Changes for employers are on the horizon: Key Amendments from the Closing Loopholes bill

The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (“Closing Loopholes No. 2 Act”) received Royal Assent on 26 February 2024, marking the second wave of reforms to the Fair Work Act 2009 (Cth) (“FW Act”) under the Albanese Government.

Employers should be aware that The Closing Loopholes No. 2 Act implements changes which include rights for casual workers, protections for independent contractors, the definition of employees and employers, civil penalty, and wage theft changes and, of course, the establishment of a statutory ‘right to disconnect’ outside of an employee’s working hours.

Test for Casual Employees (Effective from 26 August 2024)

Beginning 26 August 2024, the definition of ‘casual’ undergoes a transformation, pivoting to a new test that evaluates the absence of a firm commitment to ongoing and indefinite work. This shift aims to uncover the essence of the employment relationship, emphasizing the “real substance, practical reality, and true nature” of the connection.

Moreover, misrepresenting employment as casual when it is not will now be deemed a civil remedy offense. Hence, it is imperative for businesses to meticulously craft casual employment contracts and align procedures accordingly to unequivocally establish an employee’s status.

Sham Contracts (In force since 27 February 2024)

The FW Act now holds employers liable for misrepresenting an individual was/is under a “contract for services” instead of a “contract of employment” and this liability was subject to only specific defences. As of 27 February 2024, employers must now prove their “reasonable belief” regarding the nature of the contract. Factors such as the enterprise’s size, legal advice sought, and professional guidance will weigh into this determination by the Court.

Redefining “Employee” and “Employer” (Effective from 26 August 2024 or Earlier by Proclamation)

Building upon previous reforms, the Closing Loopholes No. 2 Act introduces a novel test to discern whether a worker qualifies as an employee or an independent contractor. This new test provides that in establishing whether a worker is an employee, the real substance, practical reality, and true nature of the relationship between employee and employer is to be considered. For example, this includes but is not limited to:

• the totality of the relationship;
• the terms of the contract governing the relationship; and
• other factors relating to the totality of the relationship, including, but not limited to, how the contract is performed in practice.

Strengthening Penalties for Wage Theft (Enforced since 27 February 2024)

Increased penalties now apply to selected civil remedy provisions including breaches of Modern Awards, Enterprise Agreements, National Employment Standards and non-compliance of payslip obligations and record keeping. Effective from 1 January 2025, intentional underpayment of employee entitlements escalates to a criminal offense.

To fortify your business against such risks, we recommend Employers to conduct regular audits and payroll system inspections as a top priority.  Should you believe that a mistake has occurred or there have been an error in payment or award compliance, please contact us and we can advise on the best next steps.

Right to Disconnect (Effective from 26 August 2024; Small Businesses from 26 August 2025)

Amidst the Senate deliberations, inserted at the eleventh hour, the ‘right to disconnect’ clause give employees the right to refrain from engaging in work-related communication beyond stipulated hours, unless deemed unreasonable. Employees will gain the freedom to refuse to monitor, read, or respond to contact (or attempted contact) from an employer outside of their working hours– this extends to the same contact of a third party.

If an employee’s refusal is unreasonable depends on a number of factors including but not limited to:

• the reason for contact/ attempted contact;
• how the contact/ attempted contact is made, and level of disruption the contact or attempted contact caused;
• the extent the employee is compensated (including non-monetary compensation) to prolong availability to perform work or be contacted, or for working additional hours outside of ordinary working hours;
• the nature of the employee’s role and the employee’s level of responsibility; and
• the employee’s personal circumstances.

It is incumbent upon employers to navigate these changes adeptly and an understanding of these amendments is critical. At Tisher Liner FC Law, our team stands ready to guide you through this evolving landscape.

Please contact Amy La Verde or Matisse Henderson for any queries.