You have no doubt been exposed to media coverage in the last week regarding further industrial relations reforms. Businesses who are most affected by the proposed laws are those who engage casuals and those who engage labour hire. The further proposed amendments are consistent with our federal government’s desire for secure jobs and better pay. While these are not in effect yet, we expect a version of these laws to be in force in the coming months. It is therefore essential that businesses review their employee engagements and ensure they are ready for the change.
On 4 September 2023, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) was read for the first time in the House of Representatives. This Bill proposes further amendment to the Fair Work Act 2009 which adds to the already significant amendments which have come into force this year, with a few more to still to come. Our prior articles have addressed these amendments which can be found here. Our Employment Team have reviewed the Bill and note that in its current form, the below are standout amendments.
For clarity, the Bill is only in its early stages of inception and is yet to be passed into law.
1.Amendments to the Definition of Casual Employment and Casual Conversion
Section 15A of the Fair Work Act (the Act) has been amended to update the Act’s attempt to define a casual relationship. The new definition takes an objective approach to the test of casual employment which is the presence or absence of a firm, advanced commitment to continuing and definite work. The practical criteria includes, among other things:
- whether there is a mutual understanding or expectation between the employer and employee as to the nature of the relationship,
- whether the employee can elect to accept or reject work,
- the future availability of continuing work, or
- whether there is a regular pattern of work.
Additional amendments involve the inclusion of a new notification procedure for casual employees who have completed six (6) months of service (or 12 months for small business employers) that allows them to be converted to a part-time or full-time employee. This will be in addition to the existing casual conversion regime.
The current test also extends the assessment to conduct engaged in by the parties after signing the contract which serves as a timely reminder to ensure that your contracts reflect the true nature of an employee’s engagement. What this means is that the employment contract stating that the employment is casual, is only part way there. The hours of work actually worked need to reflect the fact that the engagement is casual.
2.Labour Hire – A Broad Approach to Address Underpaid Labour Hire Employees and Subcontractors
The current proposal would permit both employees and organisations to apply to the Fair Work Commission for a labour hire arrangement order. The essence of the order would require labour hire providers to pay their employees no less than what that employee would receive under a host business if they were directly employed by that business. This proposal has already seen significant backlash from critics with concerns that the amendment would have adverse consequences for smaller businesses who could, in essence, be ordered to match wages of similar employees within a much larger organisation. We note that small business employers (less than 15 employees) are currently exempt along with engagements that would constitute training or short-term arrangements.
Any business which supplies labour to a client will be affected by these laws.
3.Penalties and Wage Theft – Criminal Liability
The Bill proposes to increase the penalty unit for breaches of the legislation which would see potential penalties increase to $93,900.00 and up to $939,000.00 for serious contraventions.
Another significant change is the introduction of criminal liability for wage theft. This current provision deems there to be wage theft where an employer is required to pay an employee a ‘required amount’ as stipulated by the Act or a Fair Work instrument (e.g. an Award or Enterprise Agreement) and the employer fails to pay that amount. The criteria is broken into four components with the first two bearing absolute liability (meaning knowledge or intention including recklessness or negligence is not required to be proven) with the latter two requiring intent (i.e. it must be proven that the conduct to not pay was intentional). Where wage theft is determined to have occurred, an employer could face up to 10 years in prison with fines spanning from 5000 penalty units ($1,565,000.00) up to a maximum of 25,000 penalty units ($7,825,000.00) or three times the amount that was underpaid if that amount exceeds the maximum fine.
We note that a penalty unit is indexed each financial year meaning that fines will increase every year with inflation.
Further Updates, Questions and Moving Forward
Whether or not this Bill receives Royal Assent is yet to be determined. However, it serves as a reminder to employers that now is a good time to review your employee engagements to ensure you are complying with any modern awards (if applicable) and that your contractual relationships truly reflect the practical nature of that employee engagement.
Given the scope of the Bill, we will address further proposed changes in an upcoming article which will include WHS amendments as well as some additional amendment to Enterprise bargaining.
If you have any questions or concerns in the meantime, please do not hesitate to contact our Employment Team on (02) 4927 2900.