Chapter 1Introduction

1.1The Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023 (bill) aims to close loopholes that undermine pay and conditions in the Commonwealth jurisdiction.[1]

1.2The bill is the result of the Senate dividing the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (original bill) into two bills.[2] The original bill passed both houses and received Royal Assent on 14 December 2023.

1.3This bill amends the Fair Work Act 2009 (FW Act) in relation to:

casual employment;

enabling multiple franchisees to access the single-enterprise stream;

transitioning from multi-enterprise agreements;

model terms;

intractable bargaining workplace determinations;

workplace delegates’ rights;

sham contracting;

exemptions to waive entry requirements for suspected underpayment and increasing maximum penalties for underpayments;

compliance notices;

the definition of employment;

minimum standards and increased dispute resolution for employee-like workers performing digital platform work and regulated road transport industry contractors;

removal of a sunsetted clause relating to applications to vary modern awards;

the Fair Work (Registered Organisations) Act 2009 to remove provisions relating to the withdrawal of parts of amalgamated organisations; and

the Independent Contractors Act 2006 to provide that the Act applies to independent contractors performing work remunerated at an amount exceeding the new contractor high income threshold.[3]

Background to the bill

1.4According to the Department of Employment and Workplace Relations (department), the bill would implement the majority of the Government's remaining May 2022 election commitments, as well as outcomes of the September 2022 Jobs and Skills Summit.[4]

Consultation on the bill

1.5Consultations on the measures in the bill ran between February 2023 and June2023.[5] The consultation process included the publication of detailed consultation papers, a submissions process that attracted over 220 submissions from more than 160 organisations, and more than 75 meetings with stakeholders including business, industry and employee representatives, employers, academics, community groups, and governments.[6]

1.6Consultation was also undertaken with the National Workplace Relations Consultative Committee and its subcommittee, the Committee on Industrial Legislation, as well as state and territory ministers, and senior workplace relations and WHS officials.[7]

1.7In addition, the department engaged in targeted consultation with unions, peak employer bodies, employers and employer representatives, state and territory governments, organisations with subject matter expertise, and victim support groups in relation to the WHS measures in the bill.[8]

Overview of the bill

1.8The bill seeks to amend the Fair Work Act 2009 (FW Act) and related legislation to make a range of changes to workplace relations laws, including those relating to:

defining employment;

fair pay and security for employee-like workers;

allowing the Fair Work Commission (FWC) to set minimum standards to ensure the road transport industry is safe, sustainable and viable;

standing up for casual workers; and

giving workers the right to challenge unfair contractual terms.

Fair pay and security for employee-like workers

Definition of employment

1.9The bill would amend the FW Act to require that the ordinary meaning of 'employee' and 'employer' be determined by assessing the real substance, practical reality, and true nature of the working relationship, so as to consider the totality of the employment relationship.[9]

1.10The amendments seek to overcome recent decisions made by the High Court which held that in most cases, the question of whether a relationship is one of employment should be answered solely by reference to the terms of the contract.[10]

1.11This amendment would facilitate a return to the 'multi-factorial' test previously applied by courts and tribunals in characterising a relationship as one of employment or as principal and contractor.[11]

1.12The change would apply to most workers and businesses covered by the FWAct except those who are only national system employees/employers due to a state's referral of powers to the Commonwealth.[12] The change would also not affect the meaning of 'employer' and 'employee' under other laws that rely on the common law test.[13]

Provisions relating to regulated workers

Minimum standards for employee-like workers

1.13The bill would empower the FWC to set minimum standards in relation to employee-like workers performing digital platform work (otherwise known as the gig economy).[14]

1.14An employee-like worker would be defined as a person who performs work as an independent contractor under a services contract, performs digital platform work, and also has low-bargaining power, low authority over the performance of work, and/or is remunerated at or below the rate of employees performing comparable work.[15]

1.15Minimum standards would take the form of either mandatory Minimum Standards Orders or non-binding Minimum Standards Guidelines. Applications for minimum standards to be made, varied or revoked could be made by digital labour platforms, registered organisations representing digital labour platform workers or businesses, and the Minister for Employment and Workplace Relations. The FWC would also be able to set minimum standards on its own motion.[16]

1.16The bill would also allow registered organisations representing employee-like workers to make consent-based collective agreements with digital labour platforms.[17] Employee-like workers, who have performed regular work on a digital labour platform for at least six months, would also gain access to dispute resolution for unfair deactivation by a digital platform.[18] Deactivation would be unfair if it was for an invalid reason and if the process was inconsistent with the new Digital Labour Platform Deactivation Code.[19]

Minimum standards for the Road Transport Industry

1.17The bill would give the FWC the power to set minimum standards for the road transport industry,[20] which would apply to regulated road transport contractors (contractor drivers) and road transport businesses. Employee-like workers (as defined in the preceding section) would be excluded from coverage by any minimum standards established under this provision.[21]

1.18Road transport contractors would be defined as a person working in the road transport industry as an independent contractor under a contract for services, while road transport businesses receive services under a contract for services.[22]

1.19Minimum standards would take the form of either mandatory Minimum Standards Orders or non-binding Minimum Standards Guidelines. Applications for minimum standards could be made by road transport businesses, registered organisations representing road transport workers or businesses, or the Minister for Employment and Workplace Relations. The FWC would also be able to set minimum standards on its own motion.[23]

1.20For the road transport industry, the minimum standards would be made by a FWC Expert Panel for the Road Transport Industry and would be informed by advice from a Road Transport Advisory Group (RTAG).[24]RTAG members would be appointed by the Minister and would be drawn from registered organisations that represent contractor drivers and road transport businesses. The RTAG would also be able to draw on external expertise where needed via the formation of subcommittees.[25]

1.21Before making a road transport Minimum Standards Order, the FWC would need to undertake a notice of intent process, which would require it to publish a notice of its intention to make such an order, along with the draft order. A minimum standards order could not commence until two years after the notice of intent was published. Prior to making a final order, the FWC would be required to have consulted with the RTAG, as well as parties who would be covered by the order. The FWC would also need to have regard to the commercial realities of the road transport industry.[26]

1.22As with provisions relating to employee-like workers, the bill would allow registered organisations that represent road transport contractors to make consent-based collective agreements with road transport businesses. The bill would also introduce a new 'unfair termination' dispute resolution process for road transport contractors who have undertaken work for a road transport business under a service contract for at least 12 months.[27] Termination would be considered unfair if it was for an invalid reason and if the process was inconsistent with the new Road Transport Industry Termination Code.[28]

The right to challenge unfair contractual terms

1.23The bill would allow independent contractors earning below a specified income threshold to apply to the FWC for dispute resolution in relation to unfair terms in services contracts to which they are a party.[29] This provision is designed to provide a flexible, low-cost means of resolving disputes between independent contractors and principals.[30]

Changes to casual employment

1.24The bill would amend the definition of 'casual employee' in the FW Act to account for the reality of an employment relationship, not only the contractual description.[31] Under the proposed definition, an employee will be a casual employee where the relationship is characterised by the presence or absence of a firm advance commitment to continuing and indefinite work, and the employee is entitled to a casual loading or rate of pay for casual employees under a fair work instrument or contract of employment.[32]

1.25The bill sets out a number of factors to help employees and employers determine whether or not there is an advance commitment to continuing and indefinite work.[33] These include:

the ability and actual practice of offering and accepting work;

the reasonable likelihood of continuing work given the nature of the business;

whether similar roles are undertaken by part- or full-time employees; and

whether the employee has a regular pattern of work.[34]

1.26The bill would also amend the National Employment Standards (NES) to provide a new legislative pathway for casual employees to change their employment status to full-time or part-time employment if they have worked for six months, or 12 months for small business employers.[35] The pathway would be in addition to the existing casual conversion pathway in the FW Act, that requires employers (except small business employers) to consider the employment status of casual employees after 12 months.[36]

1.27The bill would repeal the existing provision dealing with dispute resolution for casual conversion and would replace it with a procedure to resolve disputes about the operation of both the proposed employee choice pathway and existing conversion pathway.[37]

Ensuring employees receive their entitlements

Increasing civil penalties

1.28The bill would increase the maximum civil penalties for standard civil breaches and serious contraventions of civil remedy provisions in the FW Act. The bill would also change the threshold for what could constitute a serious contravention, from one that is done knowingly and systematically, to one that is done either 'knowingly' or 'recklessly'.[38]

Sham contracting

1.29The bill would amend the defence that is currently available to an employer that misrepresents employment as an independent contracting arrangement, otherwise known as known as 'sham contracting'. The proposed amendment would provide that an employer would not be liable if, at the time of the misrepresentation, the employer reasonably believed that the contract of employment was instead a contract for services. This would change the current defence to sham contracting from a test of recklessness to one of reasonableness.[39]

Right of entry to investigate underpayments

1.30The bill would amend the right of entry provisions in the FW Act by allowing registered organisations to obtain an exemption certificate from the FWC to waive the minimum 24 hours' notice requirement for entry to a workplace if they reasonably suspect one or more of their members have been or are being underpaid.[40] The FWC would be required to issue an exemption certificate if it is satisfied that the suspected contravention involve underpayments of wages or other monetary entitlements of a member of the organisation whose industrial interests the organisation is entitled to represent and who work on the premises.[41]

Enhancing delegates' rights to regulated workers

1.31The bill would expand the new entitlements conferred in the original Closing Loopholes bill to workplace delegates to regulated workers. Under this bill a person is a regulated worker if they are:

an ‘employee-like worker’, being an independent contractor performing digital platform work under a services contract with one or more ‘employee-like’ characteristics; or

a ‘regulated road transport contractor’ performing work in the road transport industry under a services contract .[42]

Improving the operation of existing arrangements

Model terms

1.32The bill would transfer responsibility from the Minister for Employment and Workplace Relations to the FWC to replace the existing requirements for determining the model flexibility, consultation, and dispute resolution terms for enterprise agreements, as well as the model term for settling disputes arising under copied state instruments.[43] Under the proposed amendments, the FWC must consider to a range of matters when determining each model term, including best practice workplace relations and any views provided by stakeholders.[44]

Transitioning from multi-enterprise agreements

1.33The bill would provide employees and employers with options for transitioning from a single interest employer agreement or supported bargaining agreement to a single-enterprise agreement, prior to the agreement's nominal expiry date.[45]

1.34The bill would provide that where a single-enterprise agreement is made and an existing single interest employer agreement or supported bargaining agreement applies to at least one of the employees covered by the single enterprise agreement, the better off overall test (BOOT) would be modified, so that the BOOT is assessed against the agreement being replaced rather than the relevant modern award.[46]

Enabling multiple franchisees to access the single enterprise stream

1.35The bill would allow multiple franchisees of a common franchisor to voluntarily bargain together for a single-enterprise agreement, while retaining the ability to make a multiple-enterprise agreement.[47] The bill would amend the definition of 'related employers' in the FW Act to allow those franchisees to bargain as a single enterprise without requiring authorisation from the FWC.[48]

Repealing de-merger from registered organisations amalgamation provisions

1.36The bill would repeal amendments made by the Fair Work (Registered Organisations) Amendment (Withdrawal from Amalgamations) Act 2020, relating to the withdrawal of parts of amalgamated organisations (de-merger). The proposed amendments would restore the requirement for de-merger applications from such organisations to be made from two to five years after the amalgamations have occurred.[49]

Financial implications

1.37The Explanatory Memorandum (EM) states the financial impact of the original bill will be $18.9 million over four years to 2026–27. According to the EM, the Australian Government has committed $104.7 million over four years to 2026–27 to support implementation of the changes, with revenues of $85.8 million expected to be returned over the same timeframe via measures in the bill, including penalties.[50]

Consideration by other parliamentary committees

1.38When examining a bill, the committee considers any relevant comments published by the Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) and the Parliamentary Joint Committee on Human Rights (PJCHR).

1.39The Scrutiny of Bills Committee reported on the original bill in its Scrutiny Digests 13 and 16 of 2023; and Digest 1 of 2024. Ministerial responses were sought and received.[51]

1.40The PJCHR considered the bill in its Report 11 of 2023 and made no comment.[52]

1.41The committee notes the EM's statement on compatibility with human rights, which concludes that the bill is 'compatible with human rights because it promotes human rights because it promotes human rights, including civil, political, social, economic and labour rights'.[53] The statement also concludes that, to the extent the bill may limit human rights, those limits are 'reasonable, necessary and proportionate'.[54]

Conduct of the committee's inquiry

1.42On 7 September 2023, the Senate referred the provisions of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 to the committee for inquiry and report. The date for report was subsequently set at 1 February 2024.[55] On 7 December 2023 the Senate agreed to divide the Bill and ordered the committee’s inquiry to be confined to the Fair Work Legislation Amendment (Closing Loopholes No. 2) Bill 2023

1.43The committee advertised the inquiry on its website and invited submissions by 29 September 2023. The committee received 178 submissions, listed at Appendix1.

1.44The committee held seven public hearings:

Sydney – Tuesday, 3 October 2023;

Perth – Friday, 6 October 2023;

Melbourne – Tuesday, 10 October 2023;

Launceston – Wednesday, 11 October 2023;

Rockhampton – Tuesday, 31 October 2023;

Canberra – Friday, 10 November 2023; and

Canberra – Monday, 22 January 2024.

1.45A list of the witnesses who gave evidence at the hearings is included at Appendix 2.

1.46The committee thanks those organisations and individuals who contributed to this inquiry by preparing written submissions and giving evidence at the public hearings.

Footnotes

[1]Department of Employment and Workplace Relations (DEWR), Closing Loopholes (accessed 1February 2023).

[2]See the conduct of the inquiry section later in this chapter for more information.

[3]Parliament of Australia, Bills and Legislation, Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023 – Parliament of Australia(accessed 1 February 2024).

[4]DEWR, Submission 42, p. 7.

[5]DEWR, Workplace Reform Consultation (accessed 1 February 2023).

[6]DEWR, Submission 42, p. 7.

[7]DEWR, Submission 42, p. 7.

[8]DEWR, Submission 42, p. 7.

[9]Explanatory Memorandum, pp. 165–169.

[10]CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2. In these decisions, a majority of the High Court held that where a comprehensive written contract exists, the question of whether an individual is an employee of a person is to be determined solely with reference to the rights and obligations found in the terms of that contract.

[11]Explanatory Memorandum, p. 165.

[12]DEWR, Meaning of 'employee' and 'employer' in the Fair Work Act 2009(accessed 1 February 2023).

[13]DEWR, Submission 42, p. 26 and DEWR, Meaning of 'employee' and 'employer' in the Fair Work Act 2009 (accessed 1 February 2023).

[14]Explanatory Memorandum, pp. 170–254 and DEWR, Submission 42, pp. 26–27. Digital platform work is work that is performed, arranged or facilitated through, or by means of, a digital labour platform.

[15]DEWR, Submission 42, p. 27. The Fair Work Commission would only be able to set minimum standards for workers who satisfy the definition of an 'employee-like' worker and are also engaged on a digital platform.

[16]DEWR, Extend the powers of the Fair Work Commission to set minimum standards for 'employee-like' workers (accessed 1 February 2023) and DEWR, Submission 42, p. 28. Terms that may be included in a minimum standards order include payment terms, deductions, working time, record-keeping, insurance, consultation, representation, delegate's rights and cost recovery. Minimum standards orders must not include terms such as overtime rates, rostering arrangements, terms that would change the status of the workers covered, or terms that are primarily commercial in nature that do not affect workers' terms and conditions of engagement, and work health and safety matters that are dealt with by other laws.

[17]DEWR, Submission 42, p. 28.

[18]Explanatory Memorandum, pp. 170–254 and DEWR, Extend the powers of the Fair Work Commission to set minimum standards for 'employee-like' workers (accessed 1 February 2024).

[19]DEWR, Submission 42, p. 29.

[20]DEWR, Allow the Fair Work Commission to set minimum standards to ensure the road transport industry is safe, sustainable and viable (accessed 1 February 2024).

[21]DEWR, Submission 42, p. 30.

[22]DEWR, Submission 42, p. 30. The road transport industry would be defined broadly, based on well-established definitions in a range of Acts, with a regulation making power allowing adjustments to ensure the definition remains relevant.

[23]DEWR, Allow the Fair Work Commission to set minimum standards to ensure the road transport industry is safe, sustainable and viable (accessed 1 February 2024).

[24]DEWR, Allow the Fair Work Commission to set minimum standards to ensure the road transport industry is safe, sustainable and viable(accessed 1 February 2024).

[25]DEWR, Submission 42, p. 31.

[26]DEWR, Submission 42, pp. 30 and 31. The parameters of a road transport minimum standards order would be similar to those for employee-like workers. However, in addition, road transport minimum orders would not deal with road transport matters that are dealt with under Heavy Vehicle National Law or another law.

[27]DEWR, Allow the Fair Work Commission to set minimum standards to ensure the road transport industry is safe, sustainable and viable (accessed 1 February 2024).

[28]DEWR, Submission 42, p. 32.

[29]Explanatory Memorandum, pp. 234–239. The amount of the contractor threshold will be set by regulation. Independent contractors who earn above the threshold will continue to have access to remedies for unfair or harsh contract terms under the Independent Contractors Act 2006.

[30]DEWR, Give workers the right to challenge unfair contractual terms (accessed 1 February 2024). Disputes would need to be about contract terms that would be considered workplace relations matters if contractors and principals were in employment relationships.

[31]DEWR, Stand up for casual workers (accessed 1 February 2024).

[32]Explanatory Memorandum, pp. 53–54.

[33]Explanatory Memorandum, pp. 55–56. The factors would include whether there is a mutual understanding or expectation between an employer and employee, whether the employee can elect to accept or reject work, the future availability of work, whether there are other employees performing the same work who are part-time or full-time employees and/or whether there is a regular pattern of work.

[34]DEWR, Stand up for casual workers (accessed 1 February 2024).

[35]Explanatory Memorandum, pp. 58–66.

[36]Explanatory Memorandum, p. 61.

[37]Explanatory Memorandum, pp. 66–70.

[38]Explanatory Memorandum, pp. 138–143.

[39]Explanatory Memorandum, pp. 132–133.

[40]Explanatory Memorandum, pp. 134–137.

[41]Explanatory Memorandum, pp. 136–137.

[42]Explanatory Memorandum, pp. 124.

[43]Explanatory Memorandum, pp. 90–96.

[44]Explanatory Memorandum, pp. 90–91.

[45]Explanatory Memorandum, pp. 81–89.

[46]Explanatory Memorandum, pp. 81–89.

[47]Explanatory Memorandum, pp. 79–80.

[48]Explanatory Memorandum, pp. 79–80.

[49]Explanatory Memorandum, pp. 145–149.

[50]Explanatory Memorandum, p. 3.

[51]Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digests 13 and 16 of 2023 and 1 of 2024 available at Scrutiny Digest 2023, and Scrutiny Digest 2024 (all accessed 1 February 2024).

[52]Parliamentary Joint Committee on Human Rights (PJCHR), Human Rights Scrutiny Report 11 of 2023, 18 October 2023, p. 3.

[53]Explanatory Memorandum, p. 48.

[54]Explanatory Memorandum, p. 48.

[55]Journals of the Senate, No. 68—7 September 2023, p. 1953.