bill.

The Bill

The Bill includes significant amendments to the Fair Work Act 2009 (Cth) (“FW Act”), including changes in response to recent High Court decisions on casual employment and contractors, and a late addition to address employees being contacted outside of their working hours.

We set out below some of the key changes that may have a more notable effect on your organisation. If you have any questions about any of the upcoming changes, please contact one of our consultants who will be able to assist you.

As at the date of publication, Parliament has not published a finalised copy of the Bill as passed by both houses, so this EMA Note has been prepared based on the original Bill and the schedule of amendments made by the Senate. These documents can be viewed on Parliament’s website here. When the finalised copy of the Bill is published, it will be published to the same website.

Casual Employment

The Bill changes the definition of casual employment, effectively seeking to legislate the findings made by the Full Federal Court of Australia in WorkPac v Skene[1] and WorkPac v Rossato[2] (prior to the High Court’s decision appealing the latter).

A court, in determining whether an employee is a casual employee, will have less regard to the contract of employment and will look to ‘the real substance, practical reality and true nature of the employment relationship’. Common indicia traditionally used to determine casual employment, including the ability for the employer to offer work and the ability for the employee to accept or reject work, continue to apply—though they will now be applied to the practical nature of the relationship rather than to the employment contract. While this definition of casual employment has retrospective application, only the conduct of the parties after commencement of the amendments will be taken into account when determining the true nature of the relationship.

For employers with current enterprise agreements, a party to the agreement can apply for the Fair Work Commission to vary the agreement to resolve any ambiguities arising from the interaction between the agreement and the new FW Act definition.

The Bill also removes the current casual conversion provisions, and replaces them with an ability for a casual employee to notify an employer that the employee believes they are a permanent employee, based on the specific criteria introduced into the definition of casual employment. The employer must respond within 21 days, must consult with the employee, and can only refuse the notification on the following limited grounds (summarised):

that the employer disagrees that the employee meets the legislated indicia of casual employment;
there are fair and reasonable operational grounds for not accepting the notification (including where substantial changes would be needed to the employee’s terms and conditions in order to comply with an award or enterprise agreement, or where there would be significant impacts to the employer’s business); or
if accepting the notification would contravene a state or territory law around recruitment or selection.

The Fair Work Commission may deal with disputes arising from these notifications.

Similarly to the revised definition of casual employment, an employee’s employment before commencement of the amendments is not taken into account when determining the employee’s right to notify in relation to casual conversion. To account for this, the current ‘residual right to request casual conversion’ will continue to apply to existing casual employees for the first six months after commencement of the amendments (12 months for a small business employer).

Employers must provide casual employees with the Casual Employment Information Statement (as published by the Fair Work Ombudsman) at each of the following times:

before (or as soon as practicable after) commencement of employment;
as soon as practicable after the employee has been employed for 6 months;
as soon as practicable after the employee has been employed for 12 months; and
as soon as practicable after every period of 12 months subsequent to (c) above.

Small business employers are exempt from providing the Casual Employment Information Statement in points (c) and (d) above.

There are various uncertainties in these new provisions, which may make it difficult to interpret and apply them to each individual circumstance. Employers should seek advice if they are unsure about their obligations for any specific cases.

These amendments will apply starting six months after the amendment act receives royal assent. We will update this EMA Note on our website with this information when the date is known.

Contractor vs Employee

Similarly to the above-described amendments to casual employees, the Bill changes the definition of an employee to effectively undo the High Court decision in CFMMEU v Personnel Contracting.[3] Focus will again be on the totality of the relationship, rather than just the terms of a wholly written contract.

Similar to casual employees, these amendments may create some uncertainty in knowing whether an individual is an employee or a contractor; and there are complicated provisions allowing for individuals to opt out of the provisions in limited circumstances. Employers who engage contractors should seek specialist advice to determine what, if any, actions they need to take.

These amendments will apply on a day to be fixed by proclamation, but no later than six months after the amendment act receives royal assent. We will update this EMA Note on our website with this information when the date is known.

Right to Disconnect

The Bill sees new laws which the Greens have been pushing for some years—a ‘right to disconnect’. Under these provisions, employees will have a right not to answer calls, messages, emails, etc from their employer (or from other parties contacting them in relation to their work) outside of their working hours, subject to a test of reasonableness.

Reasonableness will vary from circumstance to circumstance, but there will be some general instances where it will likely always be reasonable to contact an employee out of hours, including (for example) where the employer is trying to see if the employee will pick up a shift to cover another employee’s illness, or where the employee is paid an allowance for being available to take calls outside of their working hours.

The Bill does not restrict an employer from attempting to contact or otherwise sending communications to employees outside of their working hours. The main implications from the amendments are:

preventing an employer from taking adverse action against an employee for not answering or responding to those communications (subject to the test of reasonableness); and
permitting the Fair Work Commission to deal with disputes and issuing orders following those disputes. The orders the Commission may make include an order for an employee to stop refusing contact, or an order for an employer to stop taking certain actions.

Contravening an order made by the Commission will incur a maximum penalty of 60 penalty units for an individual or 300 penalty units for a body corporate ($18,780 and $93,900 respectively, as at the time this EMA Note was published). We note that contravening any order by the Fair Work Commission is currently an offence under the FW Act, for which criminal penalties may apply. The Commission will publish guidelines in relation to the right to disconnect.

For a majority of employers and employees, these changes are unlikely to have any practical impact on day-to-day work, but may have some effect in sectors where out-of-hours communication is frequent. In those sectors, employers and employees will need to determine the reasonableness of their actions in relation to communicating out of hours.

These amendments will apply starting six months after the amendment act receives royal assent. We will update this EMA Note on our website with this information when the date is known.

Intractable Bargaining Declarations

Last year’s amendments saw the introduction of intractable bargaining workplace declarations, which allows a bargaining representative to apply to the Commission where parties have been bargaining for at least nine months, the Commission has already dealt with a dispute about the agreement, and there is no reasonable prospect of the parties reaching agreement without the Commission making the declaration.

The Bill introduces new provisions, including that where there is a current enterprise agreement, no term of the declaration can be less favourable to an employee or union than a term that currently applies to the employee or union.

The Bill also expands the meaning of an ‘agreed’ term (being a type of term that must be included in a declaration) to include terms that were agreed should be included in an agreement at the time the application for a declaration was made.

These amendments could have a significant impact on employers who are at an impasse with employee and union bargaining representatives in an enterprise agreement. If you are negotiating an enterprise agreement and are at the stage where no party appears to be budging on their claims, you should seek specialist advice on how these amendments may affect you.

These amendments will apply from the day after the amendment act receives royal assent. We will update this EMA Note on our website with this information when the date is known.

Other Amendments

Various other amendments are being made, including:

provisions which expand the scope of employers who can make a single-enterprise agreement to include franchisees of the same franchisor;
provisions dealing with when an employer transitions from a single interest employer agreement (one of the types of multi enterprise agreements) to a single-enterprise agreement, the single interest employer enterprise agreement will no longer apply;
removing the current model terms from the Fair Work Regulations 2009 (Cth) and requiring the Fair Work Commission to determine new model terms for flexibility, consultation, and dispute resolution;
an exemption to the prohibition on misrepresenting employment as an independent contracting arrangement where, at the time the representation was made, the employer can prove that they reasonably believed that the contract was for a contractor rather than an employee;
requiring the Fair Work Commission to issue a right of entry exemption certificate (on application by a union) if the Commission is satisfied that the entry relates to suspected contraventions which involve underpayments;
considerable increases to the maximum civil penalties for contraventions (by conduct occurring after commencement of the amendments) including:
1. contravening the National Employment Standards, a modern award, enterprise agreement, workplace determination, national minimum wage order, or equal remuneration order;
2. contravening the requirements around payment of wages (including the times when wages must be paid), permitted deductions, and unreasonable requirements to spend or pay amounts;
3. sham contracting provisions (including making misrepresentations to an employee that they are a contractor);
4. contravening requirements relating to employee records and pay slips;
5. advertising employment at a rate that would contravene the FW Act or a modern award/enterprise agreement;
6. franchisors for certain contraventions by franchisees of their franchise; and
7. failing to comply with certain requirements from the Fair Work Ombudsman (including compliance notices);
introducing the civil penalty for being associated with an underpayment to be either the maximum penalty for contravening the relevant section or three times the underpayment amount, whichever is greater;
introducing significant new provisions regulating the road transport industry (about which, if you are a potentially affected employer, we recommend you seek specialist advice); and
amendments to coal mining long service leave (about which, if you are a potentially affected employer, we recommend you seek specialist advice).

[1] [2018] FCAFC 131.

[2] [2020] FCAFC 84.

[3] [2022] HCA 1.

Require further information/assistance?

This EMA Note is not comprehensive advice about your situation and does not cover all your obligations. If you require further information or advice, please contact your Consultant.

EMA Consulting is not a law firm and therefore does not provide legal advice or services. The information contained within this document and associated material is general in nature and should not be relied upon. If you require specific advice on a particular matter, we recommend that you contact EMAC on 08 8203 1700. Subject to the matter at hand, your EMAC Consultant may recommend that you obtain formal legal advice. If formal legal advice is required, upon your written instruction EMAC will brief your matter to a legal practitioner for this purpose. The contents of this document and associated materials do not represent legal advice.