Fair Work Act Amendments: Navigating Recent Legal Changes

DATE PUBLISHED: March 1, 2024

key takeaways

Introduction of a new federal criminal offence of ‘wage theft’. An employer would be guilty of this offence for deliberately underpaying workers.
Employees will enjoy a new ‘right to disconnect’ which will entitle them to refuse to respond to contact from their employer outside of working hours, unless such a refusal would be unreasonable,
Changes to the defense of ‘recklessness’ to ‘reasonable belief’ for employees who have misrepresented employment contracts as independent contractor agreements.
Reassessment of terms ‘employee’ and ‘employer’ based on the relationship between the parties as determined through a multi-factorial assessment, more than just what is within the terms of the contract.

key amendments in the bills

Introduction of a new federal criminal offence of ‘wage theft’. An employer would be guilty of this offence for deliberately underpaying workers.
Employees will enjoy a new ‘right to disconnect’ which will entitle them to refuse to respond to contact from their employer outside of working hours, unless such a refusal would be unreasonable.
Changes to the defense of ‘recklessness’ to ‘reasonable belief’ for employees who have misrepresented employment contracts as independent contractor agreements.
Reassessment of terms ‘employee’ and ‘employer’ based on the relationship between the parties as determined through a multi-factorial assessment, more than just what is within the terms of the contract.
Introduction of a new objective test for ‘casual employee’ based on the terms of the employment contract and the true nature of the employment relationship.
Casual employees can request that their employment be changed to a part-time or full-time arrangement after 6 months under their employer.
Businesses that pay their employees pursuant to an Enterprise Bargaining Agreement (EBA) are required to pay labour hire workers the same rate as those under the EBA.
Family and domestic violence protections.
New rights are introduced for union delegates in the workplace, including to be paid by their employer for related training conducted in their role.

Overview

The Closing Loopholes Bills No. 2 (Bill No. 2) has now been passed by both Houses of Parliament and is awaiting Royal Assent. The amendments to the Act contained within Bill No. 2 aim to enact changes to important definitions, improvements to minimum work standards, and further protections against employee underpayment.

Bill No. 2 follows several months of parliamentary debate after the Federal Government introduced the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill) on 4 September 2023. The Bill aims to ‘close loopholes’ in the Fair Work Act 2009 (Cth) (Act) to improve work health and safety laws in the commonwealth jurisdiction and address areas of the Act that currently undermine pay and conditions.

The changes brought about by this package of legislation will have significant effects on every level of Australian business. Businesses will likely face increased costs both in terms of payments to workers as well as costs associated with ensuring compliance. However, the cost of non-compliance could be astronomical.

Wage Theft

Bill No. 2 introduces a new criminal offence for the intentional underpayment of wages and/or certain statutory entitlements. It is noted that in circumstances where the underpayment of wages has been unintentional, this penalty will not be applicable/enforceable. Underpayments made accidentally, inadvertently or based on a genuine mistake would not come within scope of this offence. In addition, this will not apply to the intentional underpayment of contractual entitlements or superannuation.

Businesses with 15 or fewer employees will be covered by a voluntary small business wage compliance code, guaranteeing that they will not be referred for criminal prosecution if they take steps in the code to ensure workers are paid correctly.

Matters relating to underpayment of wages and entitlements are to be handled and investigated by the Fair Work Ombudsman (FWO), who may then refer the matter to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP).

Employers may access self-disclosure protection, cooperating with FWO to avoid wage underpayment prosecution via 'cooperation agreements,' preventing CDPP or AFP involvement while the agreement is in place. FWO inspectors can still initiate civil proceedings in relation to the conduct or referring other persons for prosecution.

The FWO will consider a range of matters before entering into a cooperation agreement, such as:

whether the employer has made a voluntary, frank and complete disclosure of the conduct;
the nature and level of disclosure;
whether the employer has cooperated with the FWO and their commitment to continued cooperation; and
the nature and gravity of the conduct.

The maximum penalties for wage theft are significant. For example, for companies, the maximum monetary penalty of up to three times the underpayment figure or $7.825 million, whichever is highest. Potential penalties of up to 10 years imprisonment is the maximum penalty for an individual, as well as a fine.

Right to disconnect

The right to “disconnect” will mean that employees may refuse to read or respond to communications from their employers after-hours, and this extends to third party contact in relation to the employee’s work.

This will become a feature across all modern awards, and is a feature of various enterprise agreements in Australian workplaces. Where the rights within the various enterprise agreements are more beneficial to the employee than what is prescribed under Bill No.2, they will continue to operate despite the new provisions.

This right to disconnect applies to calls, emails, texts, and any other contact by an employer outside of an employee’s working hours that is not reasonable. It will be unreasonable to refuse contact if this is required under a law of the Commonwealth, State or Territory.

Bill No.2 lists the following non-exhaustive list of factors that are to be considered when deciding whether the refusal of an employee is unreasonable:

the reasoning for the employer/third party’s contact with the employee;
the method of communication and the level of disruption this causes;
whether the employee is compensated for their availability to be contacted or working additional hours outside of working hours;
the particular employee’s role and responsibility in their employment; and
whether there are any personal circumstances of the employee that might affect their ability to remain contactable outside of working hours.

Workplace disputes begin with employee-employer negotiation. If no resolution, Fair Work Commission can be petitioned for orders ending the dispute, including halting refusal or unreasonable employer contact or other orders where necessary.

The new right, though not preventing after-hours emails, constitutes a "protected attribute" under the Act's General Protections, offering recourse for affected employees that have been subjected to disadvantage as a result of their refusal to read or respond to contact from the employer. Additionally, there are greater protections for employees who have been, or are being, subjected to family and domestic violence from discrimination in the workplace.

Changes to Casual Employment

The bill proposes amendments to the definition of casual employment, emphasising the absence of a firm commitment to ongoing work and entitlement to a casual loading.

After six months (or 12 for small businesses), casual employees can request full-time or part-time status if they believe they are no longer casual.

Employers now have more flexibility in rejecting such requests, needing only reasonable grounds. Formerly, employers were required to give extensive reasoning for why conversion could not occur, which has now been reduced to only providing reasonable grounds for rejection.

Anti-avoidance measures prevent misrepresentation of employment contracts and dismissal to engage as casual. Changes include strengthening anti-avoidance provisions, clearer distinction between casual and permanent roles, and enhanced casual conversion entitlements. These aim to offer clarity and security in casual employment.

Employers must avoid misrepresenting roles and provide Casual Employment Information Statements to employees. Defense is available if an employer reasonably believed a contract was for casual employment.

The proposed law would see changes such as:

expansion of current anti-avoidance provisions by requiring an employer not to change an employee’s pattern of work to avoid any right or obligations under the employee choice or casual conversion provisions;
a stronger distinction between casual and permanent employment; and
strengthening of casual conversion entitlements by providing a ‘new employee choice pathway for eligible employees to change to permanent employment if they wish to do so’.

These changes are intended to provide more clarity and security around casual employment arrangements. In light of the changes, employers should consider that:

Misrepresenting employment as casual employment when the work is that of a full-time or a part time employee may cause significant risks.
There is a defense available for employers to prove that they reasonably believed that the contract was for casual employment.
Casual employees must be provided with a Casual Employment Information Statement prior to the start of their employment, as well as every 12 months after their start date.

Definition of Employment

Independent Contractors

Bill No.2 provides that the ordinary meaning of ‘employee and employer’ will be distinguished through identifying ‘the real substance, practical reality and true nature of the relationship’ between the parties. The rights and protections of both parties will be changed as a result from this new approach.

Notably, these amendments reverse the effect of two significant High Court decisions in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2. In both of these cases, the High Court held the view that if the terms of the contract were written, the type of relationship was dependent on the terms outlined.

When looking at ‘the real substance, practical reality and true nature of the relationship’ between the employee and employer, whilst the contract is still a relevant factor in the consideration, how the contract operates in practice will come under increased scrutiny. This “multi-factorial approach” places reduced significance on the terms of the written agreement, but rather more significance on the actual conduct of the parties. This change will come into force 6 months following Royal Assent.

Bill No.2 also introduces a right for independent contractors who earn above an unspecified high-income threshold:

to ‘opt out’ of the employee / employer definition under a proposed regime yet to be finalised;
hold a right to revocation for this ‘opting out’; and
to dispute unfair contract terms in the Fair Work Commission.

For employers, this means:

The conduct between the employee and employer will be a fundamental indicator towards whether an employment or independent contracting relationship exists, even where the written contract and the intention of the employer is to engage an individual as an independent contractor.
If an independent contractor is found to in fact be an employee, a risk of underpayment of wages and entitlements may result from this determination.
Employers should revisit their contractor agreements to ensure they are compliant, and ensure they have a genuine independent contractor relationship between themselves and the contractor.

new rights for union delegates

The new provisions provide unions with greater access to workplaces and employees. Prior to this Bill the provision of facilities (access to meeting rooms, email document production resources and paid time to attend union training) to union delegates has been subject to employee discretion. Following the implementation of this Bill, workplace delegates will be given rights to access such facilities and communicate with members (and those eligible to become members).

Following the provision of this Bill, Employers must ensure:

Modern awards will need to be amended to include a term dealing with the rights of union delegates.
All new enterprise agreements will need to include a term dealing with the rights of union delegates which must be at least as favorable as the applicable award term.
Union delegates will be entitled to ‘reasonable communication; with employees eligible to be members of the union and reasonable access to workplace facilities accordingly.

Notably, the Bill also expands the general protections provisions of the Act to prohibit an employer from unreasonably refusing to deal with a workplace delegate, or unreasonably preventing the exercise of the rights of a workplace delegate.

This article was written with the assistance of Solicitor James Marmin, Law Clerk Xavier Bundock, and Law Clerk Arnold Armet.

how can mcw help?

McInnes Wilson meeting your obligations as a consequence of the Changing Loophole Bills.

Get in touch with us today if you would like to discuss how these changes may impact your business and the steps you should be taking to ensure compliance and to manage risk.