Closing Loopholes (No 2)

On 26 February 2024, the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Closing Loopholes (No 2)) received royal assent, legislating additional changes to the Fair Work Act 2009 (FW Act). This comes after recent changes were made on 15 December 2023, under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 which we have discussed in a previous article.

Closing Loopholes (No 2) will introduce several key changes to the FW Act in relation to:

• Right to disconnect;
• Casual employment;
• Personal service contractors;
• Gig contractors;
• Unfair contracts; and
• Enterprise bargaining.

This article provides an overview of these changes below.

Right to disconnect

Closing Loopholes (No 2) amended the FW Act to include an enforceable workplace right to disconnect from their employers and third parties (if the contact or attempted contact is related to the employee’s work. Employees may now refuse to monitor, read or respond to contact or attempted contact, outside working hours, unless such refusal is unreasonable. The right to disconnect will come into effect on 26 August 2024.

Please see our previous article for a discussion of the right to disconnect, the factors that will be considered to determine whether an employee’s refusal is reasonable, the dispute resolution measures available, and the implications for employers.

Casual employment

Definition of casual employment

Closing Loopholes (No 2) will introduce a new definition of casual employee in the FW Act, being that an employee is only casual if:

1. The employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and
2. The employee would be entitled to a casual loading or a specific rate of pay for casual employees under the terms of a fair work instrument if the employee were a casual employee, or the employee is entitled to such a loading or rate of pay under the contract of employment.

The amendment also specified numerous factors which would be used to assess whether the employment relationship is characterised by the “absence of a firm advance commitment to continuing and indefinite work”. Exceptions only apply if the contract of employment specifies that it will terminate at the end of an identifiable period, and that period is not identified by reference to a specified season or the completion of the shift of work to which the contract relates.

Conversion to permanent employment

With the new amendments, casual employees may give an employer written notification if their current employment relationship no longer meets the definition of casual employment (the notification). Within 21 days, the employer must give the employee a written response to the notification, stating whether the employer accepts or does not accept the notification, reasons for the same, information about changes to the employee’s employment, and setting out the dispute resolution measures available to the employee.

An employer may only not accept the notification on the following grounds:

1. Having regard to the employee’s current employment relationship with the employer, the employee still meets the requirements of the definition of casual employment;
2. Accepting the notification would be impractical because substantial changes to the employee’s terms and conditions would be reasonably necessary to ensure the employer does not contravene a term of a fair work instrument that would apply to the employee as a full-time employee or part-time employee (as the case may be);
3. Accepting the notification would result in the employer not complying with a recruitment or selection process required by or under a law of the Commonwealth or a State or a Territory.

An employer may not reduce or vary an employee’s hours of work, change the employee’s pattern of work or terminate an employee’s employment to avoid any right, including to avoid a written notification from the employee, seeking to convert their casual employment to full or part time.

It is notable that an employee is not required to change to full or part time employment from casual employment, nor is an employer permitted to require an employee to make such a conversion.

Personal service contractors

Closing Loopholes (No 2) includes a new definition of employee and employer within the FW Act. It specifies that to ascertain the “real substance, practical reality and true nature of the relationship“, the totality of the relationship must be considered, with “regard must be had not only to the terms of the contract governing the relationship, but also to other factors relating to the totality of the relationship including, but not limited to, how the contract is performed in practice“. This new definition therefore restores a multi-factorial approach to distinguishing whether a personal service worker is an employee or contractor.

Gig contractors

Closing Loopholes (No 2) amended the FW Act to allow the FWC to regulate the engagement of employee like workers, including certain ‘gig economy’ contractors. The amendments mean individuals and organisations may apply to the FWC for orders for minimum standards in the gig economy, including on pay, penalty rates, superannuation, payment terms, record-keeping, insurance and deactivation.

However, the gig contractors who may apply for such orders is restricted to digital platform workers who satisfies one or more of the following:

1. The person has low bargaining power in negotiations in relation to the services contract under which the work is performed;
2. The person receives remuneration at or below the rate of an employee performing comparable work;
3. The person has a low degree of authority over the performance of the work;
4. The person has such other characteristics as are prescribed by the regulations.

Unfair service contracts

Closing Loopholes (No 2) amends the FW Act to establish a new unfair contracts jurisdiction within the Fair Work Commission (FWC) , which will be accessible to certain independent contractors. The FWC may make an order in relation to an unfair contract term of a services contract, where it is satisfied that the services contract includes one or more unfair contract terms which, in an employment relationship, would relate to workplace relations matters.

Closing Loopholes (No 2) will also introduce a new contractor high income threshold into the FW Act, the amount of which is to be prescribed by the regulations. Applications for orders in relation to unfair contract terms, can only be made by contractors whose annual rate of earnings is less than the contractor high income threshold, in the year the application is made. The Independent Contractors Act 2006 will continue to apply for independent contractors paid above the new contractor high income threshold.

The FWC may consider the following matters to determine whether a term is an unfair service contract term:

1. The relative bargaining power of the parties to the services contract;
2. Whether the services contract as a whole displays a significant imbalance between the rights and obligations of the parties;
3. Whether the contract term under consideration is reasonably necessary to protect the legitimate interests of a party to the contract;
4. Whether the contract term under consideration imposes a harsh, unjust or unreasonable requirement on a party to the contract;
5. Whether the services contract as a whole provides for a total remuneration for performing work that is:
   • Less than regulated workers performing the same or similar work would receive under a minimum standards order or minimum standards guidelines; or
   • Less than employees performing the same or similar work would receive;
6. Any other matter the FWC considers relevant.

The Commission may set aside all or part of a service contract which it deems to be unfair, or may decide to amend or vary all or part of the services contract.

Enterprise bargaining

Closing Loopholes (No 2) also resolved numerous uncertainties in the FW Act. Pursuant to the amendments, the FWC may make a determination varying a modern award, enterprise agreement or workplace determination to resolve any uncertainty between those instruments and the FW Act. If the determination relates to a modern award, the FWC must publish the award as varied as soon as practicable.

The amendments built on the changes introduced in the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 in relation to enterprise bargaining. In an intractable bargaining workplace determination, the FWC cannot make a term less favourable to each employee and employee organisation than a corresponding term in the existing enterprise agreement. This does not apply to workplace determinations regarding wage increases and agreed terms.

Date of Commencement

If you would like any further advice on how the changes to the FW Act may impact your business, please contact our Employment, Workplace Relations, and Safety group at McCabes Lawyers.