Changes in employment law continue apace, particularly targeting employees’ pay and terms and conditions at work. Paul Cott from Law in Lydiard Lawyers provides an important overview.

In late 2023, the Federal Labour Government brought into existence the ‘Closing the Loopholes’ Bill. The new laws were brought in with the stated aim of improving pay and conditions not only for employees, but also for other workers who, whilst not employees (such as ride share and food delivery workers), are in fact independent contractors, whom the Fair Work Act does not normally regulate or have the power to regulate.

The new laws are very extensive, and some people are saying they will affect almost every worker in Australia!

Wage theft

One of the critically important new changes is to make it a criminal offence for a business to underpay its employees. Currently, wage theft (defined as underpaying employees intentionally or recklessly) can only be classed as a crime in Victoria. The new laws will make wage theft a crime Australia wide!

It is important to realise that ‘merely’ underpaying employees is not wage theft per se. There has to be dishonesty in respect of the underpayment. So, inadvertent or mistaken underpayments are not captured by these laws. As to whether we will see many successful prosecutions in this area is another thing, given the necessity, as noted, of having to prove (beyond reasonable doubt – a notoriously difficult thing to do) the state of mind of business owners (and those allegedly ‘involved in the contravention’) where wage underpayments occur.

Conversely, the offence of wage theft can be constituted by omissions to do something, not just positive acts of ‘causing’ underpayments to occur.

The maximum penalty will now be up to 10 years jail time or a hefty fine in the millions of dollars range!

Employee/contractor distinction

An issue that has given rise to a lot of uncertainty, disputation and litigation has been whether a given worker is an employee of the business they work for or whether they are in fact running a business in their own right. There are many workers who fall somewhere in between the two definitions, and whose status is therefore uncertain.

The new laws seek to reverse the recently laid down test to be used (as stated by the High Court of Australia) which is where there is a written employment contract in place, it is the contract that determines the nature of the relationship and the rights and entitlements flowing therefrom, and generally speaking nothing else is relevant.

Now, the law will reverse back into the way the law used to determine which category a worker is, by looking again at the ‘multi factor test.’ The law will now require a series of factors to be considered, such as who deducts tax, who pays superannuation, who has the right to control the manner, method and location of doing the work, is there a uniform supplied and by whom, who provides the tools to do the work, can the worker work elsewhere, does the worker have an ABN, are they paid on invoice or is a pay slip provided. These and a multitude of factors will now have to be considered and weighed up to determine the nature of the relationship. No easy feat!

Casual employment

The law will now provide an actual written definition of what casual employment is. Much uncertainty has existed in this area in the past, and misconceptions have abounded. For example, a lot of casual workers believed (or believe) that once you become a ‘long-term casual’ you then ‘morph into’ a permanent employee. This is untrue. Now the law will actually define a casual worker as to be one whose work is not involving any firm commitment (from either side, but in particular employers) to ongoing and permanent work and one who is entitled to be paid a casual loading or casual rate of pay under a written employment agreement or other industrial instrument (such as an Enterprise Agreement). It is the actuality of the working relationship that will be key, not what the parties think it is, or call it.

The gig economy

The new laws here aim to strengthen the legal protections to workers who may have been exploited in the past where they are denied some of the rights and entitlements available to employees (such as annual lave and paid sick leave, among a raft of other benefits), but where such workers are in working relationships that look very much like employee relationships. Now, the Fair Work Commission will be able to regulate gig economy workers who are in fact independent contractors, where previously the Commission had no power to regulate such workers.

Such workers will now have access to the unfair dismissal protections (which have always only been available to employees) of the Fair Work Act, and they will also now have access to potential redress in respect of unfair contract terms in relation to their work. The Fair Work Commission will now have the power to deal with disputes about unfair contract terms in services contracts by making orders to set aside, vary, or amend all or part of the contract that is unfair and which, in an employment relationship, would relate to a ‘workplace relations matter’ (such as remuneration, allowances, leave entitlements, hours of work, disputes between employees and employers, or industrial action by employees or employers).

Labour hire – Closing Loopholes

The changes noted here are described as very significant by many. The changes are complex and professional advice should be sought in respect of any queries. In summary, the Fair Work Commission will have a new power to regulate and make orders concerning labour hire arrangements and the rates of pay provided in such arrangements. The Commission will also be given the power to arbitrate disputes in regard to rates of pay.

Industrial manslaughter

These changes include the introduction (for the first time in the country) of an Australia-wide industrial manslaughter offence. The new laws make it a crime for a worker to be killed at work where the death is caused by the action or inaction of an employer. There are a raft of significant financial penalties to be introduced, with the highest to be $15 million, with even the possibility of jail time for individuals!

Expanded right of unions to enter workplaces

Under the proposed changes in this area, the Fair Work Commission can grant exemption certificates to union officials who hold Federal right-of-entry permits, allowing them to enter workplaces and access relevant records where they suspect employee underpayments, without the usual 24 hours’ advance notice that is required for such union entries. These changes obviously strengthen and support the wage theft laws (and other underpayments laws in place), as mentioned above.

Conclusion

It is important to remember that the new laws discussed in this article are, at the time of writing, proposed laws. But experience and history will tell us that the substance of proposed new laws do generally get passed into actual law. Therefore, the lessons out of this article and the proposed changes should be considered by business owners who employ workers, whether those workers are employees or independent contractors.