The Closing Loopholes No 2 legislation passed parliament on 12 February, after the House approved amendments made in the Senate. The Bill now awaits Assent and commencement of the changes.

Business NSW CEO Daniel Hunter said the changes would burden businesses with additional constraints and costs.

"Businesses are right to be concerned about the changes," he said.

"But what's important now is they comprehend them and understand the implications.

"Together with Australian Business Lawyers and Advisors, and the Australian Chamber of Commerce and Industry, we’re hosting events across NSW to ensure our members are equipped with the support and information needed to navigate these changes."

One of the most recent amendments to the Bill was a much-publicised “right to disconnect” for employees who are contacted by their employers outside normal work hours. These provisions, which have several conditions and exclusions, are discussed in detail below.

Stage 1 of the “closing loopholes” legislation was passed in December 2023. The changes made by stage 1 are explained here.

This article explains the main stage 2 changes passed this week.

The right to disconnect

These provisions were added to the legislation during its passage through Parliament. They entitle an employee to refuse to respond or to ignore communications by phone, email, or text message that arise outside their working hours, provided the refusal is reasonable.

An employee will be required to raise and attempt to resolve the matter within their workplace first, but if unsuccessful can apply to the Fair Work Commission for a “stop contact” order against the employer. The FWC may decline to issue an order if it regards the employee’s request as unreasonable in the circumstances.

The FWC will take the following factors into account to decide whether the refusal to respond to contact was unreasonable:

  • the reason(s) for contacting the employee
  • how the contact was made, and the level of disruption it caused the employee – eg impact on family/carer responsibilities
  • whether/how the employee was compensated (financially or otherwise)
  • whether the employee had to remain available for work after contact was made
  • the nature of the employee’s job and level of responsibility.

The right to disconnect will also become a workplace right for the purposes of the Act’s general protections/adverse action provisions. This means employees may be able to claim if they suffer a detriment due to their decision to “disconnect”. All modern awards will have to contain a “right to disconnect” clause.

These provisions will commence six months after the Assent date for businesses with 15 or more employees, and 18 months after for smaller businesses.

A further amendment to avoid employer fines coming very soon

As passed, it is possible that an employer could be fined under the Act’s penalty provisions for breaching a “stop contact” order. The government has undertaken to introduce a further amending Bill on 15 February 2024 to eliminate this provision.

New definition of employee and new definition of casual employment

A new definition of “employee” will be put in the Fair Work Act, putting greater emphasis on what actually happens on the job after agreeing to the initial arrangement, reversing some previous decisions that focused on what the parties originally intended the working relationship to be and what it was called.

In relation to casuals, an employee is “casual” if:

  • the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work; and
  • the employee IS entitled to a casual loading or a specific rate of pay for casual employees

Factors to consider include the “real substance, practical reality and true nature of the employment relationship”, as well as the expectations and mutual understanding of each party. It does NOT include the requirement of an agreed regular pattern of work.

Changes to “gig work” provisions via introducing “employee-like work” provisions T

The FWC will gain powers to set minimum standards in “employee-like” types of work, in particular jobs in the “gig economy” that are run via digital platforms. “Employee-like” will be determined with reference to whether the worker has low levels of control or authority over the work, bargaining power, and wages (the latter compared to what employees are paid). One of the amendments to the original Bill is that applicants will have to meet at least two of the latter criteria – a change that may mean independent contractors on platforms such as Airtasker and Hipages are less likely to become eligible (see also below). The government has used the analogy of providing a “ramp”, meaning that the workers will become entitled to some of the conditions applying to employees, but not all of them.

“Deactivation” of workers from access to a digital platform for allocating work will be regarded as “dismissal”, and employee-like workers will be able to challenge the fairness of deactivation in the FWC in similar ways that employees can claim unfair dismissal.

Minimum standards will need to take into account workers’ independence and flexible working arrangements, including which work tasks to accept or refuse, which businesses they can contract with, when and where they do the work, and how they do it.

Food-delivery apps, rideshare apps, and apps used in the care economy will be covered by the reforms, but not work derived from platforms such as Facebook, a WhatsApp group, or Airtasker that do not process payments to workers.

The FWC may set pay rates based on a shorter period than “minimum hourly rates”.

The changes will commence on whichever date is sooner – the proclamation date or six months after Assent.

Entitlement of casual employees to seek conversion to permanent employment

Employees in businesses of more than 15 employees will be able to apply for conversion to permanent employment after six months of casual employment, instead of waiting the current 12 months. They will be able to apply again after each subsequent six months. The 12-month qualifying period will continue for smaller businesses.

All employees who were casuals before the changes commence will be classified as casuals to begin with and must receive an updated Casual Employee Information Statement after the changes commence.

Employers will be able to refuse a request for conversion to permanent employment on “fair and reasonable operational grounds”, but will have to explain what those grounds are. For example, they could include having to make significant changes to the way work in the business is organised.

One amendment to the legislation is that employers will not be required to offer conversion to casual employees – it will be up to each employee to make a request.

Employers will have to provide casual employees with a Casual Employment Information Statement more often – before or at the time they start, and also after six months (excluding small business employers) and 12 months.

These provisions will commence six months after the date of Assent.

Union right of entry

The FWC’s power to waive the 24-hour notice period for union representatives to enter workplaces if there is suspicion of a breach of the Fair Work Act will be expanded to allow a waiver if the FWC believes there is a case of union member(s) being underpaid. 

Workers can challenge “unfair contract” provisions

A regulation will be introduced to provide workers under a “high income threshold” (to be set by the regulation, and presumably indexed each year) to challenge contract provisions in the FWC, which will have the power to vary or set aside contracts. Those above the threshold will continue to have access to the current provisions of the Independent Contractors Act 2006. 

Also, existing independent contractors already who earn more than the high income threshold will have the right to “opt out” of the employee/employer definition. They will also have a right of revocation.

These changes commence the day after Assent.

Other changes

Other changes passed in the No 2 Bill this week include the following:

  • allowing the FWC to set minimum standards for the road transport industry
  • changes to enterprise bargaining disputes, including an amendment from the original Bill that terms of an arbitrated bargaining outcome “must be not less favourable to each” employee and union covered by an existing agreement.

This arbitration change will significantly hamper an employer’s ability to ‘bargain-out’ of its agreements any term that prevents or hinders the efficient operation of their business unless the employer can secure these through cultural acceptance or is able to substantially buy out the terms. We anticipate unions being very reluctant to concede any changes given that they know that an arbitrated outcome cannot leave the union or employees in a lesser position compared to the pre-existing term. The same rules will also likely increase union appetite to proceed to arbitration on their own claims that might not have been agreed to by employers.

EXPERT GUIDANCE FOR BUSINESSES

Business NSW and Australian Business Lawyers and Advisors – together with the Australian Chamber of Commerce and Industry – will be providing businesses with a step-by-step guide through the new laws and how they will impact businesses.

There are 25 planned events across the state before June 30, with at least two events per region. Those events will include online live workshops as well as an on-demand series. These will all be accessible via our website.

Because the events are live, there will be a Q&A component where business owners can ask workplace law experts about the changes and how they will affect them.

Everyone who attends the workshops will also receive access to tools (including templated letters, explainer workbooks, and presentations) to further assist them.

"I also urge members to phone our workplace advice line if they need more information,” Mr Hunter said.

More analysis

Australian Business Lawyers & Advisors has published four reform updates on the changes. Read them here.