What Employers need to know about Closing Loopholes (Part 2)
Published on October 16, 2024 by Wing Ho | 何宛穎律師
As mentioned in our previous article, the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth) (Closing Loopholes No. 2 Act) received royal assent on 26 February 2024. This second set of the ‘loophole’ amendments to the Fair Work Act 2009 (Cth) (FWA) implements further reforms to Australian workplace law, including:
- A statutory “right to disconnect” from after-hours contact from an employer and third parties (such as clients);
- a new definition of “employer” and “employee”;
- new jurisdiction to determine disputes regarding unfair contract terms where the contractor is paid below the contractor high income threshold;
- a new “casual employee” definition and conversion of casual employment;
- protections for gig-workers, road transport workers and contractors; and
- additional reforms to enterprise bargaining.
These changes commenced on 26 August 2024.
This article will look at the new definition of “employer” and “employee” and the new provisions affecting casual employment.
Changes to the definition of “employer” and “employee”
The FWA governs employment relationships and confers rights and imposes obligations on an employer and employee. The FWA has historically defined “employer” and “employee” by their ordinary meaning developed by the courts[1].
A new section 15AA introduces a new definition of employment where the ordinary meaning of “employee” and “employer” is to be determined by reference to the “real substance, practical reality and true nature of the relationship between parties”. This statutory provision reverses the effect of the High Court decisions in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (Jamsek). Personnel Contracting and Jamsek emphasised the primacy of the written terms of the contract in determining whether a worker was an employee or a contractor. This marked a departure from the well-established and broader multi-factorial test[2]. By reinstating the multi-factorial test, courts will need to engage in a more complex process but will be able to make a more accurate determination of the parties’ status. This may lead to an increase in claims for unpaid leave and other entitlements by workers who are purportedly engaged as contractors but are later found to be employees.
An individual contractor whose earnings exceed the contractor high income threshold (currently $175,000 per annum) may issue an opt out notice to the principal if they do not wish to be covered by the new “employee” definition [3].
A new casual employment definition
Section 15A of the FWA has been amended to provide a new definition of “casual employee”, which has two elements, namely:
- the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work;
- the employee is entitled to a casual loading, or specific casual rate of pay, under a fair work instrument or contract.
Whether the first element exists depends on a number of factors, including the “basis of the real substance, practical reality and true nature of the employment”. This differs from the previous section 15A, which only required courts to consider the express terms of the employment contract. For further information on the previous section 15A, please refer to this article for a detailed explanation.
From 26 August 2024, section 15A expressly acknowledges that a firm advance commitment can take various forms, including things such as, an employment contract, or a combination of an employment contract and a mutual understanding or an expectation.
The new statutory provisions outline other considerations for assessing the presence or absence of a firm advance commitment, which build upon the principles set out in several court decisions, the most recent notable example being WorkPac Pty Ltd v Skene [2018] FCFAFC 131. These considerations include:
i. whether an employer can choose to offer or not offer work, or whether an employee can choose to accept or reject work (and, importantly, if this is the case in practice);
ii. whether it is reasonably likely there will be future availability of continuing work of the same kind available in the business;
iii. whether there are full-time or part-time employees performing the same kind of work in the business that is normally performed by the subject casual employee; and
iv. whether there is a regular pattern of work for the employee[4].
However, the new legislation also clarifies that a regular pattern of work does not by itself indicate a firm advance commitment to continuing and indefinite work, and that an employee who has a regular pattern of work may still be a casual employee even in its absence.
There are some exceptions to the new definition of casual employee, including employees on fixed-term contracts and certain academic staff[5]. Employees who start work as a casual employee remain as such until their employment status is changed via a conversion process initiated by the employee, by order of the Fair Work Commission (FWC) or accepting an alternative employment offer[6].
Casual conversion changes
The Closing Loopholes No 2 Act also creates a new regime for casual conversion to permanent employment, which focuses on “employee choice”. This will replace the existing regime where the onus is on the employer to offer conversion to permanent employment to qualifying casual employees.
Under new section 66AAB, a casual employee can give their employer written notification if they believe their employment is no longer casual, having regard to the new definition in section 15A. An employee can only give this notice after 6 months of employment with a non-small business employer or after 12 months of employment with a small business employer.
An employer must consult with the employee and respond in writing to the notification within 21 days by either accepting or rejecting the notification [7].
If the notification is accepted, the employer must include in their written response details about the conversion of the employee’s employment as prescribed by the new law.
An employer may reject the notification if:
i. the employee is still a casual employee as defined (that is meets the requirements of the new section 15A(1)-(4)); or
ii. “fair and reasonable operational grounds” exist, such as:
– that substantial changes would be required to the organisation of the employer’s business;
– that there would be significant impacts on the operation of the employer’s business; or that
– the employer would have to substantially change the employee’s terms and conditions of employment in order not to breach a term of a fair work instrument applying to the employee as a permanent employee; and
– accepting the notification would result in the employer’s failure to follow legally required recruitment or selection processes.
Casual conversion disputes
Under a new section 66M, parties must attempt to resolve a dispute about casual conversion at the workplace level, before referring the dispute to the FWC.
Casual Employment Information Statement
Currently, employers must provide the Casual Employment Information Statement (CEIS) to casual employees on commencement. In addition to this requirement, from 26 August 2024, non-small business employers must provide the CEIS to casual employees six months from when employment has commenced and every 12 months. The Fair Work Ombudsman published a new version of the CEIS on 26 August 2024 at this link.
New anti-avoidance provisions
Under the new civil remedy provisions concerning casual employment, employers must not:
i. dismiss, or threaten to dismiss, an employee in order to engage them as a casual employee to do the same or substantially the same work; or
ii. make knowingly false statements to influence an employee to enter a casual employment contract, to perform the same or substantially the same work.
Contravening either of these provisions may attract a maximum penalty of 300 penalty units. As at the date of this article, one penalty unit is $330.
Please note that this article does not constitute legal advice. If you are seeking professional advice on any workplace law matter, you can make an enquiry with Janine Smith (Partner) or Wing Ho (Senior Associate) via Carroll & O’Dea Lawyers’ telephone hotline on 1800 059 278 or via our Contact Page.
[1] FWA, s 11.
[2] See Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, and Hollis v Vabu (2001) 207 CLR 21.
[3] FWA, s 15AB.
[4] FWA, s 15A.
[5] Ibid.
[6] See note 6 above.
[7] FWA, s 66AAC.
