Bill introduced to ‘close the loopholes’

6 September 2023

Workplace Relations Minister Tony Burke has officially tabled the “Fair Work Legislation Amendment (Closing Loopholes) Bill 2023” which proposes to amend legislation including the Fair Work Act (FW Act) 2009. If passed in its current form, what has been proposed has the potential for significant and far-reaching impact to businesses and workplaces generally.

This Alert is not a comprehensive or complete outline of the changes. It does not address all of the changes proposed by the Bill but focuses on those which have reportedly caused the most concern for businesses if introduced and made law. Specific advice should be obtained in relation to the provisions, where needed.

The Government has expressed its hope that the Bill will be enacted with crossbench support before the end of this year.

Among other objectives, it is expressed to improve the workplace relations framework by:

  • Improving job security, by replacing the existing definition of ‘casual employee’ with a ‘fair and objective’ definition, and by introducing a new ‘employee choice pathway’ for eligible employees to change to permanent employment if they wish to do so;
  • Protect bargained wages in enterprise agreements from being ‘undercut by the use of labour hire workers’ paid less than those bargained rates;
  • Support workplace delegates, with additional rights and protections when seeking to exercise workplace delegate rights;
  • Increase maximum penalties for underpayments (including those that concern serious contraventions);
  • Introducing a new criminal offence for wage theft in respect of intentional conduct;
  • Legislating the interpretation of ‘employee’ and ‘employer’ in the context of distinguishing independent contractors from employment relationships, to return to a consideration of the multi-factorial test, and by assessment of the ‘real substance, practical reality and totality of the relationship’;
  • Allowing the Commission to set ‘fair minimum standards for ‘employee-like’ workers, including in the gig economy.

Intentional wage theft

The Bill introduces a new criminal offence for wage theft, and related offence provisions that deal with ancillary liability.  The gaol term may be up to 10 years, with fines of up to $7.8m or three times the value of the underpayment in largescale underpayments. The provisions are stated to be directed to intentional conduct, and not cases of honest mistakes.

Casual employment

The Bill proposes to define ‘casual employees’ if:

  • The relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and
  • The employee would be entitled to a casual loading or rate of pay for casual employment under a fair work instrument or contract of employment.

In determining whether or not there is an absence of a firm advance commitment to continuing and indefinite work, this is to be assessed by reference to factors that indicate the ‘real substance, practical reality and true nature of the employment relationship’ (a phrase which is not defined), the mutual understanding of the parties (including after the contract of employment was made) and other considerations such as whether there is a practical capacity for the employee to elect to reject or accept work, whether there are other employees performing the same work who are part-time or full-time employees, whether there is a regular pattern of work for the employee, and the future availability for continuing work having regard to the nature of the employer’s enterprise.Casuals are proposed to have a right under the National Employment Standards to change their status to full-time or part time by either:

  • Choosing to notify in writing of the choice to move from casual employment to permanent employment (broadly after 12 months in the case of a small business employer or 6 months if the employer is not a small business).  Consultation must occur with the employee and if the notification is not accepted ‘detailed reasons’ must be given within 21 days; or
  • Using the existing casual conversion procedure.

The Commission will be permitted to deal with disputes about employee choice, by mandatory arbitration, rather than the present law which requires arbitration by consent of the parties.

New penalties for misrepresenting casual employment have also been introduced by the Bill, plus requirements to issue the Casual Employment Information Statement to casual employees at the start of their employment and at 12 months.

Closing the ‘labour hire loophole’

New provisions are proposed to allow employees, ‘regulated hosts’ and unions to apply to the Commission for a ‘regulated labour hire arrangement order’. This has been proposed by a new Part 2-7A of the FW Act.  A regulated host includes a constitutional corporation.

The Commission would be empowered, if satisfied it was ‘fair and reasonable’ to do so, to order that labour hire providers pay their employees no less than what they would be entitled to be paid under the host businesses’ enterprise agreement, if directly employed by the host. It does not matter, for example, whether the regulated host and the employer are related bodies corporate.

Once the order is made, the employer must pay a ‘protected rate of pay’ in connection with the work performed by the employee for the regulated host (or face civil penalties). The protected rate of pay is the ‘full rate of pay’ that would be payable to the employee if the host’s instrument (enterprise agreement) applied to the employee.

Some exceptions apply, including where the host is a small business employer, where employees are employed on training arrangements and where the labour hire is for short term work (less than 3 months).

The Commission may arbitrate disputes about these arrangements. Anti-avoidance provisions will apply if passed.

Workplace Delegates Rights

The Bill proposes new workplace rights for workplace delegates. A workplace delegate is identified as a person appointed or elected to be a delegate or representative for members of a Union. The Bill proposes that modern awards and enterprise agreements detail the specific requirements for various industries, occupations and workplaces. These will be referred to as ‘delegates’ rights terms’ and will be noted for inclusion in enterprise agreements that are presented to the Commission for approval. That is, an enterprise agreement must include a delegates’ rights term for workplace delegates, no less favourable than that included in modern awards.

Workplace delegates will be afforded positive protections through these ‘delegates’ rights terms’. The workplace delegate is entitled to various matters:

  • To represent the industrial interest of members and persons eligible to be members;
  • To reasonable communication with members and persons eligible to be members; and
  • For the purpose of representing those interests, to have:
    • Reasonable access to the workplace and workplace facilitates;
    • reasonable access to paid time, during normal working hours, for the purpose of related training, unless the employer is a small business.

The employer of a workplace delegate must not:

  • Unreasonably fail or refuse to deal with the workplace delegate; or
  • Knowingly or recklessly make a false or misleading representation to the workplace delegate; or
  • Unreasonably hinder, obstruct or prevent the exercise of the rights of the workplace delegate under the FW Act or any fair work instrument (including an enterprise agreement).  This is a civil remedy provision, and the employer has the burden of proof in demonstrating its conduct is not unreasonable.

These proposed rights are intended to support the exercise of their roles in the workplace, extending those current protections applying already to employees who are officers or members of industrial associations.

Right to enter by permit holders without notice for suspected contraventions

Presently rights of entry by Unions and officials to investigate a suspected contravention of the FW Act requires 24 hours’ notice of entry, with the ability to apply for relief from that notice provision to the Commission, on limited grounds.  The Bill proposes that the grounds to issue an exemption certificate in respect of the notice requirement will be expanded to extend to ‘suspected’ contraventions involving the underpayment of wages or other monetary entitlements of a member entitled to be represented by the Union.

Family and domestic violence

Those experiencing family and domestic violence are proposed to be included as persons with protected attributes, in a strengthening of protections against discrimination (as with, for example, those with family or carer’s responsibilities).

Definition of ‘employee’ and ‘employer’

A matter of broad ranging significance is the proposed definition of employee. The Bill provides a basis for interpreting whether workers are employees or independent contractors. In doing so, the provisions will revert to application of the multi-factorial test, where regard is to be had to matters that ascertain the ‘real substance, practical reality and true nature’ of the relationship, between an individual and another person. In short, this means looking beyond the written contract or specific terms agreed between the parties to the totality of the relationship.

Reviewing unfair contract terms

Unfair contract terms in independent contracting agreements may be the subject of orders by the Commission, which takes into account the relative bargaining power of the parties to the service contract (among other matters). The Commission is proposed to have the power to set aside, amend or vary unfair contract terms, where the contractors annual rate of earnings or other amounts are less than the ‘contractor high income threshold’.

New minimum standards proposed for the gig economy and ‘employee-like’- workers

It is proposed that the Commission will also have the power to make binding or non-binding minimum standard objectives for employee like workers in the gig economy and regulated road transport contractors (called ‘regulated workers’). This change is proposed to address the need for just and favourable conditions of work.

An ‘employee-like worker’ is expressed to be an individual who is party to a services contract (whether as a director of a company, trustee of a trust or partner in partnership), who (in broad terms) performs all or a significant majority of the work under the services contract, as digital platform work.

The Bill will allow the Fair Work Commission to make binding or non-binding minimum standards for regulated workers which could include minimum rates of pay for people engaged by gig work digital platforms as well as the terms of payment, time periods and how quickly after a shift a worker is to be paid.

The proposals support the making of collective agreements by consent between ‘digital platform operators’[1] and road transport businesses, and Unions. Access to collective bargaining is intended to promote favourable conditions of work for persons who are independent contractors under a services contract through digital labour platforms.

Another issue to be addressed is the lack of a dispute resolution process available for employee-like (gig) workers who have been unreasonably dismissed from a platform. Gig workers currently do not have unfair dismissal remedies available to them which is proposed for change through ‘unfair deactivation’ or ‘unfair termination’ laws. The Commission would be empowered to deal with these disputes.

Increasing the penalties for civil remedy provisions

The Bill proposes to increase the maximum civil pecuniary penalties for contraventions generally, and serious contraventions, by five times. It is also proposed that ‘serious contraventions’ be amended to apply to knowing and reckless contraventions, rather than knowing and systematic contraventions.

Additional proposals

Whilst not dealt with in detail by this Alert, other proposals include:

  • Enabling multiple franchisees to access single enterprise agreement making provisions;
  • Protecting redundancy pay to employees who lose the right to that pay where a business downsizes from a larger business to a small business employer because of insolvency;
  • Enabling employers and employees to transition from multi-employer agreements to single enterprise agreements, subject to a BOOT that compares the new agreement to the conditions in the multi-enterprise agreement not the underpinning Award – even if those conditions are more beneficial in the multi-enterprise agreement than the applicable modern award.

We will continue to report on this latest tranche of proposed industrial law changes as developments arise.

[1] An ‘online enabled application,website or system operated to arrange, allocate or facilitate the provision of labour services’.

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