ARTICLE
28 March 2024

Fair Work Reforms 2024: The Second Wave

M
Madgwicks

Contributor

Madgwicks Lawyers has been serving clients since 1975 with reliable legal advice, clear explanations of outcomes, and practical options. Their deep expertise helps clients navigate complex matters by providing informed decision-making. The firm prioritizes developing long-term relationships with clients locally and globally, adding value beyond legal services. With over 100 staff and expertise in key practice areas, Madgwicks is an award-winning commercial firm. As part of Meritas, they are connected to a global alliance, offering business law services in 92 countries.
Summary of key changes for employers, to help to ensure your business remains compliant with the new obligations.
Australia Employment and HR
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The Fair Work Legislation Amendment (Closing Loopholes) No 2 Act 2024 came into force on 26 February 2024, ushering in another raft of significant changes to Australia's industrial landscape.

These amendments represent the second wave of reforms under the Albanese Government's industrial relations changes, further strengthening protections for workers and imposing additional responsibilities on employers.

Following our recent business briefing ( click here to watch the recording), Madgwicks' Workplace Relations lead, Tim Greenall, has summarised the key changes for employers, helping to ensure your business remains compliant with new obligations, including:

  1. New workplace delegates rights and protections
  2. Increased civil penalty orders and criminal liability for wage theft
  3. New employee right to disconnect
  4. New definition of employment/independent contractor
  5. Changes to casual employment
  6. New minimum standards for Gig economy workers and contractors in the road transport industry

1. New workplace delegates rights and protections

Effective 15 December 2023, workplace delegates have new statutory rights and are entitled to:

  • represent the industrial interests of members and potential members of the Union (including disputes with their employer);
  • reasonable communication with members and potential members about their industrial interests; and
  • reasonable access to the workplace and its facilities to represent those industrial interests.

Delegates employed by non-small businesses (i.e. 15 or more employees) are also entitled to have reasonable access to paid time during normal work hours for workplace delegate training.

From 1 July 2024, Awards and new Enterprise Agreements must have a term providing for the exercise of rights of workplace delegates. Civil penalty orders will also apply to any employer which:

  • unreasonably refuses to deal with a workplace delegate; or
  • unreasonably hinders the exercise of the rights of the workplace delegate.

2. Increased civil penalty orders and criminal liability for wage theft

Effective 27 February 2024, increased penalties apply to selected civil remedy provisions including breaches of the NES, Modern Awards, Enterprise Agreements, and non-compliance of record keeping, payslip obligations, or compliance notices:

  • The maximum civil penalty for non-small businesses (i.e. 15 or more employees) increases five-fold per breach, from $93,900 to $469,500.
  • Serious contraventions for breaches done either, "knowingly or recklessly" will also increase to $4,695,000.

From 1 January 2025, all penalties will be increased to the greater of:

  • three times the underpayment amount; or
  • $469,500 per breach; or
  • $4,695,000 for a serious contravention as defined above.

Starting 1 January 2025, intentional underpayment of employee entitlements constitutes a criminal offence, carrying a maximum penalty of:

  • 10 years imprisonment; or
  • $7,825,000 for a body corporate or three times the amount of the underpayment.

Recommendations for business

  • Invest in up-to-date payroll systems.
  • Understand and comply with all terms of Awards and Enterprise Agreements that are applicable.
  • Focus on audit and other checking systems to ensure compliance on an ongoing basis especially when put on notice of potential non-compliance.
  • Self-disclose any honest mistakes or miscalculations to the Fair Work Ombudsman (FWO) to avoid criminal prosecution through:
    • Cooperation Agreements; and
    • compliance with the new Voluntary Small Business Wage Compliance Code declared by the Minister.

3. New employee right to disconnect

Commencing 26 August 2024 (unless a small business which commences 26 August 2025), an employee may refuse to monitor, read or respond to contact, or attempted contact from:

  • an employer outside of the employee's working hours unless the refusal is unreasonable; and/or
  • a third party (e.g. customer or client) if the contact or attempted contact relates to their work and is outside the employee's working hours unless the refusal is unreasonable.

Whether a refusal is unreasonable depends upon:

  • the reason for the contact or attempted contact;
  • how the contact or attempted contact is made and the level of disruption the contact or attempted contact causes the employee;
  • the extent to which the employee is compensated to remain available to perform work during the period in which contact was made or attempted or for additional working hours outside of the employee's ordinary hours of work;
  • the nature of the employee's role and the level of the employee's responsibility;
  • the employee's personal circumstances (including family or caring responsibilities).

Introduced by Green's Senator, Barbara Pocock, the purpose of the reform is to improve the conversation about the boundary between working and personal time. It is not expected that there will be a deluge of legal cases as employers already have a general OH&S obligation to provide a workplace that is healthy and safe (including psychologically) so far as it is reasonably practicable.

Disputes about the right to disconnect

  • The right to disconnect is a workplace right meaning the General Protections provision in the Fair Work Act (FW Act) applies, prohibiting the taking of adverse action such as termination because the employee has exercised this right.
  • Any disputes should be resolved at the workplace by discussions, failing which, either party can refer to the Fair Work Commission (FWC) by conciliation or arbitration.
  • The FWC must make written guidelines in relation to the operation of the right to disconnect and whether the employee's refusal is unreasonable or not.
  • All Awards will also be required to include a right to disconnect clause.
  • There is an exclusion for any action required for any prejudice to Australia's national defence, national security or covert or international operation of the AFP.

4. New definition of employment/independent contractor

Commencing 26 August 2024 (or an earlier date set by the Australian Government), the definition of employment is to be determined by ascertaining the "real substance, practical reality and true nature of the relationship," by having regard to:

  • the totality of the relationship; and
  • not only the terms of the contract governing the relationship, but other factors relating to the totality of the relationship including how the contract is performed in practice.

This is a statutory reversal of the new High Court approach in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (see previous article), which gave primacy to the terms of the contract in determining if an individual was a contractor or employee.

This definition marks a return to the multifactorial approach with all of its uncertainty and potential retrospective operation for independent contractors deemed to be employees, with back payment claims for employee entitlements such as annual leave and sick leave and minimum wage rates.

New Independent Contractor definition

It is important to note that sham contracting is a civil penalty offence and there is now a narrower defence based on "reasonableness".

Independent contractors earning less than the "contractor high income threshold" (not yet defined but expected to exceed $167,500 per annum), can now apply to the FWC if subject to Unfair Contract terms.

New opt-out notice provision for Independent Contractors

For Independent Contractors whose earnings exceed the "contractor high income threshold" a principal may give a notice of election to opt out of the new statutory definition, that deems an Independent Contractor to be an employee under that definition.

The Independent Contractor has the option to opt out of the new definition within 21 days after the giving of the notice or at any time after the commencement of the section.

Recommendations for business

  • Issue the opt out notice to preserve an independent contractor relationship where earnings are in excess of the contractor high income threshold but only if likely the business will be deemed to be an employer.
  • Proceed cautiously for contractors where earnings are below the contractor high income threshold.

5. Changes to casual employment

New definition of casual employment

Commencing 26 August 2024, an employee is a casual employee only if:

  • the employment relationship is characterised by an absence of a firm advance commitment to continuing indefinite work; and
  • the employee would be entitled to a casual loading or a specific rate of pay for casual employees under an Award, enterprise agreement or the contract of employment.

Whether the employment relationship is characterised by "an absence of a firm advance commitment to continuing indefinite work" is to be assessed on the basis of:

  • the real substance, practical reality and true nature of the relationship; and
  • that a firm advance commitment can be in the form of a contract of employment or in addition to the terms of that contract, in the form of a mutual understanding or expectation between the employer and employee not rising to the level of a term of a contract (but may be inferred from the conduct of the employer and employee after entering into the contract of employment or from how the contract is performed); and
  • having regard to, but not limited to the following considerations (which may indicate the presence [rather than the absence] of such a commitment):
    1. there is an inability of the employer to elect to offer or not offer, work;
    2. there is an inability of the employee to elect to accept or reject work (whether this occurs in practice);
    3. having regard to the nature of the employer's enterprise, it is reasonably likely that there will be future availability of continuing work in that enterprise of that kind usually performed by the employee;
    4. there are permanent employees performing the same kind of work in the employer's enterprise that is usually performed by the employee; and
    5. there is a regular pattern of work for the employee, but this does not of itself indicate a firm advance commitment to continuing and indefinite work. That is, an employee that has a regular pattern of work may still be a casual employee if there is no firm advance commitment to continuing and indefinite work.

For the avoidance of doubt:

  • all of the above considerations must be considered, and no single consideration is determinative. Not all considerations necessarily need to be satisfied for an employee to be considered other than a casual employee; and
  • a pattern of work is regular even if it is not absolutely uniform and includes some fluctuation or variation over time (including for reasonable absences, such as for illness, injury and recreation).

It is important to note that these provisions:

  • abolish the definition introduced by the 2021 Morrison Government changes where the employer could determine by contract whether there was an absence of a "firm advance commitment to an agreed pattern of work"; and
  • reverse the recent High Court decisions emphasising the primacy of the contract by reference to the "real substance, practical reality and true nature of the relationship" and how it is conducted in practice.

The stated legislative object of the new casual employment provisions is to establish a framework dealing with changes to casual employment status that:

  • is quick, flexible and formal;
  • addresses the needs of employers and employees;
  • provides for the resolution of disputes to support the employee's choice about employment status.

Whether these provisions will operate as they are intended is unclear, as they are likely to make it very risky to employ "regular" casuals, particularly for small businesses taking on casual employees.

New casual conversion rights

The onus will now be on the employee (rather than the employer) to initiate and make a request to change their employment status where:

  • the casual employee has been employed for at least 6 months (or 12 months for a small business employer); and
  • the employee believes the employment relationship is no longer that of a casual employee having regard to the criteria set out above.

The employer can refuse an employee's request for conversion on a broader "fair and reasonable operational grounds" including:

  • substantial changes would be required to the way to work in the employer's enterprise is organised;
  • there would be significant impacts on the operation of the employer's enterprise;
  • substantial changes to the employer's terms and conditions would be reasonably necessary to ensure that the employer does not contravene a term of an Award that would apply to the employee as a permanent employee.

The employer must respond within 21 days and consult with the employee prior to rejection. The employee may refer any dispute to the FWC for arbitration.

New casual requirements to be aware of

  • Employers will be required to provide Fair Work Casual Information Statement to casual employees upon the commencement of employment, and also after six months (excluding small business employers) and 12 months, and every 12 month after that (excluding small business employers).
  • New sham casual contracting prohibition as a civil penalty provision.

6. New minimum standards for Gig economy workers and contractors in the road transport industry

Commencing 26 August 2024, the FWC will have power to make minimum standard orders for "employee like" workers performing services via digital platform, and contractors in the road transport industry.

These standards could relate to payment terms, deductions, working time and insurance, but not overtime or penalty rates, rostering or minimum engagement terms.

A new process for unfair termination or unfair deactivation dispute resolution process will also be introduced.

Watch the recording of Tim's presentation

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.

ARTICLE
28 March 2024

Fair Work Reforms 2024: The Second Wave

Australia Employment and HR

Contributor

Madgwicks Lawyers has been serving clients since 1975 with reliable legal advice, clear explanations of outcomes, and practical options. Their deep expertise helps clients navigate complex matters by providing informed decision-making. The firm prioritizes developing long-term relationships with clients locally and globally, adding value beyond legal services. With over 100 staff and expertise in key practice areas, Madgwicks is an award-winning commercial firm. As part of Meritas, they are connected to a global alliance, offering business law services in 92 countries.
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