The Closing Loopholes legislation
The Closing Loopholes legislation significantly changed the Fair Work Act 2009 (Cth). The legislation was one of the biggest overhauls in Australian workplace relations law in recent years.
As a refresher, the Closing Loopholes legislation consisted of two Acts: the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) and the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth).
Among the most notable changes, the legislation introduced:
- a new definition of 'employer' and 'employee'
- an employee's right to disconnect
- new provisions for regulated labour hire arrangement orders.
With the changes in effect for over a year now, we are finally seeing how the Fair Work Commission is applying some of these new and updated provisions.
New definition of employment
One of the changes that has caused the most confusion for employers is the introduction of the new definition of employment.
Previously, courts and commissions would primarily consider the terms of the contract between the parties in determining whether an individual was an employee or a contractor. Now, the relevant consideration is the 'real substance, practical reality and true nature' of the relationship, which includes both the terms of the relevant contract and how the contract is performed in practice.
The new definition took effect on 26 August 2024 but also applies to relationships that were entered into before that date. Keep in mind that this definition only applies for the purposes of the Fair Work Act ; other definitions continue to apply for different purposes, for example superannuation.
This new definition was recently considered by the Commission in Ms Jessica Dickson v Ms Susann Kovacs, Mr Felipe Cespedes [2025] FWC 1218. In this case, the applicant was a nanny and cared for the respondents' two children.
Before commencing work, the applicant sent a text to the respondents stating that she had previously done work of this basis as a 'cash in hand' contractor. The applicant was paid $35 per hour, with an extra $50 per week for superannuation. The applicant agreed that she would administer her own superannuation payments. The applicant did not work through an ABN, render invoices to the respondents or file quarterly reports with the ATO.
Despite this, the Commission concluded that, under the new definition, the applicant was an employee rather than an independent contractor. This was primarily due to the large amount of direction that the respondents had over the applicant in practice. This included directing the applicant as to her duties while caring for the children and the location of her work.
This case is an example of how the Commission will look at the arrangement between the parties. Even if the employer and employee have agreed to working on a contractor and principal arrangement in the contract terms, the Commission will still look beyond these terms.
Right to disconnect
The right to disconnect provisions of the Fair Work Act give employees the right to refuse to monitor, read or respond to contact, or attempted contact, outside of their working hours, unless the refusal is unreasonable. These provisions have been in effect for non-small business employers since last year and was extended to small business employers as of 26 August 2025.
Despite the right to disconnect provisions being one of the most controversial changes in the Closing Loopholes legislation, the Commission has recently issued a statement that, to date, it has not considered any test cases or resolved any significant disputes regarding the right to disconnect.
However, there is currently an adverse action claim being heard in the Federal Court that includes allegations that an employer contravened the Fair Work Act by taking adverse action against an employee when she exercised her right to disconnect. The applicant is seeking $780,000 against her employer. We will provide further updates on this case as they become available.
It is important to remember that all modern awards now have right to disconnect terms. These provisions allow employees to enforce their right to disconnect through their modern award, as well as through the enforcement provisions in the Fair Work Act and through the Commission.
These provisions are also relevant in enterprise bargaining, and many enterprise agreements now have right to disconnect terms that are adapted to their specific industries and workplaces.
Regulated labour hire arrangement orders
In contrast, applications for regulated labour hire arrangement orders (RLHA orders) have experienced a significant surge. At the date of this article, the Commission has made 75 RLHA orders.
The Fair Work Act allows some individuals, including employees and unions, to apply for an RLHA order to cover a labour hire employer. An employer covered by an RLHA order must pay the employees it provides to the host organisation at no less than the protected rate of pay .
This essentially means that employers need to pay these employees at the full rate of pay under the host instrument, including any relevant loadings, allowances, overtime rates, penalty rates, incentive payments and bonuses.
Importantly, the Commission is willing to make an RLHA order even if there may be significant negative financial effects for the employer.
For example, in Applications by the Mining and Energy Union re Bulga Open Cut Mine [2025] FWC 1273, the Commission made an RLHA order. The Commission accepted that the increase in costs to the employer from the RLHA order could potentially result in the employer's arrangement with the host becoming wholly unviable and commercially unsustainable. Although this could require the employer to terminate some of its ongoing labour hire arrangements and cease offering employment to affected employees, the Commission still made the RLHA order.
Similarly, in the recent case of Application by the Mining and Energy Union re Bengalla Mining Company Pty Ltd [2025] FWCFB 53, the Commission made an RLHA order requiring two labour hire companies to pay their employees in accordance with a host employer's enterprise agreement.
The financial effects of an RLHA order would have been significant for the employer, with full-time employees potentially receiving $30,000-$50,000 more per year if paid according to the host's enterprise agreement instead of the labour hire employer's enterprise agreement.
The employer claimed that it would not be fair and reasonable to pay its employees in accordance with the host enterprise agreement, as that agreement provided for an annualised salary compensating employees for working weekend shifts and overtime. The labour hire employers claimed it would be unfair to pay their employees an annualised salary reflecting higher entitlements when their employers would not be working under those arrangements.
The Commission accepted that the labour hire employees may be over-compensated if paid according to the host employer's enterprise agreement because of the annualised salary arrangement. However, the employers did not provide enough evidence of their size financial position or the potential impact of an RLHA order on their finances. The Commission found that the fairness to employees in making an RLHA order outweighed any unfairness to the employer.
Conclusion
After a year of Closing Loopholes, we have started to see how the new provisions are affecting businesses.
The approach and application by the courts and commissions of other Closing Loopholes legislation, including the new wage theft offence, remains to be seen.
It is entirely possible that more significant changes to employment laws are yet to come, such as limitations on employment contract restraints for employees under the high income threshold, and the introduction of new safeguards for penalty rates in modern awards.
Please contact a member of our workplace relations and safety team if you require assistance with any of the issues raised in this article.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.
