New provisions and key amendments 10 min read
The second tranche of the Federal Government's Closing Loopholes Bill has passed both Houses of Parliament and is now awaiting Royal Assent.
You can read the Bill here. You can also read our earlier September Insight and December Insight for further detail.
This Insight examines the new provisions and key amendments, and offers recommended steps employers should take to ensure they comply with the new laws when they commence operation.
Key takeaways
- The new employee 'right to disconnect' will take effect six months after the Act receives Royal Assent. At that time, an employee may refuse to respond to contact from their employer outside their working hours, unless such a refusal would be unreasonable.
- There will be a new definition of 'casual employee' based on 'the real substance, practical reality and true nature of the employment relationship', and taking into account a range of factors. Casual employees will also be able to change to permanent employment under a new 'employee choice' process, which will replace the existing provisions regarding employer offers and employee requests for casual conversion.
- The Bill will introduce other changes to the Fair Work Act, including regarding independent contractors, right of entry, maximum penalties, intractable bargaining workplace determinations, gig workers and road transport contractors.
New provisions: right to disconnect
After the Closing Loopholes Bill was divided into two tranches in December 2023, the Government agreed to a Greens amendment to the Bill that introduces a 'right to disconnect' into the Fair Work Act.
This is a general right that will be enjoyed by all employees (ie not only employees covered by industrial instruments). This right is subject to some qualifications but, unfortunately, the operation of the right has the potential to be marked by recurring disagreements about what will constitute a 'reasonable' refusal to respond to contact.
Employers can, and should, take some basic preparatory steps now, in advance of the right coming into force.
The right will permit an employee to refuse to respond to contact (or attempted contact) from their employer or third parties about work outside the employee's working hours, unless the employee's refusal to do so is unreasonable.
The new provisions explicitly state that the assessment of whether an employee's refusal to respond to contact will be unreasonable must take into account:
- the extent to which the employee is remunerated to remain available for work, or to perform work, outside the employee's ordinary working hours;
- the nature of the employee's role and the level of the employee's responsibility;
- the reason for the contact or attempted contact and how it is made;
- the level of disruption caused to the employee by the contact or attempted contact; and
- the employee's personal circumstances, including family or caring responsibilities.
The right will not apply where the contact with the employee is required under a law. In such circumstances, the employee cannot rely on the right to refuse to respond.
An employer will not automatically contravene the Fair Work Act by contacting or attempting to contact an employee outside their working hours. What employers will be prohibited from doing is dismissing (or taking other adverse action against) an employee who reasonably refuses to respond to out-of-hours contact. By bringing the 'right to disconnect' within the adverse action framework, the changes to the Fair Work Act add a further basis upon which an employee may allege unlawful adverse action; claims in which the employer bears the burden of proof.
The changes include the introduction of a formal dispute resolution framework for disputes about the operation of the 'right to disconnect' provisions, including disputes about whether an employee's refusal to respond to, or engage with, contact is unreasonable.
The first step in this framework will be a requirement that the employer and employee attempt to resolve the dispute within the workplace, through discussions.
If workplace-level discussions do not resolve the dispute, then either the employer or the employee can refer the dispute to the Fair Work Commission (Commission). The Commission will develop processes for dealing with disputes—we anticipate that disputes will follow the kind of two-stage, conciliation-arbitration approach that the Commission uses in anti-bullying applications.
The Commission will have the formal power to make different kinds of orders:
- If the employee has been unreasonable in refusing to respond to contact, the Commission can make an order to require the employee to stop refusing to respond.
- If the employee has been reasonable in refusing to contact, the Commission can:
- order the employer to stop requiring the employee to respond to that contact; or
- order the employer to not take disciplinary action against the employee on the basis of that reasonable refusal.
If the Commission makes an order, contravening the order risks a civil penalty of up to $18,780 for each contravention.
The new provisions will take effect six months after the Act receives Royal Assent.1
- Employers should carefully consider the kinds of out-of-hours contact with employees that are likely to occur in their business. Employers should use this exercise to determine what contact is essential or likely to be reasonable and carries an expectation that it will be responded to. Employers should then determine whether employees within the organisation are remunerated in a way that takes this expectation into account.
- Where an employee's remuneration has already been set in a way that takes into account an expectation that they remain available, from time to time, to be contacted and to perform work outside of normal business hours, assess whether the employment contract should be updated to make that expectation explicit.
- For employees in senior positions or who have roles where some out-of-hours contact and work is likely, this fact can be made explicit in relevant contracts and position descriptions.
- The Commission will be publishing guidelines on the operation of these provisions. Employers should review these guidelines carefully because they will provide an insight into how the Commission might distinguish between reasonable and unreasonable refusals to respond to contact.
Key amendments
The following provisions have been amended since the Bill was divided by the Senate in December 2023.
Casual employment
As we reported in our September Insight and December Insight, the Bill introduces a new definition of 'casual employee' and a new 'employee choice' process, whereby a casual employee may notify their employer that they believe they no longer meet the requirements of the new definition of casual employee and, if the employer accepts the notification, the employee's employment status changes to permanent employment.
Under previous versions of the Bill, the employee choice process operated concurrently with the existing provisions regarding employer offers and employee requests for casual conversion, there were limited grounds for an employer to reject an employee choice notification and the employer was required to give detailed reasons if they decided to reject an employee choice notification.
Under the Bill as passed:2
- For casual employees engaged on or after the new laws come into effect, the existing provisions regarding employer offers and employee requests for casual conversion will be removed, and the employees will be able to use the new employee choice process to change to permanent employment.
- For casual employees engaged before the new laws come into effect, the existing provisions regarding employer offers and employee requests for casual conversion will be preserved until six months after the new laws come into effect, at which point the existing provisions will be removed and the employees will be able to use the new employee choice process to change to permanent employment.
- An employer may reject an employee choice notification on fair and reasonable operational grounds.
- An employer must give the employee reasons if they decide to reject an employee choice notification, however those reasons need not be 'detailed'.
- Employers must give casual employees a Casual Employment Information Statement before they commence employment, six months after they commence employment, 12 months after they commence employment and every 12 months thereafter.3
The new laws regarding casual employees will come into effect six months after the Act receives Royal Assent.
In preparation for the changes, employers should:
- review the current use of casual employees to assess the likelihood they would be considered permanent employees under the new definition;
- review any template contracts used to engage casual employees and update to ensure they reflect the recent changes to the law; and
- consider whether internal process changes (including casual conversion processes) are required to comply with the new laws.
Right of entry for suspected underpayments
As we reported in our September Insight, the Bill introduces a new right for unions to enter workplaces without notice to investigate suspected contraventions of the Fair Work Act in respect of members. To exercise the right, unions must first obtain an exemption certificate from the Commission so that the usual 24-hour notice is not required.
Under the amended provision, the Commission must issue the exemption certificate if either:
- the Commission reasonably believes that giving an employer advance notice of the entry might result in the destruction, concealment or alteration of evidence of an underpayment; or
- the Commission is satisfied that the suspected contravention(s) involve the underpayment of a union member that the union is entitled to represent, and the Commission reasonably believes that advance notice of the entry would hinder an effective investigation into the suspected contravention(s).
The new right of entry for suspected underpayments provisions come into effect on 1 July 2024.
Increased maximum penalties
In our September Insight, we outlined the significant increases to the maximum civil penalties for contraventions of the Fair Work Act.
Under the Bill as passed, the five-fold increase to the maximum civil penalties that currently apply will:
- be limited to 'selected civil remedy provisions' only (including breaches of the National Employment Standards, modern awards and enterprise agreements); and
- will only apply to corporations that are not small business employers.
The changes to civil penalties will come into effect the day after the Act receives Royal Assent.
Independent contractors
Our September Insight described the Bill's proposal to amend the definition of 'employee' and 'employer' to make clear that the ordinary meaning is to be determined by ascertaining the 'real substance, practical reality and true nature of the relationship' between the individual and the company.
Under the Bill as passed, there is a new mechanism for an individual who would be considered an employee under the new definition to 'opt out' of being classified as an employee. To be eligible to opt out, the individual's earnings must exceed the 'contractor high income threshold'. Currently, there is no detail about the amount of the contractor high income threshold, which will be prescribed by the Fair Work Regulations 2009 (Cth) at a later date.
The opt out mechanism may be exercised by either an individual or the employer of the individual by providing a written opt out notice and a statement of earnings to the other. An individual can revoke an opt out notice, although each individual may only give one opt out notice in respect of a particular relationship.
The new definition of employment will come into effect six months after the Act receives Royal Assent, unless by earlier proclamation.
In preparation for the changes, employers should:
- review the current use of independent contractors to assess the likelihood that contractors would be considered employees under the new definition;
- review arrangements for the engagement of highly paid independent contractors and consider whether it would be appropriate to agree with these contractors should they exercise the opt out mechanism; and
- review any template contracts used to engage independent contractors and consider whether amendments should be made to those templates to reflect the changes to the law.
Gig workers and road transport contractors
As reported in our September Insight, the Bill introduces provisions to empower the Commission to set minimum standards for road transport contractors and 'employee-like' digital platform workers in the gig economy.
The Bill as passed amends the framework for regulating these sectors that was proposed in the version of the Bill after it was split in December 2023, including by:
- introducing a comprehensive framework to enable the Commission to make 'contractual chain orders' that will apply to businesses along the supply chain in the road transport industry; and
- introducing a requirement that the Commission be satisfied before approving any collective agreement to cover 'employee-like' gig economy workers or road transport workers that the agreement is not contrary to the public interest.
These provisions will come into effect six months after the Act receives Royal Assent, unless by earlier proclamation.
Employers should undertake a mapping exercise to determine whether any parts of their workforce might be impacted by these changes (including mapping across supply chains if applicable) and then develop appropriate strategies to manage these changes in light of this work.
No substantive changes
The remaining key provisions have been passed with no substantive amendments since the Bill was divided into two tranches in December 2023. Further details about these amendments are set out in our September Insight and December Insight.
When will the new provisions take effect?
The commencement dates for each of the following key provisions are set out in the table below.
| Provision | Commencement date |
|
Franchisees can collectively bargain for enterprise agreements |
The day after the Act receives Royal Assent. |
| Transitioning from multi-enterprise agreements to single-enterprise agreements | The day after the Act receives Royal Assent. |
| New model terms | 12 months after the Act receives Royal Assent, unless by earlier proclamation. |
| Intractable bargaining workplace determinations | The day after the Act receives Royal Assent. |
| Workplace delegates' rights | Six months after the Act receives Royal Assent, unless by earlier proclamation. |
| Defence to sham contracting arrangements | The day after the Act receives Royal Assent. |
Footnotes
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Small business employers and employees (as defined by the Fair Work Act) will have 12 months before the new provisions apply to them.
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Different transitional periods apply for small business employers.
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Small business employers are only required to give casual employees a Casual Employment Information Statement before they commence employment and 12 months after they commence employment.