Closing Loopholes No. 2: what you need to know on the right to disconnect, casual employment and more

Casual employment

Definition of casual employment

A new definition of casual employee will consider the practical reality of the employment relationship, as opposed to merely the terms in the employment contract.

The new definition of casual employee is as follows:

• the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and
• the employee is entitled under a fair work instrument or contract of employment to a casual loading or specific rate of pay for casuals.

Indicia for assessing whether there is a firm advance commitment includes:

• consideration of the real substance, practical reality and true nature of the employment relationship, noting that a firm advance commitment can be in the form of a contract, or a mutual understanding or expectation not rising to the level of a contract term (and can be inferred from conduct);
• factors which indicate the presence of a firm advance commitment include:
  • inability of the employer to elect to offer, or not offer, work or inability of the employee to elect to accept or reject work;
  • the reasonable likelihood of future availability of continuing work, given the nature of the business;
  • whether there are full or part time employees performing the same kind of work; and
  • whether the employee has a regular pattern of work (even if it fluctuates or contains variation over time, eg. for illness, injury or recreation).

Exception for academic university staff

The Act removes the ban on employees being both casuals and under a fixed-term contracting arrangement, but retains an exception for academic university staff. Under this exception, universities will not be able to have casual academic teaching staff engaged on contracts that have an expiry or end date. Academic university staff may still be classified as either casuals subject to the casual conversion provisions, or as fixed term employees subject to the fixed term contract limitations.

The NES has been amended to provide a new pathway for casuals to choose to change their employment status from casual to permanent if they have been employed for 6 months (or 12 months in the case of a small business), rather than 12 months as previously required by the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth). The relevant disputes process has been updated accordingly.

Specified event

To avoid concerns regarding the uncertainty of casual conversion, the Act states that there must be a "specified event" which clearly delineates the casual employee's transition to another form of employment. A specified event involves:

• the employee's employment status is changed to full-time or part-time employment in accordance with the casual conversion provisions in the FW Act;
• the employee's employment status is changed by order of the FWC pursuant to the updated arbitration powers;
• the employee's employment status is changed to full-time or part-time employment under the terms of a fair work instrument that applies to the employee; or
• the employee accepts an alternative offer of employment (other than as a casual employee) by the employer and commences work on that basis.

Casual Employment Information Statement (CEIS)

Whilst there is an existing requirement to provide a CEIS upon commencement of an employee's employment, the Act now includes an additional requirement for the employer to provide the CEIS as soon as practicable after the employee has been employed by the employer for a period of 12 months, and after each period of 12 months for which the employee is employed by the employer.

Employers who are not small businesses will also need to provide the CEIS at 6 months from when the employee commenced employment.

Employee choice about casual employment

The Act removes existing casual conversion provisions and replaces it with a similar but separate "employee choice" framework.

Casual employees may now give an employer written notification if they would like to change their employment status to full-time or part-time employment after 6 months' employment, or 12 months for small businesses.

Employers will be required to respond to written notification from casual employees within 21 days after the notification is given to the employer. Employers must comply with a range of form, content and notice requirements for a response to be properly provided. The Act provides that the employer may not accept the employee notification, if:

• the employee meets the definition of a casual employee;
• there are fair and reasonable operational ground for not accepting the notification; or
• accepting the notification would result in the employer not complying with recruitment or selection processes required by Commonwealth, State or Territory laws.

The new "employee choice" pathway differs to the previous process of casual conversion – now, it is up to the employee to initiate the shift to permanent employment, as opposed to the employer who was required to review their casual workforce and offer casual conversion where appropriate. Employees can also only now assert permanent employment after their job has already been "ongoing" – forming a stricter test than under the casual conversion provisions which only required casual employees to be working on a "regular basis" for six or 12 months.

Anti-avoidance framework

The Act introduces anti-avoidance provisions to ensure casual employees are not improperly engaged. This includes requirements that employers must not:

• dismiss, or threaten to dismiss, an individual who is an employee in order to engage that individual as a casual employee to perform the same, or substantially the same, work; and
• make a statement that the employers knows is false in order to persuade or influence the individual to enter into a contract for casual employment under which the individual will perform the same, or substantially the same, work for the employer.

Disputes

At a first instance, the Act requires that the parties to the dispute attempt to resolve the dispute at a workplace level. However, if the dispute cannot be resolved, the FWC has powers to resolve the dispute, including arbitration, as a last resort.

Small claims procedure

The Act seeks to expand upon the small claims jurisdiction by allowing casual employees to commence proceedings if the casual employee has a dispute about whether they were a casual employee when they commenced employment with their employer.

Commencement date

6 months after Royal Assent

The departure from the terms of the employment contract as the primary indicator of casual employment may afford employers less certainty when defining their relationship with employees.

Employers must actively assess the practical realities of the employment relationship to avoid improperly classifying employees.

With the removal of the casual conversion provisions and the introduction of the employee-led "employee choice" pathway, there are less stringent requirements on employers to review their workforce and proactively offer permanent employment. Instead, employers will only need to take action when they receive an "employee choice" notification.

Right to disconnect

The "right to disconnect" was a late addition to the Bill.

As passed, the right to disconnect will require that modern awards include a right to disconnect term (precise wording to be determined), providing for the exercise of an employee right to "refuse to monitor, read or respond to contact, or attempted contact, from an employer or third party outside the employee's working hours unless the refusal is unreasonable."

The FWC will issue determinations to vary modern awards already in operation to include this right to disconnect term.

The Bill also includes a general right to disconnect provision applicable to all employees in similar terms. This will act as a right, rather than a requirement, meaning employees are not prohibited from responding or connecting out of hours if they wish.

Unreasonable refusal

Similar to the criteria for reasonable additional hours already set out in the FW Act, whether a refusal to respond is "unreasonable" will be determined by a multi-factor test, including an assessment of:

• the reason for the contact (or attempted contact);
• the method of contact (having regard to the "level of disruption" the contact causes);
• the extent the employee is compensated to remain available or for working additional hours;
• the nature of the employee's role and their level of responsibility;
• the employee’s personal circumstances (including family or caring responsibilities); and
• whether the contact is required under a law of the Commonwealth, a State or Territory.

The right to disconnect will be a workplace right for the purposes of the general protections provisions. There will be no blanket prohibition on an employer contacting employees after-hours.

Disputes

The amendments also introduce a process for dealing with disputes about the right to disconnect. If a dispute does not first resolve at the workplace level, an application can be made for the FWC to deal with the dispute. The FWC is empowered to make orders to stop refusing contact or to stop taking certain actions (such as disciplining the employee for refusing contact).

If an application made to deal with a right to disconnect dispute includes more than one dispute, the FWC must also deal with those disputes.

Contravening an order

Contravention of such an order constitutes a civil penalty contravention.

The government has also introduced a new bill to prevent employers from facing criminal penalties, an apparent mistaken inclusion. 

Commencement date

Day after the end of the period of 6 months beginning on the day this Act receives Royal Assent

The amendments as introduced suggest there will be a substantial degree of discretion when assessing the "reasonableness" of a refusal. It may be appropriate to develop policy materials for managers (and other staff) that gives clear guidance on matters like:

• understanding "urgency";
• the difference between contact by phone calls or text vs emails; and
• maintaining an awareness of others" personal time, particularly parents and carers.

For senior and executive staff, employers may wish to undertake a review of their employment agreements, to ensure that an expectation for reasonable out of hours contact is set out, in a similar vein to the way "reasonable additional hours" would be.

For employers with offices in different time-zones, with employees who utilise flexible work arrangements or who operate in specific industries (like emergency services), further guidance will be essential. 

Gig economy – regulated road transport worker and digital labour platform worker protections

New protections for non-employee gig economy workers

The Act introduces new protections for "employee-like" workers (otherwise known as regulated workers). Regulated workers include "employee-like workers" namely regulated road transport and digital labour platform workers. The key changes are summarised below.

Minimum standards order

The Act empowers the FWC to establish minimum standards for employee-like workers or regulated road transport contractors through a Minimum Standards Order" (MSO). The FWC may make an MSO upon application by an eligible organisation, on its own initiative, or the Minister. Applications for MSOs are subject to certain consultation and content requirements, including that the application must specify the class of regulated workers to be covered, and whether the application is for an employee-like worker MSO or a road transport MSO.

The FWC is subject to stringent procedural and publication requirements in respect of MSO and must also consider a range of matters when making an MSO – requirements which vary depending on if the MSO is for an employee-like workers, or for road transport workers.

If the Workplace Relations Minister considers it in the public interest to do so, they are empowered defer or suspend the operation of an MSO or certain terms of the MSO (subject to certain limitations).

There are also similar provisions establishing an MSO system specific to road transport workers and employee-like (gig economy) workers.

Collective agreements

Collective agreements may now be made between a regulated business, specifically a digital labour platform operator or a road transport business, and an organisation.

A collective agreement may be made between a regulated business and an organisation entitled to represent the industrial interests of one or more employee-like workers, in respect of:

• the terms and conditions on which regulated workers covered by the collective agreement perform work; and
• how the collective agreement will operate.

Like enterprise agreements, the process of creating a collective agreement is extensively set out in the Act, which include:

• providing a consultation notice for a proposed collective agreement;
• making reasonable efforts to give notice to regulated workers;
• applying to the FWC to deal with a dispute if negotiating entities are unable to resolve a dispute about the making of the agreement;
• requesting that a negotiating entity sign a proposed collective agreement; and
• registration of the collective agreement by the FWC.

The Act also sets out the process for varying and terminating registered collective agreements.

Road transport workers

Road Transport Expert Panel and Road Transport Advisory Group: The Act establishes the Road Transport Advisory Group as an advisory body to the FWC in relation to matters that relate to the road transport industry. The Act also introduces an Expert Panel for the road transport industry and Road Transport Advisory Group to satisfy its key object of establishing an appropriate safety net of minimum standards for regulated road transport workers and employees in the road transport industry

Road Transport Industry Contractual Chain: Contractual chain refers to a chain or series of contracts or arrangements to perform road transport work. Whilst previous versions of the Bill conferred powers upon Parliament to make regulations relating to contractual chains within the road transport industry, the Act now permits the FWC to make road transport contractual chain orders or guidelines.

Digital platform work – unfair deactivation

Further protections for employee-like workers against unfair deactivation are established. These provisions aim to establish a framework for dealing with unfair deactivation and unfair termination that is quick, flexible and informal and addresses the needs of regulated businesses and workers, and provides appropriate remedies if employee-like workers are unfairly deactivated or terminated.

In considering whether a deactivation was unfair, the FWC will consider:

• whether there was a valid reason for the deactivation related to the person's capacity or conduct; and
• whether any relevant processes specified in the Digital Labour Platform Deactivation Code were followed (as made by the Minister by legislative instrument); and
• any other matters that the FWC considers relevant.

The FWC is empowered to make orders outlining the appropriate remedy for unfair deactivation or termination.

Commencement date

A single day to be fixed by Proclamation. However, if the provisions do not commence within the period of 6 months beginning on the day this Act receives the Royal Assent, they commence on the day after the end of that period.

Regulated businesses hiring road transport and digital labour platform workers should prepare for potential changes to minimum worker entitlements.

With digital labour platform workers being equipped with a new suite of protections against unfair termination and de-activation, businesses should ensure that terminations are supported by a valid reason, and the Digital Labour Platform Deactivation Code is followed.

Intractable bargaining workplace determinations

The Secure Jobs, Better Pay Act introduced an intractable bargaining scheme which aims at providing stronger powers for the FWC to assist in resolving bargaining disputes, including a simpler and faster pathway to arbitration.

The Closing Loopholes Act amends the intractable bargaining provisions in three substantive ways.

1. No less favourable test

   The Closing Loopholes Act inserts a new provision which, amongst other things, provides that a term of a workplace determination that is included to comply with subsection 270(3) (inclusion of terms that deal with a matter at issue), and that deals with a particular matter, "must not be less favourable" to employees and employee organisations who were their bargaining representatives than a term of the enterprise agreement applicable immediately before the determination is made (other than terms providing for wage increases).

   Ordinarily, when the FWC is asked to consider whether employees are "better off" under an enterprise agreement, it considers the proposed terms in an enterprise agreement on a global basis (namely, the better off overall test).

   However, these changes require the FWC to undertake a line-by-line comparison with the previous agreement and ensure that, for all unresolved matters, every term in the old agreement has a specific counterpart in the proposed workplace determination that is no less favourable to the affected employees and unions.

2. Changes to "agreed term"

   The Closing Loopholes Act also amends the meaning of "agreed term" to include any terms:

   • that the bargaining representatives agreed should be included in the enterprise agreement "at the time the application for an intractable bargaining declaration concerned was made" (whereas previously the test was to be applied after the end of the post-declaration bargaining period or the making of the intractable bargaining declaration);
   • any further term the bargaining representatives agree should be included in the agreement between the application and when the declaration is made; and
   • any further term the bargaining representatives agree should be included in the agreement between the declaration and end of any post declaration bargaining period.

   The effect of these changes removes the potential for either bargaining party to change their position because of an intractable bargaining application being made. Accordingly, bargaining parties may be reluctant to make any firm agreements during bargaining, except on an "in principle" basis that reserves the opportunity of later rejection.

3. Retrospective application

These changes apply retrospectively, allowing the FWC to amend previous workplace determinations upon application by an employer, employee or employee organisation covered by the original determination.

Commencement date

The day after Royal Assent.

These changes carry substantial implications for employers engaged in bargaining, as they will restrict the FWC from arbitrating on provisions that might diminish existing conditions for employees and unions.

These changes therefore highlight the need to have a clear enterprise bargaining strategy will be essential to effectively navigate the nuances of the new intractable bargaining regime.

Sham contracting

Employers who have incorrectly classified an employee as an independent contractor may be penalised for sham contracting, unless they can use the amended sham contracting defence.

The new defence provides that an employer has not contravened the sham contracting provisions if, at the time of the representation, the employer reasonably believed the contract of employment was a contract for services.

Prior to this change, an employer needed to prove that they did not know and were not reckless as to whether the contract was an employment contract rather than a contract for services.

In determining whether the employer's belief was reasonable, regard will be had to:

• the size and nature of the employer's enterprise; and
• any other relevant matters. 

Commencement date

 The day after Royal Assent.

This amendment replaces the test that employers "did not know and were not reckless" to an objective test that they "reasonably believed" the contract of employment was a contract for services.

Businesses should review independent contractor arrangements to ensure they are accurately labelled and avoid the risk of sham contracting.

Workplace delegates' rights

The new entitlements for workplace delegates under the original Closing Loopholes bill will be extended to cover workplace delegates who are also "regulated workers". Workplace delegates will now be entitled to communicate with non-employee regulated workers who are current or prospective union members. Workplace delegates will also be entitled to paid time to attend training during normal working hours for the purposes of related training, except for employees of small businesses.

Note: A person is a regulated worker if they are an employee-like worker (being an independent contractor performing digital platform work under a services contract with one or more employee-like characteristics) or regulated road transport contractors.

Workplace delegates' extended protections prohibit the associated regulated business from:

• unreasonably failing or refusing to deal with the workplace delegate;
• knowingly or recklessly making a false or misleading representation about the workplace delegate; or
• unreasonably hindering, obstructing or preventing the exercise of the rights of the workplace delegate under the FW Act or a fair work instrument.

An employer who contravenes these new workplace delegate rights can be liable under the general protections provisions of the FW Act.

Commencement date

A single day to be fixed by Proclamation. However, if the provisions do not commence within the period of 6 months beginning on the day this Act receives the Royal Assent, they commence on the day after the end of that period.

Employers should note the expanded rights of workplace delegates and the lawful means of responding to these delegates. 

Unfair contract terms

A new framework for independent contractors to set aside perceived unfair contract terms in service contracts has been introduced. Under the framework, independent contractors with incomes below the "contractor high income threshold" (to be prescribed in regulations) can now apply to the FWC for orders to have all, or part, of a services contract set aside.

The amendment introduces another set of broad multi-factor criteria for determining whether a contract is unfair, not limited to the respective bargaining power of the parties, whether the term is deemed "reasonably necessary" to protect the legitimate interests of a party to the contract and whether the term imposes a harsh, unjust or unreasonable requirement on a party to the contract.

When dealing with these disputes, the FWC may choose to either conduct a private conference to deal with the matter or proceed to hearing, having regard to the view of the party and the most "effective and efficient" way to resolve the matter. After an order is made that terms of the contract are unfair, the FWC may only grant permission to appeal if there has been a serious error of fact or if it is in the public interest.

Independent contractors with incomes above the contractor high income threshold would continue be able to access the existing unfair contracts protections under the IC Act, ensuring that they would still have the right to an effective remedy.

Commencement Date

 6 months from the date of assent.

Entities utilising independent contracting arrangements, particularly those aware of outstanding disagreements about contract terms, should prepare for this new mechanism.

Historically, the Independent Contractors Act 2006 (Cth) has dealt with independent contractors, under which the Federal Court has jurisdiction to deal with disputes. The amendment now allows the FWC, a more accessible and less cost prohibitive jurisdiction, to deal with disputes about unfair terms in services contracts.

Exemptions to waive entry requirements for suspected underpayment and increasing maximum penalties for underpayments

Registered organisations can now obtain an exemption certificate from the FWC to waive the minimum 24 hours" notice requirement for entry to a workplace, if they reasonably suspect one or more of their members have been underpaid.

The FWC must issue an exemption notice if satisfied that the suspected contravention, or contraventions, involve the underpayment of wages, or other monetary entitlements, of a member of the organisation whose industrial interests the organisation is entitled to represent and who performs work on the premises. The FWC must also reasonably believe that advance notice of the entry given by an entry notice would hinder an effective investigation into the suspected contravention or contraventions.

In addition to the existing prohibition against refusing entry, employers must also not "otherwise act in an improper manner” when a permit holder exercises this right. 

Commencement Date

 1 July 2024.

Employers will need to review existing right of entry procedures and ensure employees overseeing rights of entry understand their obligations. 

Other technical matters 

Some other more technical amendments include:

• confirming the Federal Court or Federal Circuit and Family Court of Australia may make orders requiring a person to comply with a compliance notice issued by an inspector of the Fair Work Ombudsman;
• amending the Fair Work (Registered Organisations) Act 2009 (Cth) to remove provisions relating to the withdrawal of parts of amalgamated organisations; and
• removal of sunsetted clause relating to applications to vary, revoke or make modern awards.