The Fair Work Legislation Amendment (Closing Loopholes No. 2) recently passed through Parliament. Now that the bill has received Royal Assent (26 February 2024), some pretty significant changes will impact Australia’s employment laws. 

For employers, understanding these changes are crucial. These amendments are bound to impact your workplace policies and practices. Understanding what they are is the first step to ensuring compliance. 

Let’s take a closer look at what’s new with Closing Loopholes No. 2. 

Wait – What Is The ‘Closing Loopholes’ Bill?

In case you missed it, last year the Fair Work Act went through some pretty significant changes. 

In December 2023, a bill to amend the Fair Work Act, known as the ‘Closing Loopholes’ amendments received royal assent. The bill introduced some pretty notable changes, impacting matters such as wage theft and redundancy. 

However, the Closing Loopholes bill was split in two by the senate. The amendments that were passed and approved in December last year was the first part.  

We’ve written about the first part of the Closing Loopholes bill in our article, Closing Loopholes: What The Fair Work Legislation Amendments Could Mean For Small Business. If you haven’t already, check it out to learn more. 

Recently, the second part of the Closing Loopholes bill passed through parliament. Employers can expect some pretty big changes with the new amendments, so if you’re a business owner then now is a good time to brush up on your employment law knowledge. 

So, What Changes Should I Expect With Closing Loopholes No. 2? 

You can expect some pretty significant changes now that Closing Loopholes No. 2 has been passed in Parliament. 

Closing Loopholes No. 2 clarifies the definition of employees and employers, explains when it’s appropriate for employers to contact their employees, adds increased penalties for a breach of workplace regulations and much more. We’ve listed a quick summary of the changes you should be aware of.  

The Right To Disconnect

The right to disconnect establishes an employee’s right to have no contact with their employer or workplace outside of work hours. This means, if any employer chooses to email, message, call or contact their employee in any other way outside of their working hours, the employee has a right to refuse this contact without being penalised for it. 

If you’re an employer, this does not mean you can’t expect to contact your employees outside of work at all. However, it does mean that any contact you make would need to be for a reasonable purpose, such as an emergency. Moreover, if the employee is being contacted outside of their work hours and being expected to perform work duties, then you’ll need to ensure they are properly compensated for this.  

When these changes will take place: 6 months after Royal Assent (18 months after Royal Assent for small businesses). 

Defining Employees and Employers

It may come as a surprise however, the Fair Work Act has never explicitly  defined an employee or an employer – until now. Instead of depending on contracts to assess the difference between an employee and an employer, courts will need to assess the “real substance, practical reality and true nature” of the relationship between the employer and their employee. 

It places greater emphasis on looking at the conduct, behaviour and practices of the employment in question, rather than just what was signed on paper. By inserting this definition in the Fair Work Act, the aim is to make it easier to determine whether a worker qualifies as an employee or an independent contractor.

Assessing the difference between an employee and an independent contractor is important, particularly when it comes to sham contracting. Closing Loopholes addresses sham contracting in the amendments by making it more difficult for employers to prove they genuinely  were not aware their conduct constituted sham contracting. 

When these changes will take place: 6 months after Royal Assent and immediately after Royal Assent for sham contracting.   

Contractor Rights

Minimum standards have been introduced for independent contractors working on digital platforms. These contractors have been described as ‘employee-like ‘ workers and as such, there will be a basic standard for them introduced by the new amendments. The new contractor rights will set a base standard for matters such as payment, insurance, consultation, cost recovery and representation. Not everything will be covered by the new contractor rights, so it’s a good idea to talk to a legal expert if you’re hiring contractors on your digital platform for more information. 

Another important detail to note is that digital platform independent contractors that have been working for their employer for a period of 6 months or more and earn under the contractor high income threshold will be able to claim unfair deactivations. This applies in certain circumstances, when the contractor has been released from their employment. 

The Australian Government will be releasing a Digital Labour Platform Deactivation Code with more details, so it’s a good idea to keep an eye out for that. 

Similar changes have been added to the rights of contractors in the road transport industry. A ‘road transport contractual chain order’ will allow minimum standards for some road and transport contractors. In addition to this, road transport contractors can expect increased unfair termination protections. 

When these changes will take place: 6 months after Royal Assent. 

New Casual Employee Rights 

Previously, determining whether or not an employee was considered casual depended heavily on the contract between the employee and employer. With the new changes, the test for determining whether an employee is casual or not has completely changed. 

Now, the conduct after the employee commenced working will be taken into account, as this can better reflect the type of employment the employee was working under. Similarly to distinguishing between an employee and a contractor, the same type of consideration will be applied when determining whether a person is a casual worker by looking at the “real substance, practical reality and true nature”  of the relationship between the employee and their employer. 

Essentially, determining whether not not an employee is casual will take these two main factors into consideration: 

  • If the employment relationship has an absence of a firm advance commitment to continuing and indefinite work
  • Whether the employee is entitled to a casual loading or any other rate of pay for casual employees (this usually comes from fair work rules or a contract of employment)

Casual employees also have the right to send their employer a written notification after 6 months of employment (12 for small businesses) if they want to convert to a full-time or part-time employee (if they meet the requirements). This is known as “employee choice”.  

As an employer, you will have 21 days to respond to their notification. Of course, you have the right to refuse the conversion under reasonable grounds. However, you’re no longer required to formally offer a conversion to your employees after the 12 month period. 

When these changes will take place: The rights of entry for unions will commence from 1 July 2024. 

Increased Penalties and Union Entries 

There will also be increased penalties for a breach of workplace regulations. These penalties are mainly higher financial penalties however, some of the consequences will also depend on the violation itself. The penalties are mainly for the underpayment of wages and serious contraventions – they’ve also broadened the scope of what constitutes a serious contravention. 

Furthermore, unions have more grounds on which they can apply for a waiver of the 24 hour notice. When a union wants to enter a workplace, they usually need to provide the employers with a 24 hour notification, unless they apply for a waiver with Fair Work. Under the legislative amendments, unions can now successfully apply for this waiver and enter a workplace unannounced if they suspect they are underpaying employees. 

When these changes will take place: 6 months after Royal Assent. 

Enterprise Bargaining

The enterprise bargaining changes give the Fair Work Commission the power to make an ‘intractable bargaining declaration’. The declaration prevents any new terms in an enterprise agreement to be less favourable to an employee or union, compared to the already existing agreement. If the Fair Work Commission makes an intractable bargaining decision, then it will be up to them to make a workplace determination at the earliest possible date. 

When these changes will take place: Immediately after Royal Assent. 

The changes that have been introduced by the bill aren’t niche changes at all. In fact, they are general enough that a significant amount of workplaces will be impacted — including yours. 

How Do I Make Sure My Business Is Compliant With Closing Loopholes No. 2? 

It’s a good idea to get in touch with a legal expert to review your current workplace practices and policies. From there, you can take any action necessary to make sure your business is in compliance with Fair Work regulations. 

You may need to review your Workplace Policies, update your Employee Agreements, Contractor Agreements and Staff Handbooks. If you don’t already have these legal instruments, then this is a good time to get them drafted with the new Fair Work amendments. 

For more guidance, get in touch with our legal experts – they will be happy to guide your business through the Closing Loopholes No. 2 changes. 

Next Steps 

Now is a crucial time to ensure your business practices are in line with the Fair Work Act amendments. Our legal experts can help you with your next steps. 

  • The Fair Work Legislation Amendment (Closing Loopholes No. 2) recently passed Parliament, bringing significant changes to Australia’s employment laws
  • Employers must understand and adapt to these amendments, impacting workplace policies and practices for compliance
  • Closing Loopholes No. 2 clarifies the definition of employees and employers, emphasising the real nature of the relationship rather than just contractual terms
  • New rights include the “Right to Disconnect,” allowing employees to refuse employer contact outside work hours without penalty
  • Independent contractors on digital platforms and in the road transport industry will have minimum standards introduced, with rights for unfair deactivation
  • Changes to casual employee rights include a revised test for determining casual status, consideration of post-employment conduct, and the option for employees to request conversion after 6 months
  • Increased penalties for workplace regulation breaches, expanded union entry rights, and enterprise bargaining changes are also part of Closing Loopholes No. 2, impacting a broad range of workplaces

If you would like a consultation on The Fair Work Legislation Amendment (Closing Loopholes No. 2), you can reach us at 1800 730 617 or for a free, no-obligations chat.

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