We have prepared a summary of the most significant changes arising from the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (‘Closing Loopholes No. 2 Act’), which was passed by the Federal Parliament on 12 February 2024 and received royal assent on 26 February 2024.The Closing Loopholes No. 2 Act amends the Fair Work Act 2009 (FW Act).

We consider that the legislative changes will impact all employers and principals across Australia and provide greater rights and flexibility for employees, independent contractors and gig workers. Unless expressed otherwise in our summary, the commencement date for the changes is six months after royal assent of the Bill (26 August 2024).

We encourage employers to contact our team for further guidance.

The ‘right to disconnect’

Closing Loopholes No. 2 Act amends the Fair Work Act 2009 to prevent employers from contacting employees (or attempting to contact) outside of their ordinary work hours. The amendment ensures employees are not required to monitor, read or respond to email, telephone calls or any other kinds of communication from an employer (or third party) outside their ordinary working hours, unless the employee’s refusal to do so is unreasonable. Whether the employee’s refusal is unreasonable will be determined by a number of factors including the reason for the contact; how the contact is made; the level of disruption caused by the contact; compensation received by the employee for remaining available to perform work during the period or for working any additional hours outside of their ordinary hours; the nature of the employee’s role and level of responsibility; and the employee’s personal circumstances (including family or caring responsibilities).

Employers must be aware that the amendments contain a formal dispute resolution process relating to the application of these provisions. If the dispute is not initially resolved between the parties at a workplace level (which is the first requirement), either the employee or employer can apply to the Fair Work Commission to deal with the dispute and the following types of orders can be made – the employer must cease contact with the employee outside of their ordinary hours; an employer must not take disciplinary action against an employee for refusing the contact; or an employee must stop refusing contact with the employer outside their ordinary hours. A contravention of an order attracts a civil penalty of up to $18,780 for each contravention.

For small businesses, the changes come into effect 18 months after royal assent.

Casual employment

There are significant changes to the definition of who is a casual employee. The new objective definition of casual employment provides that an employee will be a casual where the employment relationship is characterised by ‘an absence of a firm advance commitment to continuing and indefinite work’. The existence of a regular pattern of work does not of itself indicate a firm advance commitment to continuing and indefinite work and no single factor is determinative of this. A number of factors are to be considered in determining whether there is a firm advance commitment to continuing and indefinite work, including, the real substance, practical reality and true nature of the relationship; the terms of a contract; the ability for an employee to accept or reject work; and whether there are other permanent employees performing the same kind of work.

The avenues for casual conversion have also been amended and there is a new ‘employee choice’ notification process permitting casual employees to request to convert to permanent employment after a period of 6 months (or 12 months for an employee of a small business).

An employee’s request for conversion to permanent employment can be refused on fair and reasonable operational grounds. The Fair Work Commission will be permitted to arbitrate on whether an employer has reasonable grounds to refuse to make an offer or decline a request for casual conversion.

Gig workers and road transport contractors

The Fair Work Commission’s jurisdiction has been widely extended with the changes benefiting contractors operating in the gig economy and road transport industry, referred to as a ‘regulated worker’. Collective agreements will be able to be made between regulated workers and a digital labour platform or road transport business.

Significantly, the Fair Work Commission will be empowered to set minimum standards for road transport contractors and ‘employee-like workers’ in the gig economy. Employee-like workers perform work through a digital labour platform, such as a food delivery or ride share platform and road transport contractors include ride-booking drivers. In addition, orders can be made that include terms such as payment terms, deductions, record-keeping, consultation, and insurance. Both employee-like workers and regulated road transport contractors will be permitted to file claims for ‘unfair deactivation’ where they have been deactivated from the digital labour platform or ‘unfair termination’ if their services contract is terminated (and they meet the relevant pre-requisites). Further, for road transport workers, ‘road transport industry contractual chain orders can be made by the Fair Work Commission, deterring unfair contract terms being used and relied on that include unfair rate reviews and fuel levy clauses. Although the changes are set to come into effect 6 months after royal assent, they can be introduced earlier by proclamation.

Definition of employment and unfair contract terms

The intention of the amendments to define employment is to facilitate a return to the ‘multi-factorial’ test previously applied by courts and tribunals in characterising a relationship as one of employment or of principal and contractor. The definition will require consideration of the ‘real substance’, ‘practical reality’ and ‘true nature of the relationship’, when determining whether a worker is an independent contractor or an employee. Therefore, an assessment will require examination of the totality of the relationship between the parties. This will include not only the terms of the contract governing the relationship but also the manner of performance of the contract, to characterise a relationship as one of employment or one of principal and independent contractor.

Another new addition provides independent contractors who earn over the new contractor high income threshold the right to issue an ‘opt out’ notice (to the principal/potential deemed employer) electing that the new employee definition will not apply to them in respect of that relationship. In effect, this will preserve their status as an independent contractor.

In addition, the Fair Work Commission will be permitted to deal with disputes about unfair terms in services contracts to which an independent contractor is a party, and they may order that a contract be set aside. An unfair contract term may include remuneration that is less than an employee would be paid for performing the same work, restraints on the contractor or unreasonable working hours. The changes are set to come into effect 6 months after royal assent, however, they can be introduced earlier by proclamation.

Right of entry for underpayments

The right of entry scheme for entry permit holders such as union officials will include a provision to waive the 24 hour-notice period by applying to the Fair Work Commission for an ‘exemption certificate’, if the entry into the workplace concerns the underpayment of wages or other monetary entitlements of its members. This change has been implemented with a view to preventing the possibility of destruction, concealment or alternation of relevant documents and records. It is important to note that the Fair Work Commission must reasonably believe that the advance notice of the entry given by an entry notice might result in the destruction or concealment of evidence and is satisfied that alteration of relevant evidence would hinder an effective investigation into the suspected contravention/s. These changes come into effect on 1 July 2024.

Intractable bargaining

The legislative changes also include amendments to bargaining for a new enterprise agreement. Commonly when parties are bargaining for a new enterprise agreement, disagreements can occur between bargaining representatives. Therefore, an ‘intractable bargaining determination’ is made by the Fair Work Commission that decides the terms and conditions of employment that could not be agreed on by the bargaining representatives.

Under the changes, when the Fair Work Commission makes an intractable bargaining determination, the terms to be included in the enterprise agreement must not be less favourable to employees than the terms of the current enterprise agreement which covers their employment, thereby removing the risk that employees’ terms and conditions are negatively impacted by an intractable bargaining determination. Employers, however, can be worse off following such a determination. These changes commenced on 27 February 2024.

When you require assistance with interpreting how these complex changes will affect your business, please contact one of our specialist employment lawyers who will help you to navigate these changes.