Closing Loopholes or Radical Change? The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023
Earlier this week, the Albanese Government introduced the ‘Fair Work Legislation Amendment (Closing Loopholes) Bill 2023’ (Bill), which contains a number of significant reforms to the workplace relations landscape. If fully implemented in its current form, the Bill will lead to a number of implications in the way businesses and workers engage with each other and will clear the path to an array of protections and remedies that some workers cannot currently access.
We highlight below some key areas for reform under the Bill, which are likely to be subject of further commentary and amendment.
As the Bill progresses and the final outcome becomes clearer, we will continue to monitor any amendments (which are almost inevitable) and highlight important implementation dates for employers and workers (both employees and independent contractors including gig workers and labour-hire workers).
Amending the Definition of Casual Workers
The Bill proposes an amended definition of ‘casual workers’ which considers the ‘totality’ of the employment relationship so that the test as to determining who is a casual worker is broader and less reliant on the specific terms of the contract.
The amended definition retains the notion that a casual employee is someone who has no firm advance commitment to continuing and indefinite work but enhances this to allow for the consideration of the practical reality of the working relationship.
The Bill provides a list of indicia so that an objective assessment of the employee’s nature of work can be undertaken.
Reverting to the ‘old’ meaning of ‘Employment’
Some two years ago, the two High Court cases of Personnel Contracting and Jamsek upended what the field of labour law and industrial relations considered to be the conventional approach of identifying employment relationships (as opposed to independent contractor arrangements).
The two High Court cases gave primacy to the terms of a written agreement in determining whether the engagement between an organisation and a worker was one of an employment relationship or principal and independent contractor.
The Bill proposes to revert to the position before Personnel Contracting and Jamsek by using the well-established multi-factorial test to evaluate whether an employment relationship exists between the parties.
Labour Hire Loophole
This amendment is aimed at preventing employers, whose businesses are covered by an enterprise agreement, from paying labour-hire workers a rate of pay that is less than the rate prescribed in the relevant applicable enterprise agreement, in effect circumventing the operation of the enterprise agreement.
The Bill provides for applications to be made to the FWC by employees, unions and hosts to seek orders relating to labour-hire arrangements. When covered by an order of the FWC, companies engaging labour-hire employees will be required to pay all labour-hire employees the equivalent of what they would receive under the host’s enterprise agreement. Some exemptions will apply such as where the host is a small business.
Criminalising ‘Wage Theft’
The Bill seeks to criminalise the deliberate underpayment of workers. While it has been unlawful for employers to underpay their employees, the underpayment will now attract harsher, criminal offences.
If convicted of this new crime of wage theft, individuals can face a maximum of 10 years imprisonment and corporations could incur a maximum fine of $7.8 million. It is certainly going to give all employers pause when making and reviewing arrangements for the payment of staff and deter those who have been knowingly and intentionally short-changing employees.
In considering this proposed amendment it should be remembered that it will not apply to all cases of underpayment. As with criminal matters, the intent of the employer will be fundamental. It will lend some rigour to the term ‘wage theft’ which in colloquial settings has been used loosely to even include scenarios where there has been inadvertent underpayment by a well-meaning but mistaken employer.
The Bill introduces a new offence of industrial manslaughter under the federal Work Health and Safety Act 2011. The crime applies where the gross negligence or recklessness of a duty holder (including a person conducting a business or undertaking) leads to a workplace death. Individuals convicted of the offence can face a maximum of 25 years imprisonment, and body corporates can face a maximum fine of $18 million.
Protection of ‘Employee-Like Workers’ such as Gig Workers
The Bill provides for the introduction of minimum standards for ‘employee-like’ workers in the gig economy performing work on digital labour platforms. Those eligible would be able to apply to the FWC for ‘Minimum Standards Orders’ tailored to their performance of work. The Minimum Standards Orders could include terms relating to a number of working standards, such as payment, working hours, record-keeping and insurances.
Further, the Bill provides for employee-like workers to have general protections against adverse action, as well as protections against ‘unfair deactivation’, similar to the unfair dismissal protections currently provided to employees under the Fair Work Act.
If ultimately passed and implemented, it will be fascinating to see how these reforms, particularly as they relate to workers on digital labour platforms, will actually operate in practice.
Unfair Service Contracts
The Bill proposes to provide independent contractors, who are party to a contract for services, with an avenue to challenge unfair contract terms through the Fair Work Commission. Such terms may relate to whether the worker is paid less than the new ‘contractor high income threshold’.
The Bill sets out a number of factors which the FWC will consider when determining whether the terms of a contract for service are unfair.
Small Businesses (businesses with fewer than 15 employees)
The Bill provides a number of exemptions for small businesses from the proposed changes under the Bill. For example, small businesses are exempt from the payment obligations imposed by the labour hire reforms. The development of a Voluntary Small Business Wage Compliance Code is also proposed so as to ensure that only intentional wage theft is punished.
Further, most small businesses are currently exempt from making redundancy payments to their employees (subject to the terms of an applicable modern award or industrial instrument). The Bill proposes to add an exemption to this part of the NES, whereby businesses which are the subject of bankruptcy or liquidation, and which were not initially a ‘small business’ will be required to make redundancy payments to any employees remaining in the business following a bankruptcy or liquidation process.
As the Bill makes its way through federal parliament, we will monitor its status and provide updates.