Fair Work Closing Loopholes Unleashes Major Shake-up in 2024

February 28, 2024

Major changes to the law regulating employment and workplace relations enacted recently under the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 unleashes significant changes that are likely to adversely impact employers including in casual employment, a new right to disconnect, sham contracting arrangements, substantial increase in civil penalties, and more. Here is what you need to know.

Casual employment

The meaning of casual employee in the Fair Work Act 2009(Cth) is changing on August 26, 2024. Although the amended definition retains the current characterisation of casual employment as the absence of a firm advance commitment of the employee and employer to continuing and indefinite work, the new definition includes payment of the casual loading and requires consideration of the real substance, practical reality and true nature of the employment relationship, not just what is in the employment contract on day one. 

The ‘real substance, practical reality and true nature‘ requires consideration of indicia that may, unless carefully monitored, result in an employee no longer considered a casual as the employment relationship changes over time. This may catch employers off-guard, therefore careful drafting of employment contracts and any variations to the nature of the employment over time will need to be monitored. The considerations include whether the employee is free to accept or reject work, it is reasonably likely that there will be future availability of continuing work, the work is usually performed by full-time or part-time employees and whether there has been a regular pattern of work.

Right to disconnect

Commencing on August 26 2024 for non-small business employees and August 2025 for small businesses, eligible employees will now have the ‘right to disconnect’ outside of work hours. This means employees will have the right to refuse to monitor, read, or respond to contact (or attempted contact) from an employer or a third party outside their working hours, with the exception of if the refusal is unreasonable.

New rules will apply in determining whether an employee’s refusal is unreasonable or not. This includes the reason for the contact, the manner of contact, and the extent to which the employee is compensated.

Disputes may be referred to the Commission which will have power to issue any order it deems appropriate including but not limited to preventing the employee or employer from continuing to contact the individual/s. 

Right of Entry

From July 1st this year unions will have the authority to go to the Fair Work Commission for an ‘exemption certificate’ that will essentially bypass the current minimum 24-hour’ notice requirement for entry into a workplace in the case of suspected underpayment of wages or other monetary entitlements of the union’s members employed at the workplace.

The Fair Work Commission will issue the exemption certificate where they reasonably believe that advance notice of the entry given by an entry notice would result in the destruction or concealment of evidence.

Delegates Rights

From the 1st of July 2024, modern awards, new enterprise agreements, and workplace determinations are required to provide a term outlining the rights of workplace delegates. These terms will provide specific detail of those rights for each particular industry, organization, and enterprise. They must be more beneficial than the minimum rights under the FW Act. The requirement to include a delegates’ rights term will only apply to enterprise agreements put to a vote on or after 1 July 2024.

Civil Penalties Increase

From February 27 this year, an increase in the maximum civil penalties that courts may impose for certain contraventions applies. These penalties may also apply to companies that are not small business employers. In addition, an increase in the maximum civil penalty a court can order for not complying with a compliance notice will be imposed. Further, there will be a new threshold for what constitutes a serious contravention, which relates to how aware a person is of the risks associated with the circumstances.

For information on the penalties and criminalization of wage theft click here

Employment and Sham Arrangements

Commencing from the 26th of August 2024, new definitions of ‘employee’ and ‘employer’ will be inserted into the Fair Work Act.

In ascertaining whether a worker is an employee or an independent contractor, there must be consideration of the following:

  • real substance, practical reality, and true nature of the relationship
  • the whole relationship between the parties, including the terms of the contract and how the contract is performed in practice.

Exceptions will apply to the implementation of the definitions. For example, specific workers may elect to ‘opt out’ of becoming employees using a notification process where they can earn more than the contractor’s high-income threshold. Note: this threshold has yet to be set

Starting February 27th there will be changes to the defence to misrepresenting employment as an independent contractor arrangement, also known as ‘sham contracting’. 

The current test that an employer is unaware and did not act ‘recklessly’ will now change to a test of ‘reasonably believed’. This means the employer must have held a reasonable belief that there was a contract for services. Whether the belief can be considered reasonable will depend on the size and nature of the employer’s enterprise and any other relevant matters.

Further Information

As these changes will be rolling out during 2024 and beyond, employers should review their employment arrangements and make the necessary changes required by the new laws. Maguire Legal will publish over the next few months more detailed information to support employers in understanding their obligations as they evolve. Please contact us if you require further advice or support to manage these changes.

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