Workplace reforms – What you need to know

Following on from the SHBC Annual Northwest Sydney Business Summit in September, Alana Rafter from Australia Business Lawyers and Advisors (ABLA) who participated in our panel discussion, has provided more detail on the key issues she shared information on and the questions raised by businesses in our regions. You can read about them in this article written by Alana Rafter Sydney Workplace Australian Business Lawyers & Advisors.

There were a large number of reforms announced on Monday 3rd September. Which do you think will have the biggest impact on business?

  • The Federal Government has introduced into Parliament a third tranche of landmark industrial relations reforms in the form of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill).
  • Two key impacts for business at large include the proposed:
    • insertion of a new definition of employment to overcome the High Court’s decisions in the CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; and
    • insertion of a new definition of casual employment.
  • Both reforms lessen the weight currently put on the written contract as determining the nature of the relationship and require consideration of surrounding factors to ascertain the “real substance, practical reality and true nature”.

 

Employment Definition

The Bill introduces a new definition of employment, whereby the ordinary meaning of employee and employer is determined by ascertaining the “real substance, practical reality and true nature” of the relationship between the individual and the person by having regard to the “totality of the relationship”. The terms of the contract continue to be a relevant factor, however, regard must also be had “to other factors relating to the totality of the relationship including, but not limited to, how the contract is performed in practice”.

Critically, this means that to determine whether a person is an employee or a contractor, it will no longer be sufficient to simply look to the terms of the written contract.

This new definition will have implications for businesses engaging independent contractors. In short, it has the effect of reviving the traditional “multifactorial” test for determining whether a person is an employee or independent contractor used to be applied.

 

Casual Employment

The Bill introduces a new definition of casual employment.

Under the Fair Work Act 2009 (Cth), the current definition of “casual employment” has the following features:

  1. it is tied to the offer of employment that is “made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person”;
  2. considerations for assessment of the characterisation of the relationship are strictly limited (for example, the ability to elect/reject work, described as casual);
  • makes clear that “a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work”; and
  • “the question of whether a person is a casual employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party.”

The ‘new definition’ provides that a casual employment relationship is characterised by:

  1. “an absence of a firm advance commitment to continuing and indefinite work”; and
  2. an entitlement to causal loading.

The assessment of whether the employment relationship is casual is informed by consideration of the following:

  • “the basis of the real substance, practical reality and true nature of the employment relationship”;
  • “on the basis that a firm advance commitment can be in the form of the contract of employment or, irrespective of 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 that contract”; and
  • having regard to the following factors which “which indicate the presence, rather than an absence, of such a commitment”:
    • whether there is an inability of the employer to elect to offer work or an inability of the employee to elect to accept or reject work;
    • whether it is reasonably likely that there will be future availability of continuing work in that enterprise of the kind usually performed by the employee;
    • whether permanent employees perform the same type of work; and
    • whether there is a regular pattern of work for the employee.

Significantly, this definition does not include a requirement for an agreed regular pattern of work.

The updated definition is more aligned to the common law position prior to the High Court’s WorkPac Pty Ltd v Rossato [2021] HCA 23 decision and is designed to overcome the High Court’s decision in that case. Fixed term and specified task contracts are excluded from the definition.

In short, the change means that parties will need to look beyond the written terms of a contract to determine whether an employee is truly a casual and must make an assessment having regard to the “real substance, practical reality and true nature of the employment relationship”. 

 

Changing the Status

The Bill also introduces what is in effect a new and alternative ‘casual conversion’ process, whereby employees engaged as casual employees remain so until the occurrence of a ‘specified event’.  The Bill provide an ability for casual employees to give written notification that they believe they no longer meet the requirements set out in the casual employment definition (for small business employees after 12 months, for other employees 6 months) and if they have not previously refused an offer to convert and meet other eligibility criteria.

 

More Information

For a further explanation about the impact of the proposed reforms for businesses that engage casual employees and contractors, here’s a link to an article prepared by Julian Arndt, Director and Luis Izzo, Managing Director of Australian Business Lawyers and Advisors (ABLA): IR Reforms – Contracts: Casuals and Contractors.

ABLA have also recently hosted a webcast, presented by Julian and Luis addressing the major reforms proposed by the Bill. It can be accessed via the following link: Third tranche IR reforms webcast.

In relation to the same job, same pay reforms, what are employers expected to do to be compliant when using labour hire or contractors?

The “Same Job, Same Pay” reforms have been re-branded “Closing the Labour hire loophole” – whereby parties will be able to apply for a “Regulated Labour Hire Arrangement Order” which would entitle employees performing work for a host corporation (e.g., through a labour hire or service arrangement) to the same pay as an enterprise agreement covered employee of the host corporation.

Broadly, this reform will mean that where an enterprise agreement covers a particular type of work at a host employer, orders can be made requiring employees provided to the host employer to be paid in accordance with the host employer’s enterprise agreement, even if they are not direct employees of the host employer or covered by the host employer’s enterprise agreement.

These orders will only require the employer providing labour to pay the applicable rate pay under the host employer’s enterprise agreement (described as “the protected rate”). Two obligations will arise to be compliant:

  1. the employer supplying will need pay the protected rate; and
  2. the host employer will need to provide information to assist.

This reform is aimed at ensuring that so-called ‘bargained rates’ cannot be undercut through the use of outsourced labour. It will not apply in the following circumstances:

  1. where the host employer is a small business (so less than 15); or
  2. where FWC is not satisfied it is fair and reasonable.

Other exemptions include:

  1. an exclusion on surge workforces – where the employee’s period of performing work will be less than 3 months; and
  2. an exclusion where a training arrangement applies to the employee in respect of the work performed for the host (i.e. the employee is a trainee).

Whilst the reforms appear to be primarily targeting traditional labour arrangements that supply labour, it noted that the reforms do not expressly exclude the possibility that a contract wholly or principally performed for the provision of services rather than the supply of labour could be subject to a ‘Regulated Labour Hire Arrangement Order’.

Under the current proposal, the Regulated Labour Hire Arrangement Order regime comes into force from 1 November 2024, although applications can be made from the day the legislation is passed.

Significant anti-avoidance provisions have been included in the Bill which apply retrospectively. This means penalties may apply in relation to conduct engaged in before the Bill commences. This is intended to prevent businesses from taking steps to avoid obligations under new Part 2-7A. Broadly, this means (should the Bill be passed) it will be unlawful to:

  1. enter into a scheme to avoid the operation of the new provisions;
  2. vary the engagement of workers (e.g., dismissing or hiring them) with the purpose of avoiding the operation of the new provisions;
  3. vary the engagement of labour hire firms with the purpose of avoiding the operation of the new provisions; and
  4. engage independent contractors with the purpose of avoiding the operation of the new provisions.

These provisions appear to be directed at ensuring that employees who are meant to be the beneficiaries of the ‘same job, same pay’ entitlement, do not lose their jobs because of the introduction of the new laws.

More Information

For a further explanation about the impact of the proposed reforms for businesses that provide or engage labour hire, here’s a link to an article prepared by Nigel Ward, CEO + Director and Caitlin Vincent, Associate Director at ABLA: IR Reforms – Pay and Unions.

The reforms have changed the definition of independent contractors under the Fair Work Act. So what do businesses using contractors need to do to ensure they don’t breach the new laws?

Overview

Building upon the earlier explanation of the proposed changes to the definition of employment, it is important for businesses to appreciate that a comprehensive written agreement will no longer be the end of the story. Hence, when drawing up agreements, factors such as control, flexibility, etc (factors related to the “totality of the relationship”) will be relevant if the true nature of the relationship is challenged. The new definition of employment is proposed to take place from date of Royal Assent.

The Bill also proposes significant expansion of the jurisdiction of the Fair Work Commission; a reform that will impact some businesses more than others.

 

Independent Contractor Regime

From 1 July 2024, there will be two regimes:

  1. the Independent Contractors Act 2006 (Cth) will continue to operate but only apply to independent contractors earning income above the “high income threshold” for contractors (a threshold that is yet to be defined); and
  2. the Fair Work Act will include a new regime that applies to contractors earning below the high-income threshold for contractors.

The Fair Work Commission will be able to conciliate, mediate and arbitrate on disputes relating to “unfair contract terms” in services contracts.  In determining whether a contract term is unfair, the Fair Work Commission may take into account:

  1. any significant imbalance between the rights and obligations of the parties;
  2. whether the contract term is reasonably necessary to protect the legitimate interests of a party to the contract;
  3. whether the contract term imposes a harsh, unjust or unreasonable requirement on a party to the contract;
  4. whether the services contract as a whole provides total remuneration for performing work less than that earned by employees or regulated workers under a Minimum Standards Order or Minimum Standards Guideline; and
  5. any other matter the Fair Work Commission considers relevant.

The remedies of the Fair Work Commission do not include compensation, but the Commission will be able to set aside, void, amend or vary services contracts of Contractors when they are deemed unfair. The unavailability of compensation is likely to deter over utilisation of this regime.

Expanded Jurisdiction

From 1 July 2024, two other groups traditionally classified as “independent contractor” now fall within the jurisdiction of the Fair Work Act:

  1. ‘Employee-like workers’ performing ‘services contracts’ for ‘digital labour platform operators’; and
  2. ‘Regulated Road Transport Contractors’ and ‘Regulated Road Transport Businesses’ who engage them.

For both forms of “regulated worker” the FWC will have three broad powers:

  1. to make Minimum Standards Orders;
  2. ratify collective agreements (which are reached by consent); and
  3. resolve disputes about “unfair terminations” (road transport) and “unfair deactivation” (digital platform work).

 

More Information

For a further explanation about the impact of the proposed reforms for businesses that operate in road transport, here’s a link to an article prepared by Julian Arndt, Director and Luis Izzo, Managing Director at ABLA: IR Reforms – Road Transport

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