Industrial and Workplace Relations Update – Closing Loopholes Bill (Part 1)

Overview

A third piece of legislation has now been introduced to Parliament by the Government in the form of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill). It follows the ‘Secure Jobs, Better Pay’ and ‘Protecting Worker Entitlements’ legislation which are both now in operation.

The Bill as its title suggests intends to close loopholes existing in the Fair Work Act 2009 (Cth) (Act) which allow underpayment and substandard conditions to be imposed on a range of workers. This article will highlight the key changes proposed by the Bill relating to employment relationships that both employers and employees ought to be aware of, should the Bill be made into law.  

Changes to casual employment

The current definition of casual employment in the Act will be changed to be more narrow and objective. The current definition refers to a casual employees as someone with “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work”, focusing on the terms on which the employee has been offered work and how they are paid. This concept will remain however the updated definition will require reference to factors that happen during the employment such as the employee’s actual work patterns.

A new pathway focussing on choice for casuals to access permanent employment will also be introduced. This would allow casuals the right to notify their employer after 6 months of employment that they believe their job no longer meets the definition of casual employment. Following this notification, the employer would then be obligated to consult with the employee and inform them if their employment will be changed to permanent or not. If there is a refusal then this must be specified appropriately based on certain legislative grounds. This pathway will be introduced in addition to the current casual conversion rights after 12 months of employment.

Definitions of employer and employee

A new section would be added to the Act requiring that the ordinary meanings of both ‘employee’ and ‘employer’ be determined by reference to the real substance, practical reality and true nature of the relationship between the parties. The intention behind this change is to make a return to the ‘multi-factorial’ test to determine whether an employment relationship exists, which was moved away from by the recent High Court decisions of Personnel Contracting and Jamsek. The multi-factorial test requires an analysis of the totality of the relationship and the performance of the contract, not just the written terms of contract documenting the relationship in order to determine if it is an employer-employee relationship or that of an independent contractor.

By having the true nature of the relationship as determinative (not just the written component), the new provision will ensure that arrangements aiming to evade the legal obligations of an employment relationship by documenting it as a contractor relationship, be more likely to be legally ineffective.

Criminalising wage theft

A major change proposed by the Bill is to make it a criminal offence for an employer to engage in intentional conduct that results in underpayment of a ‘required amount’ to an employee, also known as wage theft. The employee must be entitled to be paid the amount under the Act, a fair work instrument, or a transitional instrument.

The Fair Work Ombudsman would be able to investigate possible offences of wage theft however prosecutions will instead be handled by the Commonwealth Director of Public Prosecutions, on information provided by the Australian Federal Police. Prosecutions can be commenced within 6 years of the alleged wage theft occurring. Penalties for employers found guilty would be severe, with the potential for imprisonment for up to 10 years for individuals. Fines could be a maximum of $1.5 million for individuals, $7.8 million for companies, or 3 times the underpayment amount if that would be greater.

Despite the significant penalties, the concept of a ‘cooperation agreement’ would be created as a form of ‘safe harbour’ against prosecution. This would see an employer self-report conduct that may amount to wage theft and enter into a cooperation agreement with the Fair Work Ombudsman, similar to an enforceable undertaking that would prevent future prosecution.

Workplace delegates

New rights for employees acting as workplace delegates for a union would also be introduced, establishing a legislative basis for matters such as access to meeting rooms, document protection, paid time to attend union training etc. which previously were left to employer discretion. Greater protections in addition to the general protections provisions would also be created for workplace delegates prohibiting employers from unreasonably failing to deal with them, hindering, obstructing, or preventing the exercise of their rights, or knowingly making misleading representations to them.

These rights would be entrenched in modern awards and enterprise agreements for appropriate regulation.

Small business redundancy exemptions

Small businesses of 15 employees or less are exempted from having to make redundancy payments to employees. This exemption has seen certain employees in larger businesses (of 15 or more employees) miss out on redundancy pay if they are one of the last employees to lose their job, because the business by that time has fallen under the 15-employee threshold. Provisions would be inserted into the Act to address this situation where an employer only becomes a small business due to insolvency.

New protected attribute for discrimination

Further protections would be introduced for employees suffering from family and domestic violence. ‘Subjection to family and domestic violence’ would be classified as a protected attribute and these employees would be protected from adverse action by their employer on the basis of discrimination due to experiencing family and domestic violence.

Key Takeaways

There are many more changes being proposed by the Bill which will be covered in a second part to this article releasing soon. 

The proposed changes outlined in this article serve as a good reminder for employers to review their documentation and practices relating to employment relationships to avoid an excessive compliance burden should the Bill be made into law. If you need assistance with this or further information on the Bill, please contact:

Jim Babalis
Special Counsel
T 03 5225 5205
E jbabalis@ha.legal

Sonia McCabe
Senior Associate
Accredited Specialist in Workplace Relations
T 03 5226 8558
E smccabe@ha.legal

Matthew Synoradzki
Lawyer
T 03 5226 8542
E msynoradzki@ha.legal