‘Closing Loopholes’ Legislation: What does it mean for employers?

The Federal Government is moving to introduce legislation, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, designed to close ‘loopholes’ which are allegedly being exploited by some employers. Of the proposed legislation, the most significant element is the wage theft laws.

Wage theft laws

Currently, only Victoria and Queensland have criminalised wage theft laws that carry jail sentences, however with the proposed laws, all states and territories will have similar punishments in place. Specifically, employers that deliberately underpay employees can face up to 10 years in prison and fines of up to $7.8 million or three times the amount that was underpaid if that amount exceeds the maximum fine

Along with the announcement of the proposed legislation also came the announcement of extra funding for the Fair Work Ombudsman who will receive $32 million across the next the four years to implement wage theft reforms. This will likely continue the trend of increased surveillance across businesses, searching for underpayment and employment non-compliance.

Despite the increased severity of punishments for those business owners who intentionally underpay their employees, it was also announced that there will be an outlet for employers to self-report underpayments. This acknowledges the complexities in payroll compliance and gives employers the chance to report and repay underpayments in the event they identify them.

Other changes

There were a number of other changes included in the ‘Closing Loopholes’ Bill that are designed to create fair working conditions for all employees.

Casual workers

Creating clarity amongst the definition of a casual employees is another important element of the proposed legislation. Here it is found that a casual employee is “someone who has no firm advance commitment to continuing and indefinite work.” In addition to the definition, another change is that the assessment of if an employee is casual is not limited to the initial employment contract, meaning that whatever is happening within the workplace can be considered and updated over time. To determine whether or not there is no firm advance commitment there are a number of considerations employers and employees must review, including:

  • How is work offered and accepted?
  • Is it reasonable to assume that work will be continually offered?
  • Are part/full-time employees employed in similar roles?
  • Is there a regular pattern of work?

Furthermore, in addition to the existing casual conversion laws, which create additional opportunities for casual employees to transition to permanent work, there will be new, clear pathways for casuals to become permanent employee at their own initiative. Specifically, employees who have worked at least 6 months (12 months for small businesses) will be able to notify their employer that they no longer meet the definition of a casual employee, and believe they should be permanently employed.

Another significant impact of the proposed changes, is that it proposes the implementation of a new dispute resolution framework, which would essentially make it easier for employees to raise disputes regarding their employment status.

The amendments also propose to extend protections against ‘sham contracting’ to casual employment arrangements that would effectively punish employers who mischaracterise permanent employees as casual employees.

Sham contracting

Under the proposed changes, if an employer has misrepresented an employee as an independent contractor, the employer will need to show that they reasonably believed they were correct in their classification. However, the defence of an employer being ignorant, or making an unreasonable mistake has been removed, and employers will now be liable for their mistake.

Labour hire

Under the proposed legislation, employees of labour hire companies, would be entitled to seek an order that would prohibit labour hire providers to pay no less than what an employee would be entitled to be paid under the host business’ enterprise agreement if they were hired by the host direct. There are also provisions for alternative protected rates of pay, higher than what would have otherwise been payable to the employee, in the event that the rates proscribed by the enterprise agreement are deemed unreasonable.

Workplace health and safety

Ensuring safe working conditions was another aspect of the proposed legislation. These changes include:

  • Updates to the Asbestos Safety and Eradication Agency Act 2013 to prevent illness related to asbestos and silica.
  • Creating a faster claims process for first responders submitting worker’s compensation claims relating to PTSD.
  • Increasing penalties for industrial manslaughter, including penalties of up to $18 million and prison sentences of 25 years, and further provisions to ensure body corporates and the Commonwealth are kept accountable for breaches in their workplace health and safety responsibilities.
  • Including ‘subject to family and domestic violence’ to the list of protected attributes that employees cannot be discriminated against, listed within the Fair Work Act 2009.
  • Ensure workers have access to representation in matters addressing safety and compliance issues in the workplace.

How are small businesses impacted?

There are a number of differences between the way the laws impact small businesses, as opposed to other businesses.

Casual employment

Employees working in a small business will have to work at least 12 months before that can notify the employer that they believe they no longer meet the requirements of a casual worker and are seeking permanent employment. For other businesses, casual employees only are required to work 6 months.

Wage theft

The proposed wage theft laws are designed to target intentional underpayment, not mistakes or miscalculations. If a small business underpays its employees, they will not be criminally charged if they have been compliant with the new Voluntary Small Business Wage Compliance Code (yet to be published). That being said, it is still important to be vigilant in regard to compliance obligations, as the civil remedy provisions that apply to non-intentional contraventions are also set to increase under the proposed changes.

Enabling multiple franchisees to access the single-enterprise stream

The proposed legislation aims to strengthen the ability of franchisees and their employees to bargain for just and favourable conditions of work by permitting access to the single-enterprise agreement stream. This will impact franchisees, who own multiple sites, who would potentially be treated as a single enterprise, which impacts accessibility to enterprise bargaining.

Need more assistance?

Australian employment law is already complex without the changes and updates you have to factor in. ER Strategies specialises in assisting businesses become, and stay compliant with Australian employment law. If you think you could benefit from our help, get in contact with us on 1300 55 66 37, or click the button below.

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