The Fair Work Legislative Amendment (Closing Loopholes) Bill 2023 has been split, with the first part of the Bill passing the Senate this afternoon. The remaining section that passed through the House of Representatives last week will proceed to the Senate in early 2024. To assist employers prepare for the proposed changes to the Fair Work Act 2009 (Cth) (‘the Act’) Holman Webb has highlighted the key amendments (from a total of over 80 proposed changes), which will likely have the greatest impact. The key changes are:
- Small business redundancy exemption
- Wages for labour hire employees
- Introduction of new Industrial Manslaughter provisions for Commonwealth offences
- Introduction of criminal provisions for intentional underpayments
The remaining parts of the Bill which will be dealt with in the new year include:
- Amending the definition of casual employees
- Regulation of contractors who are on digital platforms or in road transport
- Increased penalties for underpayments
Which loopholes did the Senate close?
Small business redundancy exemptions
Section 121(1)(b) of the Act currently produces an anomaly when a larger employer downsizes due to insolvency and the number of employees falls below 15, the threshold for a small business. At 14 or less employees, a business does not have to pay Redundancy Pay. For example, if an employer is winding up operations and payroll and finance employees are retained for the purpose of processing redundancy payments, when it comes time for their employment to be terminated for reasons of redundancy, the employer is not obliged to pay Redundancy Pay because at the time that the employment relationship ended, they had fewer than 14 employees.
The amendments address the inequitable outcomes that are produced by this exemption, where the employer is subject to either a winding up order or downsizes employees pursuant to the operation of the Bankruptcy Act. This change ensures that Administrators or Insolvency Practitioners wind-up companies as expeditiously as possible and prevent them from relying on the existing loophole.
Labour Hire: Closing the loophole
Currently, in the Act, there is a loophole that allows some employers to pay labour hire employees differently to those they employ directly, for example where a Host Employer is party to an Enterprise Agreement.
The amendments will close off this loophole by regulating labour hire arrangements by seeking to introduce the ability for Unions and employees to seek an order from the FWC for a “Regulated Labour Hire Arrangement Order” (an Order). Pursuant to the changes, if a Host Employer is subject to an Order, they are obliged to ensure that the placed employees are paid the same as the employees they directly employ. There is an element of cooperation in that the Host Employer may request the employer of the employees to assist them in meeting their obligations.
Labour hire workers who are paid higher rates than directly employed workers would not be affected.
Work Health and Safety Act 2011 (Cth) Amendments
A new offence of industrial manslaughter for Commonwealth Work Health and Safety Act jurisdiction breaches. This amendment to the Commonwealth jurisdiction brings the legislation in line with the recently amended model framework and the Queensland and ACT jurisdictions. While the maximum penalties for Category 1 offences under the Work Health and Safety Act 2011 (Cth) will also significantly increase, the specific industrial manslaughter offence provides stronger penalties for the most egregious breaches of safety duties in the workplace, including up to 25 years imprisonment for individuals.
In a press release by the NSW Government, the Minns Government intends to introduce similar legislation in the first half of next year into the NSW laws (see https://www.nsw.gov.au/media-releases/industrial-manslaughter-law-to-be-introduced-nsw).
Increased penalties and criminalisation of underpayments
The Amendments passed introduce provisions for a new offence of wage theft which would apply to intentional conduct after the commencement of the proposed legislation. The provisions will be incorporated into the Commonwealth Criminal Code (the CC Code) and will allow the Fair Work Ombudsman to investigate suspected underpayment crimes and related offences as defined by the CC Code. It provides absolute liability for certain elements of the offence.
The proposed increase to maximum penalties for underpayments will be dealt with by the Senate in the new year.
Remaining Loopholes - 'Part 2’ of the Closing Loopholes Bill in 2024?
What is the definition of a casual employee under the Fair Work Act?
The Bill seeks to add clarity and objectivity surrounding the definition of a ‘casual employee’. Since the High Court’s decision in WorkPac Pty Ltd v Rossato  HCA 23, there has been uncertainty around the true definition of a “casual” employee. The Bill seeks to return the law to the previously accepted definition of a casual employee based on providing those observing the employment relationship point-in-time definitions to determine if an employee is truly casual or not.
Further, the Bill requires an objective assessment of whether there is a “firm advance commitment to continuing and indefinite work”, as well as providing specific “events” for when a casual employee converts to full time or part time. Such events include an offer to convert (and acceptance), an order of the Fair Work Commission or by operation of an industrial instrument. In making this change, Parliament has removed the reliance on “continuing and definite work to be according to an agreed pattern of work” and turned the focus to what the observer must objectively determine to class an employee as “casual” having regard to the true and practical reality of the nature of the relationship between the parties.
Proposed changes to casual conversion
The amendments will allow eligible casual workers to choose whether to change their employment status to permanent and ensure that no employees are forced to change, and introduces a new avenue for a general protection workplace right if a casual employee is misclassified to the employee’s detriment. There are already provisions within the Act pertaining to the conversion of casual employees to permanent, those provisions are being repealed and replaced to include the choice provisions mentioned above.
Additionally, these new provisions provide an exhaustive list where an employer may reject an offer of conversion to permanent employment. Listed grounds include where the employer believes that the employee is still correctly classified as a casual based on the new casual definition provisions and where it is impractical for the conversion to occur having regard to whether there would be substantial changes to the terms and conditions of the employment significantly impacting the way the employee works.
If you are concerned about receiving a casual conversion request, please get in touch with one of our workplace relations experts.
Contractors: Digital Platform and Road Transport Workers
The amendments allow the Fair Work Commission to set minimum standards for ‘employee-like’ workers, including in the gig economy. These provisions are set to ensure greater workplace protection for independent contractors who perform digital platform work or are engaged in the road transport industry. The amendments enable the Fair Work Commission (FWC) to hear disputes about unfair contract terms, including unfair deactivation from digital labour platforms as well as the termination of disputes regarding road transport contractor services; and regulate wages and terms of employment to provide for minimum standards, order collective workplace agreements.
The Bill provides for a definition of “employee-like workers” as well as providing clarity around consideration to be given by the FWC to the objectives of the Road transport industry when making wage determinations and collective enterprise agreements.
Reminder – Changes to fixed term contracts
Holman Webb would like to remind employers that limitations on fixed term contracts have now commenced. This includes a maximum contract period, including renewals and extensions, of 2 years and no more than 2 consecutive contracts for the same or similar work. Exceptions may apply in limited cases, and you should obtain legal advice if you believe that an exception applies to your employee.
Holman Webb’s workplace relations team are here to help. If you have a query relating to any of the information in this article or any of the other 80 plus changes to the Act or would like to speak with an expert on how these changes are set to impact you and your organisation, please do not hesitate to contact us.