Closing Loopholes: Key changes effective 26 August 2024 & what they mean for you

The Fair Work Legislation Amendment (Closing Loopholes No.2) Act 2024 has introduced significant changes that are already in effect, with more to come on 26 August 2024. These amendments have substantial implications for businesses across various industries. It’s crucial for employers to stay informed about these changes and understand how they may impact daily operations.

In this article, we delve into the upcoming amendments, offering a comprehensive overview of the changes on the horizon. By understanding these updates, businesses can better prepare for the transition and ensure compliance with the new legal requirements.

From 26 August, eligible employees will gain the ‘right to disconnect,’ allowing them to step away from work-related communications outside their regular working hours.

This will also be reflected in all Awards that affect non-small business employers. Included in the Award updates will be specific rules explaining how the right to disconnect will operate across different industries and jobs. Furthermore, the right to disconnect will be considered a workplace right and protected under general protection laws. For small business employers, this change will take effect from 26 August 2025.

What does this mean for Employers?

Employers will still have the ability to contact employees outside of normal working hours for specific reasons, however employees now have the right to refuse to monitor, read or respond to contact from employers or third parties outside their working hours, unless the refusal is unreasonable.

To determine whether a refusal is unreasonable, employers will need to consider a number of factors including the reason behind the contact, whether the employee is being remunerated for the contact, or are working additional hours outside their ordinary hours. The nature of the role’s responsibility and any personal circumstances should also be taken into consideration when determining reasonableness. Any dispute relating to an employee’s right to disconnect should in the first instance be attempted to be resolved at the workplace level however either party may utilise the service of the Fair Work Commission to help resolve the dispute.

A new ‘ordinary meaning’ of the terms employee and employer will be introduced into the Fair Work Act 2009. The new definition of ‘employee’ has been added to provide greater clarity in establishing whether a person is an employee or independent contractor.

What does this mean for Employers?

In determining whether an individual is an employee, employers must consider the real substance, practical reality and true nature of the working relationship as well as all parts of the working relationship between both parties.

This will depart from the previous test that focused on the terms of a contract. Under the new definition, some working relationships may be categorised differently and therefore different rights apply to those impacted. There will also be changes for independent contractors, such as minimum standards for employee-like workers and provisions around unfair contract terms.

This change also aims to clarify defences in cases of sham contracting. The previous requisite ‘recklessness’ test that had to be established for a defence against sham contracting has been replaced by a test of ‘reasonableness’. To defend a sham contracting claim, an employer must now prove that at the time the representation was made they reasonably believed the worker was engaged as a contractor.

Contractors will also now have the ability to apply to the Fair Work Commission where they believe there is an unfair contract term in their services contract. The Commission will have the power to decide if a service contract contains unfair terms and amend or vary any parts of the contract containing these. This remedy is only available where there is a ‘constitutional connection’ (such as performing work under a services contract for a constitutional corporation). The remedy will also be unavailable to contractors that earn above what will be the contractor high income threshold.

A new framework for minimum standards has also been set up to safeguard independent ‘employee like workers’ and contractors working on digital labour platforms and the road transport industry. To be considered for the purpose of these minimum standards, the person must be a party to a services contract, perform all (or a significant majority) of the work under the services contract and not perform any work under the services contract as an employee. These minimum standards also provide those covered with access to collective bargaining and representation by workplace delegates.

The minimum standards will allow the Fair Work Commission to implement orders and guidelines over payments, insurance and deductions. They can also implement road transport contractual orders and guidelines around payment times, fuel levies, rate reviews, termination and cost recovery. The Commission can also deal with disputes over unfair deactivation or termination.

Under these changes, a new definition of ‘casual employee’ will be added to the Fair Work Act 2009. Under this definition, an employee will only be casual where there is no firm advanced commitment to continuing and indefinite work, taking into consideration the real substance, practical reality and true nature of the employment relationship and where the employee is entitled to receive a casual loading or specific casual pay rate.

There are also changes to how casual conversion occurs. Casual employees can now notify their employer that they wish to convert to permanent employment where they have  been employed for at least 6 months (or 12 months if working for a small business employer) and believe they no longer meet the requirements of the new casual employee definition.

What does this mean for Employers?

With regard to determining the casual employment relationship, employers must consider:

• whether there is a firm advanced commitment to continuing and indefinite work;
• the real substance, practical reality and true nature of the employment relationship; and
• if the employee is entitled to receive a casual loading or specific casual pay rate.

Regarding casual conversion requests, employers must consult with the employee and provide an answer within 21 days of the employee providing notification of their request to convert.

Where the conversion is accepted, the employer must then provide the employee with information that stipulates:

• the new employment status (part-time or full-time)
• the employee’s new hours of work, and
• when the change will take effect

Employers may refuse a request for casual conversion where the employee still meets the definition of a casual or there are fair and reasonable grounds for not accepting the notification.

Employers must also now provide all casual employees with a Casual Employment Information Statement that outlines information about employment conditions. This will need to be provided to new employees before or as soon as possible after the start of their employment. Non-small businesses will also have to provide these to casuals at the 6 month and 12-month marks of employment and then on every subsequent 12 months of employment and small businesses 12 months after employment.

Employers must carefully review the changes introduced by the Fair Work Legislation Amendment (Closing Loopholes No.2) Act 2024 and determine if their operations need adjustments to remain compliant. Among these changes, the right to disconnect is expected to have the most significant impact on employers moving forward. Small business employers, in particular, should stay aware of the additional changes set to take effect in November 2024 and early 2025.

If you would like to know more about the changes taking effect on 26 August, please contact us and a Mapien Workplace Strategist will be in touch within 24 hours.