New legislation a potential game-changer for contractors

You have probably heard about the Closing Loopholes industrial relations legislation being introduced by the Commonwealth Government. Depending on your choice of news source these changes will bring about the end of the civilised world or they will create a more level playing field for many workers.

The Closing Loopholes Bill (or to give it it’s full name, Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Cth)) is actually the third round of legislative changes from the Labour government to fulfil their pre-election Industrial Relations (IR) reform promises. I’ve written about some of the previous changes here. Like the others, this round includes a large number of reforms, but there’s a couple of high profile ones that are likely to have a significant impact on our sector.

Political nerds will note that the legislation hasn’t officially been passed yet, but we expect it to get through in its substantive form sometime soon.

These are the key things providers need to be aware of:

New definition of casual employee

The proposed legislation includes a new definition to differentiate between causal and permanent employees. Over the past few years, the way that a casual employee is defined has been determined by the type of employment offered, usually through the employment contact. The new definition expands that to include the ‘substance, practical reality and true nature of the employment relationship’.

This means the whole relationship between employer and employee is now assessed, not just the wording in their contract. I.e. if it looks like a duck, and sounds like a duck, and walks like a duck, it’s probably a duck even if it’s wearing a name badge saying “woof woof I’m a dog, honestly.”

The new definition for a casual employee is based on:

• There being “an absence of firm advanced commitment to continuing and indefinite work”.

• Whether there is a regular pattern of work.

• Whether the terms of the employment are agreed - this can be in an agreed contract, or a demonstrated mutual understanding between employer and employee.

• Whether the employee can accept or reject work offered by the employer.

• Whether there are other full time or part time employees doing the same kind of work.

There are also new rules around the conversation from casual employment to permanent employment, and new dispute resolution measures for dealing with disagreements about casual status.

As a provider, if you engage casual workers it’s worth reviewing your operations - not just the wording in your employment contracts - to see where these changes might affect you. The risk for some providers is that workers you considered as casual may be classified as not casual, meaning a whole raft of employee obligations on pay and conditions might apply. This change is proposed to take effect from 1 July 2024, which isn’t a whole lot of time if you engage a lot of casual employees.

Employee-like workers and digital labour platforms

The Labour government has had the gig economy in its sights for reform for a while. The changes create a new category of ‘employee-like worker.’  It aims to address some apps and platforms engaging workers as contractors when the relationship often looks more like an employer-employee relationship. Like the classification of casual employment, it’s holistic - so the whole work relationship will be looked at rather than just the contract. And the focus is on workers on platforms that have low bargaining power, low autonomy over their work and pay rates comparable to employees. This reform is a biggie, and it could potentially affect tens of thousands of participants. 

These changes add a new definition of ‘digital labour platform’ into the Fair Work Act, meaning “an online enabled application, website or system operated to arrange, allocate or facilitate the provision of labour services” where the focus is on independent contractors delivering those services. We know from the NDIS Commission Own Motion Inquiry into Platform Providers that more than 13,000 NDIS participants access supports from a digital platform provider.

We’re not just talking about Uber and Menulog here. The Minister for Industrial Relations said in his National Press Club address that apps used in the “care economy” (his words, not mine) will be covered. But things like Airtasker, Facebook groups, WhatsApp groups and other more informal networks, even if they use an app, won’t be covered by this change. One of the key determining features is that the platform has to process a payment in some way.

For workers found to genuinely be independent contractors, there is no change. If a worker is getting work through a digital platform but is deemed to actually be an employee-like worker, that doesn’t mean they automatically have to stop being a contractor and start being engaged as an employee. But the new definition does allow the Fair Work Commission to create Award-like minimum standards for workers who are defined as employee-like. These minimum standards can cover a wide range of things including rates and conditions. But these are just new powers for the Fair Work Commission, not mandated actions. So we don’t know what these changes will affect in practice.    

The Commonwealth government isn’t aiming to kill these platforms (a big part of the economy would collapse if that happened), but to level the playing field in situations where they believe some digital platforms use a blanket contractor approach to skirt around meeting some employee obligations. It’s fair to say that if I can stay in bed and have a bahn mi delivered to my door for only a few dollars, someone somewhere is getting the short end of the stick.

There are also new rules around ‘unfair deactivations’ from digital platforms. And the Fair Work Commission can hear contactor’s disputes about unfair contract terms.

Given the number of platform providers has increased significantly over recent years, we can expect to see some change in how these organisations operate.

Wage theft

There are now new criminal offences for employers who are found to be deliberately and knowingly underpaying their workers. These offences recognise that if an employee sticks their hand in the till and takes cash from the business, it’s considered a criminal offence - so why not the same for employers? This new offence is classified as ‘wage theft’, but genuine or inadvertent mistakes by employers will not be punished. There is also a voluntary code being developed for small businesses that would guarantee an organisation is not referred for prosecution if they take steps to ensure workers are paid correctly.

Though make no mistake, the Commonwealth government is flexing their muscle here. The penalties for wage theft are eye watering. For individuals - up to 10 years imprisonment and a fine of three times the underpayment amount; for body corporates - $1.5million, with stronger penalties. We know that the majority of employers are doing the right thing, but the takeaway is that intentionally underpaying workers is being taken very seriously. As a provider, you want to be developing systems to make sure that you are not underpaying workers.

The government is proposing this change comes into effect on 1 January 2025, but it may commence earlier.

Same job, same pay

As part of the legislation, there is also a reform that aims to stop an employer paying two people a different amount if they are doing substantially the same job, except one is employed directly and the other is engaged through a labour hire arrangement. This has been prompted by cases where employers have used labour hire arrangements to get around paying employee rates. There are some exceptions, like small businesses and short term labour hire arrangements.

It’s been a year of significant IR reform. These changes are part of a broader move to give more power to workers in a range of different employment situations. What is yet to be tested is: how will these changes affect NDIS service provision? We have huge diversity in how workers are engaged across the sector. To get the sector we want, we need flexibility in our IR landscape, as well as legislation that respects and values workers.

More details about the Closing Loopholes legislation is available here.

Please note: I'm not a lawyer, and this is not legal or industrial relations advice.