‘Closing Loopholes No. 2’ passed by Parliament

After agreeing to split its desired ‘Closing Loopholes’ legislation into separate parts to secure passage of the less controversial elements prior to Christmas 2023, the next instalment of the Government’s proposed IR reform has been successfully negotiated faster than expected, with the ‘Closing Loopholes No. 2’ Bill having passed both Houses of Parliament as of 12 February. The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (‘Closing Loopholes No. 2’) received Royal Assent 26 February 2024.

Closing Loopholes No. 2 is comprised of the more contentious components of the Albanese Government’s IR changes, including (but not limited to) casual employment, minimum standards for gig economy workers, sham contracting and, the newly highlighted ‘right to disconnect’, which has surprisingly attracted most of the media attention in recent weeks.

Casual employment

From 26 August 2024*, the existing casual employment definition (introduced by the Morrison Government in 2021) will be amended to provide that an employee will only be a casual employee of an employer, if:

A primary indicator for determining whether the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work includes assessment “on the basis of the real substance, practical reality and true nature of the employment relationship”. This sits in contrast to the current definition of casual employment, which holds an employee to be a casual employee “on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party”.

An employer’s obligations with respect to making offers of conversion to eligible casual employees will be phased-out by 26 February 2025 (26 August 2025 in the case of small business employers), while casual employees’ right to request conversion will be enhanced. Casual employees employed by a small business employer (less than 15 employees) retain the right to request conversion to permanent employment upon completion of 12 months’ employment, but casual employees of an employer that is not a small business will be entitled to raise a request for conversion after just six months’ employment (the current qualifier being 12 months’ employment), if the employee regards they no longer meet the definition of casual employment.

From 26 August 2024 onwards, all employers will be obliged to furnish new casual employees with a copy of the Casual Employment Information Statement both on commencement of employment (as is currently the case) and again, each time the casual employee achieves another 12 months of employment. Employers who are not small business employers will also be obliged to re-issue the Casual Employment Information Statement when a casual employee completes their first six months of employment.

Provisions inserted into the Fair Work Act 2009 by the Morrison Government to prevent an individual who was engaged and paid as a casual from ‘double dipping’ – i.e. seeking historical back payment of leave entitlements that would have accrued had their employment been defined as permanent, when they had instead been paid a casual loading – will be preserved, as will the ability of the Fair Work Commission to deal with disputes regarding casual conversion.

Right to Disconnect

Closing Loopholes No. 2 will also introduce a right for workers to disconnect after hours, derived from an amendment negotiated by Greens Senator, Barbara Pocock; a development that oddly attracted enormous interest on the eve of the legislation being passed, despite having previously escaped scrutiny. 

The amendment will require that all Modern Awards be varied by the Fair Work Commission to include a clause confirming an employee’s right to “refuse to monitor, read or respond to contact, or attempted contact” from their employer or third party “outside of the employee’s working hours unless the refusal is unreasonable”.

It will remain permissible for employers to contact employees outside of hours for the purposes of filling vacant shifts (e.g. due to unexpected absences for illness, etc) and/or where the employee is suitably compensated for such out-of-hours duty (e.g. on call allowances, overtime penalties and above-award arrangements, etc).

The Fair Work Commission will have the power to mediate, conciliate or arbitrate a dispute regarding an employee’s right to disconnect, either by way of an order that an employee stop unreasonably refusing contact or, to prevent an employer from taking disciplinary action against an employee who reasonably refuses to respond to out-of-hours contact.

The Government confirmed it would immediately seek to vary the brand-new legislation (which it has already done), to ensure that a breach of a right to disconnect order made by the FWC is made not a criminal offence, after the Coalition blocked Labor’s last-minute request for change.

Workplace Relations Minister, Tony Burke, accused the Coalition of “throwing a pathetic tantrum in the Senate” and commented that it was “difficult to imagine a situation where criminal penalties would ever be appropriate”. Minister Burke was at least satisfied the criminal offence penalty could successfully be removed before it could be inappropriately applied, acknowledging the right to disconnect changes do not come into force until 26 August 2024, or, in the case of a small business employer, August 2025.

Take a closer look at the ‘Right to Disconnect’ in our related post.

Sham contracting

Division 3 (Definitions relating to the meanings of employee, employer etc.) of the Fair Work Act 2009 (the Act) will be varied to include provisions for “determining the ordinary meanings of employee and employer” which has been designed as “a response to the decisions of the High Court of Australia in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2”.

In contrast to the aforementioned decisions of the High Court which favour the view that the terms of a written contract prevail to determine whether an individual has been engaged as a contractor or employee, the new definition inserted into the Act will require the “totality of the relationship” be considered, including “how the contract is performed in practice” (not just the terms of the contract governing the relationship) to ascertain whether an individual is an employee, as opposed to independent contractor.

This refined definition will have a direct bearing on the Fair Work jurisdiction but will not necessarily impact contractor/employee tests applied by the Australian Taxation Office for tax and superannuation matters, or any other relevant authority which may be called upon to consider the contractor/employee question.

*NOTE: This date was originally referenced as 1 July 2024, reflecting the proposed operative date at the time the Bill passed the Senate. The revised operative date of 26 August 2024 was confirmed the day the legislation received Royal Assent (26 February 2024).