26 August 2024 saw the Fair Work Act’s introduction of1:
- The right to disconnect.
- New definitions of casuals and employees (therefore contractors too).
- New protections for ‘regulated workers’ and independent contractors.
These laws expand the Fair Work Commission’s jurisdiction to resolve disputes about the right to disconnect from work, casual-to-permanent disputes, unfair deactivation from digital platforms, regulated road transport workers, delegates’ rights and disputes about unfair contract terms for independent contractors. The Commission can now set minimum standards or guidelines for regulated workers and road transport contractual chains.
This is on top of last year’s Closing Loopholes laws that introduced pay secrecy provisions, restrictions on fixed term contracts, new protections for labour hire workers, workplace delegates and employees subjected to family and domestic violence.
Oh, and there’s the new industrial manslaughter law introduced in South Australia on 1 July 2024, and the WHS regulations introduced at Christmas time to manage the risk of psychological harm in the workplace.
As if the Commission didn’t have enough to do, it has commenced consultation on the insertion of a ‘working from home’ term in the clerical award (which is likely to be inserted into other modern awards).
Still to come, the government has restraint clauses in its sights. Treasury has established a Competition Taskforce on Post-Termination Worker Restraints which has consulted on its issues paper, ahead of predicted legislative restrictions on the right to restrain an employee’s competition against a former employer.
High quality, free resources are available on the websites of the Fair Work Commission, the Fair Work Ombudsman and SafeWork SA to explain workplace laws. But knowing what they say, and what they mean for your business are two different things.
What impact will these laws have on Australian businesses?
The right to disconnect
Well, with respect to the right to disconnect, even the Commission is saying it doesn’t really know. The Commission intends to decide a few disputes first so that it can produce better informed guidance material about how it’s going to apply these new laws when it is called upon to settle disputes. Small business employers can watch this play out from the sidelines as this law will not apply to them for another year yet.
What will amount to ‘reasonable’ refusal of contact by an employer is yet to be determined, and with a civil penalty regime in place, most employers will be hesitant to be the first to find out.
Casuals and contractors
The new definitions of casuals (that applies from 26 August only – not to existing casual staff) and employees, and the Commission’s new jurisdiction to resolve disputes about unfair terms for contractors, all reflect a very clear (and effective) governmental agenda to promote permanent employment.
Looking at the protections available today for casual employees and contractors2, can businesses really continue to say ‘I just want to engage them this way because it’s easier’? Again, with exposure to a civil penalty regime, getting compliance with Fair Work laws sorted out upfront – rather than waiting for someone to complain or lodge a dispute – is the way to go.
The Australian Tax Office has issued guidance on this front. In the wake of the High Court decision in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1, the ATO has published:
- Practical Compliance Guideline PCG 2023/2 Classifying workers as employees or independent contractors – ATO compliance approach.
- A draft update to Taxation Ruling TR 2023/4DC1 Income tax and superannuation guarantee: who is an employee?3
The 26 August Fair Work changes mean that we4 must once again take into account what happens after the employment contract is entered into to assess whether the worker is permanent, casual or a contractor. These laws require consideration of the real substance, practical reality and true nature of the employment relationship (rather than just the words in a contract). The Fair Work Ombudsman is calling this the ‘whole of relationship test’.
This is a return to the common law understanding of a worker, which is reflected in ATO guidance material. This guidance material provides examples of low risk and high risk working arrangements – that is, the risk of being pursued by the ATO for a worker’s superannuation entitlements, plus penalties. This summary does not do justice to many pages of guidance material, but very briefly, to engage a contractor:
- Have a comprehensive written agreement which demonstrates the parties’ understanding of the tax and super consequences of the arrangement.
- Act in accordance with the agreement (no significant deviation in performance).
- Obtain (and retain) reasonably arguable advice from a professional as to whether the worker is an employee or falls within the extended definition of ‘employee’ for superannuation purposes.
‘Regulated workers’ and independent contractors
From 26 February 20255 regulated workers earning less than $175,000 will be able to apply to the Commission for a remedy if they have been unfairly deactivated from a digital labour platform or unfairly terminated.
Again, to oversimplify, regulated workers are:
- ‘Employee-like’ contractors with low bargaining power performing digital platform work.
- Road transport contractors.
The Commission does not need to wait six months before it starts setting aside or varying unfair terms that would relate to workplace relations matters if an independent contractor were an employee. However, the services contracts need to be entered into on or after 26 August 2024.
The Commission will consider (amongst other things) relative bargaining power, imbalance in rights and obligations, the worker’s remuneration (compared to employees or minimum standards guidelines for regulated workers), and whether a harsh, unjust or unreasonable requirement is imposed.
Turbulent times ahead
These changes will affect big and small businesses alike. Right now, psychological wellbeing may be just as much an issue for owners of SMEs as it is for staff. At least an award scheme to govern working from home arrangements might provide clarity and reduce disputes (if employers have any fight left in them).
To be fair (after all, it’s called the Fair Work Act), employers have failed to heed the call to compliance with record-keeping laws, the National Employment Standards and industrial instruments since our civil penalty regime was enacted in 2009. The legislature has responded with force. Your standard maximum civil penalty for a company’s breach of an award provision now sits at $93,900 for a small business employer and $469,500 for others so:
- Have your remuneration and record-keeping practices regularly audited.
- Ensure you are engaging workers in a way that reflects the true nature of the working relationship. Do your compliance work up front.
- Email me regarding issues of particular interest and we can arrange seminars and further articles to suit.
May the Fair Work Act treat you fairly in the year ahead.
1 Amongst other things.
2 Earning less than $175,000, subject to ‘opt out’ provisions. Note the defence for sham contracting has been reduced from ‘not reckless’ to ‘reasonable’ belief’.
3 The comments period for the draft update has now closed so we can expect that to be finalised soon.
4 Constitutionally covered businesses; not sole traders, partnerships, other unincorporated entities and non-trading corporations in New South Wales, South Australia, Queensland, Victoria and Tasmania, as well as the Tasmanian local government and most of the Victorian state government.
5 Service of 6 months is required for eligibility