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Closing loopholes – an interesting name for legislation amendments. In this case however, it’s a rightly fitting name.
The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 focuses on what the name promises – minimising gaps in employment laws that have historically been exploited for unfair practices, such as wage theft and unsafe working conditions.
The changes are quite broad and even if you’re running a compliant business without any obvious ‘loopholes’ in your employment practices, the changes may still affect you. Read on to learn more.
Note – This article only covers ‘Part 1’ of the Closing Loophole Amendments Act, which became law in 2023. A second Act (Fair Work Legislation Amendment (Closing Loopholes No. 2)) became law on 26 February 2024 – you can read our summary of this here.
What Exactly Are The ‘Closing Loophole’ Amendments?
The closing loophole amendments are changes to the Fair Work Act, which is the main piece of legislation defining employer/employee rights, duties and obligations Australia.
The amendments to the Fair Work Act (which we’ll discuss in more detail below) impact a few other laws, all of which relate to fair work rights. As such, these are some fairly significant legislative changes happening in Australia and every business owner should be aware of them.
So, What’s Changing With The Fair Work Legislations Amendments?
There are a number of changes the amendments are going to bring forward. These changes include:
- Criminalising wage theft
- Regulating labour hire agreements
- New protections for delegates
- Increased protections against discrimination for those experiencing family and domestic violence
- Changes to the small business redundancy exemptions when it comes to insolvency
- Making conciliation conferences compulsory
- The removal of entry permits for health and safety representatives in certain cases
- Amendments to asbestos safety laws
- Changes to the Safety Rehabilitation and Compensation Act 1988
- The Work, Health and Safety Act has been amended to add industrial manslaughter (plus increased penalties for other offences)
How Do These Legislative Changes Impact My Small Business?
We’ve summarised some of the key legislative changes you may want to look out for as a small business owner below.
Wage Theft
Under the new laws, if an employer is found to be deliberately underpaying their employees wages or superannuations contributions, they could face severe penalties: These penalties are stated as:
- A maximum of 10 years imprisonment or
- A maximum fine which is more than 3x the amount of the underpayment
- If the court can’t figure out the underpayment amount: For an individual – 5,000 penalty units ($1,565,000). An organisation can be charged – 25,000 penalty units ($7,825,000)
The wage theft laws follow the minimum standard of pay, modern awards and other entitlements set out by Fair Work Australia.
The new amendments also provide ‘safe haven’ provisions for employers. Safe Haven provisions can be enacted under two circumstances:
- If the employer acts in accordance with the Voluntary Small Business Wage Compliance Code (yet to be developed by the government). If the wages are in line with the code, the employer will not be prosecuted
- By entering into a cooperation agreement with the Fair Work Ombudsman that voluntarily discloses wage theft. This doesn’t guarantee the employer won’t be prosecuted however, it can give them a better chance to avoid criminal penalties (and correct their wrongs)
Increased Protection Against Discrimination
The amendments have expanded the anti discrimination framework to include employees suffering from family and domestic violence discrimination in the workplace.
The changes now make it unlawful for an employer to discriminate against an employee or a potential employee if they are currently or have previously been the victims of family or domestic violence.
Redundancy
Under National Employment Standards, employees are entitled to redundancy pay upon termination if the circumstances meet certain requirements.
However, a ‘loophole’ in the Fair Work legislation meant that some employees were missing out on the redundancy pay they were entitled to. This loophole was taken advantage of when employers decided to downsize their business to less than 15 employees due to insolvency. Once the employer has less than 15 employees, they are able to avoid redundancy payments as they can now classify themselves as a small business.
With the new changes, if an employee is made redundant during the insolvency process, they will not miss out on redundancy payments simply because their workplace is now considered to be a small business.
This change only applies for employees being made redundant during an insolvency (and missing out on payments for this reason). Laws exempting small businesses from paying redundancy to employees still apply in all other circumstances.
Labour Hire Workers
Under the legislative amendments, labour hire employees need to be paid the minimum wage they would receive if they were working directly under their ‘host employer’ or in a public sector, doing the same job.
Employers utilising labour hire workers need to ensure the wages their workers are receiving correctly meet the minimum industry standard or risk facing legal penalties.
Industrial Manslaughter
Work, health and safety laws will be updated to include the criminalisation of industrial manslaughter. This means:
- Industrial manslaughter is now a recognised offence under commonwealth health and safety legislation
- Under these new laws, a workplace can be held criminally responsible for serious injuries that result in an employee’s death
- Penalties include $18 million for a body corporate and 25 years imprisonment for an individual
- There will also be an increase to the category 1 offence penalties. Body corporate penalties have gone from $3 million to $15 million. Conducting businesses, undertakings and officers now risk a penalty of $3 million (previously $600, 000). For any other person, the increased penalty rate went from $300, 000 to $1.5 million
- There’s also a 39.03% increase to all other penalties in the Work, Health and Safety Act
- A Family and Injured Workers Advisory Committee will also be established under the changes
When Will These Changes Come Into Effect?
The implementation of these changes won’t occur all at once. Instead, they are scheduled to roll out on multiple key dates. Here are the key dates you need to know.
15 December 2023
- Small business insolvency redundancy regulations come into effect
- Labour hire provisions apply
- Workplace delegates rights provisions are also in effect
- Protections for those subject to family and domestic violence have commenced
- Compulsory conciliation amendments have started
1 July 2024
- Delegates rights term must be factored into in a workplace agreement made on or after 1 July 2024
- Fair Work Commission is required to issue modern awards that include a delegates rights term
- Delegates rights term are now to be included in all legal agreement that have been voted on or after 1 July 2024
1 November 2024
- Regulated labour hire arrangement orders can now begin
1 January 2025
- Wage theft provisions come into effect (or one day after the Voluntary Small Business Wage Compliance Code is released)
Keep in mind, these dates can be subject to change. Moreover, we have briefly summarised a few of the legislative amendments in this article. To gain a better understanding of how the closing loopholes amendments may impact your small business, it’s a good idea to chat with a legal expert.
Note – This article only covers ‘Part 1’ of the Closing Loophole Amendments Act, which became law in 2023. A second Act (Fair Work Legislation Amendment (Closing Loopholes No. 2)) became law on 26 February 2024 – you can read our summary of this here.
Key Takeaways
To summarise what we’ve discussed:
- The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 aims to minimise gaps in existing laws to prevent unfair practices in the workplace
- Not all amendments will impact every small business but understanding them is crucial for legal compliance
- The amendments include severe penalties for wage theft, including imprisonment or fines up to three times the underpayment amount. ‘Safe haven’ provisions exist for compliant employers
- Increased protection against discrimination now covers employees facing family and domestic violence
- Changes address a loophole in redundancy payments during insolvency for employees of small businesses
- Labour hire workers must be paid the minimum wage they would receive if working directly for the host employer or in the public sector
- Industrial manslaughter is criminalised under work, health and safety laws, with significant penalties for corporations and individuals
- The changes will be implemented on various dates, set for 2024 and 2025
- Ongoing reviews may lead to additional amendments to the Fair Work Act in the future
- It’s advisable for small businesses to stay informed about these changes and seek legal advice for better understanding and compliance
If you would like a consultation on the fair work legislations amendments, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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