This Bills Digest replaces a preliminary Digest published on 6 September 2023.
Purpose of the Bill
The purpose of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) is to amend the Fair Work Act 2009 (FW Act) and related legislation to make changes to various elements of the workplace relations framework.
Structure of the Bill
The Bill is comprised of four schedules:
- Schedule 1 sets out the main amendments to the FW Act and related legislation. It contains 18 Parts.
- Schedule 2 deals with extending the functions of the Asbestos Safety and Eradication Agency to address silica related diseases.
- Schedule 3 introduces a rebuttable presumption that post-traumatic stress disorder (PTSD) suffered by specified first responders was contributed to, to a significant degree, by their employment.
- Schedule 4 introduces a new offence of industrial manslaughter in the Work Health and Safety Act 2011 (WHS Act).
Structure of this Bills Digest
Due to the limited time in which to consider the large and diverse range of measures contained in the Bill, this Bills Digest deals only with the measures in the Bill that:
- replace the existing definition of casual employee with a ‘fair and objective definition’ and introduce a new employee choice pathway for eligible casual employees to change to permanent employment, if they wish to do so
- amend the FW Act to insert an interpretive principle that would, in effect, reinstate the ‘multi-factorial’ test applied by courts and tribunals to determine if a worker is an employee or independent contractor prior to the High Court decisions in CFMMEU v Personnel Contracting Pty Ltd  HCA 1 and ZG Operations Australia Pty Ltd v Jamsek  HCA 2
- prevent enterprise agreement wages from being undercut by the use of labour hire workers who are paid less than those rates (‘same job, same pay’)
- introduce a new criminal offence for intentional wage theft and make associated increases to the maximum civil penalties for various civil offences, as well as adjust the threshold for what constitutes a serious contravention
- allow the Fair Work Commission (FWC) to set ‘fair minimum standards’ for ‘employee-like’ workers, including in the gig economy and non-employee road transport industry workers
- amend the Safety, Rehabilitation and Compensation Act 1988 (SRC Act) to introduce a rebuttable presumption that PTSD suffered by specified first responders was contributed to, to a significant degree, by their employment and
- introduce a new offence of industrial manslaughter in the WHS Act.
The matters which are not considered in this Bills Digest are set out in Appendix 1. Readers are referred to the Explanatory Memorandum for information about these measures.
As the Bill contains several discrete measures, background information (including any relevant consultation), stakeholder comments and commencement details are provided separately in relation to selected measures.
The Bill has been referred to the Senate Education and Employment Legislation Committee (the Committee) for inquiry and report by 1 February 2024. Details of the inquiry are at the inquiry homepage.
Senate Standing Committee for the Scrutiny of Bills
At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not yet commented on the Bill.
The Explanatory Memorandum (p. 3) notes:
- the measures in the Bill have a financial impact of $18.9 million over four years to 2026–27
- the Government has committed $104.7 million over four years to 2026–27 to support implementation of measures in the Bill and
- revenues of $85.8 million over four years to 2026–27 are expected to be returned through measures in the Bill, including penalties.
Regulatory Impact Statements for specific measures in the Bill set out the financial impact of these measures on businesses.
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.
Parliamentary Joint Committee on Human Rights
At the time of writing, the Parliamentary Joint Committee on Human Rights had not yet commented on the Bill.
Key issue #1: proposed definition of casual employment
Development of common law definition of casual employment
A long line of cases decided in Australian courts—going back to at least 1936—considered how to define casual employment. In summary, the case law provided that a casual employee was an employee who was employed to perform work:
- on an ‘as needs’ basis and
- without regularity to their pattern of work and
- without any guarantee that the employment relationship will be ongoing.
The above was to be determined, on a case-by-case basis, by reference to various factors that indicated the real substance, practical reality and true nature of the employment relationship and not solely by the description the parties gave to the relationship (for example, by the terms of a contract or by the terms of an enterprise agreement).
Common law v employer practices
However, over time a persistent divergence developed between:
- the long-established common law understanding of what constituted ‘casual employment’ and
- the industrial practices of employers in engaging and treating employees as casuals, including in circumstances where this conflicted with the common law definition of casual employment.
This arose because:
- it was common for modern awards, enterprise agreements and employers to define casual employees as those engaged and paid as casual employees and
- this contrasted with the common law definition of casual employment which looked at the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work. This was reckoned by reference to the actual conduct of the parties over time—not by reference either solely, or predominately, to the written contract entered into at the outset of the relationship.
Importantly, definitions in modern awards, enterprise agreements or employment contracts could not override the common law definition of casual employment. This meant that even though an employer engaged and paid an employee as a casual, this did not mean that they were, in fact, a casual employee. As noted by a leading legal academic prior to the subsequent insertion of the current definition of casual employment into the FW Act:
The problem, however, which is far from new but has been known about for many years, is that an employee may be treated by their employer as a casual, yet not actually be a casual as a matter of law.
Concerns about ‘double dipping’
This divergence raised concerns that as casual employees are paid loading rates to compensate for the National Employment Standards (NES) entitlements that are not available to them, then the application of the common law definition of ‘casual employee’ could result in ‘double dipping’: where an employee engaged and paid as a casual would be entitled to NES entitlements, such as annual leave.
Whilst not explored in detail in this Bills Digest, it appears that such outcomes were uncommon. This was because under the common law employers were, generally, able to offset any casual loadings paid in lieu of NES entitlements to employees who were engaged as casuals but who were, later, found to be in fact non-casual employees.
In order to address the problem, the Fair Work Amendment (Casual Loading Offset) Regulations 2018 were made, formalising the existing ability under the common law for employers to offset any loadings paid in lieu of NES entitlements to employees who were engaged as casuals but who were in fact non-casual employees.
In addition, further amendments were made to the FW Act made by the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (2021 Amendment Act) in relation to the definition of casual employment and casual conversion.
Current legislated definition
The 2021 Amending Act inserted a definition of casual employee into the FW Act for the first time, with effect from 27 March 2021. Currently section 15A of the FW Act provides that a casual employee is to be determined by reference to the terms of an employee’s employment contract, without consideration of the employment relationship in practice (for more details see pages 18 to 19 of the Bills Digest for the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021).
Critically, section 15A entrenches the primacy of contract law in characterising an employment relationship and the nature of the initial engagement of an employee over any substantive analysis of the employment relationship. Further, subsections 15A(3) and 15A(4) provide:
- a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work and
- the question of whether a person is a casual employee of an employer is to be assessed 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.
This overturned the common law at that time, namely the principle that an agreed pattern of ordinary hours of work is central in determining whether casual employment does not exist. The independent review of the changes made by the 2021 Amendment Act – including the insertion of the current definition of causal employment – noted:
While the Review has not considered primary evidence on revised employment practices, the Review considers that the statutory definition may generate an employer practice of engaging casuals under carefully drafted contracts that satisfy the statutory definition, but where the reality is that the parties know, or expect, that their subsequent conduct will be based on a commitment to, and acceptance of, continuing and indefinite work.
High Court decision in Rossato
The definition of a casual employee in section 15A of the FW Act came into effect after the filing of the appeal to the High Court in the Rossato case, but before the High Court had made its decision. Importantly, the new definition in section 15A of the FW Act did not apply to the Rossato case. This was because the earlier decision of the Full Federal Court which was the subject of the appeal to the High Court was made before section 15A commenced.
In Rossato, the High Court considered (and ultimately overturned) the common law definition of a casual employee that existed prior to the insertion of section 15A into the FW Act. In Rossato the High Court held that:
- a casual employee is one who has no firm advance commitment from the employer as to the duration of their employment or the days or hours they will work, and who provides no reciprocal commitment to the employer and
- written contractual arrangements that are subsequently adhered to are determinative of whether there is such a firm advance commitment.
In essence, the High Court held that the character of the employment relationship is established by the rights and obligations which constitute the relationship (for example, under an employment contract), rather than by reference to the subsequent conduct of the parties.
Definition of casual employee after Rossato
This had the effect of largely aligning the common law definition of casual employee with both the industrial practices noted above and the definition of casual employee in section 15A of the FW Act. That is, if an employee was engaged in writing as a casual employee and paid as such, then they were a casual employee. Subsequent conduct of the parties would not alter the nature of the employment relationship. As noted by one legal practitioner, in terms of the common law, the Rossato decision ‘entrenched the primacy of contract law in characterising work relationships, underpinned by enforceable promises rather than expectations or hopes’.
The consultation processes for the proposed changes to the definition of casual employment and new method for employees to change from casual to permanent employment included:
- The Senate Select Committee Inquiry into Job Security, which the Bill’s Regulatory Impact Statement (RIS) notes attracted 62 submissions that ‘specifically raised issues with casual employment’ and the resulting report, which made recommendations that dealt with casual employment, was ‘carefully reviewed’ by the Department
- the Review undertaken as required under the 2021 Amending Act, was comprised of:
- five ‘separate virtual consultation sessions with employment law academics, peak industry bodies, employee representatives, state and territory government representatives and Commonwealth entities’
- an in-person session held in Sydney and
- 13 written submissions from stakeholders and a further eight submissions responding to an online questionnaire.
In addition to the above, the RIS notes:
the Government has continually consulted with a broad range of stakeholders including union and employee representatives, employers and employer representatives, state and territory governments, community representatives and academics as part of the broader consultation process being undertaken to support the introduction of legislative reforms into the Australian Parliament in Spring 2023.
This included publishing information on the department’s website, inviting written submissions and holding in-confidence discussions to ‘help inform departmental advice to Government’. The RIS also notes that the Committee on Industrial Legislation (COIL), a subcommittee of the National Workplace Relations Consultative Council, met on 16 and 17 August 2023 to consider an exposure draft of the legislation to enact the reforms.
New definition of casual employee
Item 1 in Part 1 of Schedule 1 repeals and replaces section 15A of the FW Act, which contains the existing definition of casual employee. Under the new definition in proposed section 15A an employee is a casual employee only 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’ either a casual loading or a specific rate of pay for casual employees under an applicable industrial instrument (for example, a modern award or enterprise agreement) or under the terms of their employment contract.
Determining ‘an absence of a firm advance commitment to continuing and indefinite work’
The Bill sets out indicia that are used to determine an absence of a firm advance commitment to continuing and indefinite work, including the ‘real substance, practical reality and true nature of the employment relationship’ (proposed paragraph 15A(2)(a)). The Bill provides that a firm advance commitment may be in the form of:
- a mutually agreed term in a contract of employment or
- a mutual understanding or expectation between an employer and employee and
those can be inferred from the conduct of the employer and employee after entering into the employment and how the contract for employment is performed.
The Bill further provides that when determining the presence or absence of a firm advance commitment to continuing and indefinite work, all of the following factors must be considered (but do not all have to be satisfied for an employee to be considered as other than a casual employee):
- whether there is an inability of the employer to elect to offer work or an inability of the employee to elect to accept or reject work
- whether, having regard to the nature of the employer’s business, it is reasonably likely that continuing work of the kind performed by the employee will be available in future
- whether there are full-time or part-time employees performing the same kind of work that is usually performed by the employee and
- if the employee engages in a regular pattern of work (noting that a pattern of work will be regular even ‘if it is not absolutely uniform and includes some fluctuations and variations over time’).
Under the proposed definition, the practical reality and true nature of the relationship must be considered. This includes considering conduct that occurred after entering into the contract of employment and how the employment contract is performed. In effect:
- how an employment contract is written will not solely or predominantly determine the nature of the relationship between employers and workers and
- how an employment contract is performed in practice largely will.
For example, a firm advance commitment can be inferred by virtue of the conduct of the parties over a long period of time, such as consistent employment under rosters provided 12 months in advance. As such, the Bill codifies a definition of casual employee that largely reflects the common law definition as it stood before the enactment of the 2021 Amendment Act and the decision of the High Court in Rossato (with the exception of not imposing a requirement for ‘continuing and indefinite work' to be according to an agreed pattern of work).
Exemption: casuals engaged on fixed-term contracts
It is possible for an employer to engage an employee as a casual under a fixed-term contract. As the employment relationship ends upon expiry of a fixed-term contract, this would potentially point to an absence of a firm advance commitment to continuing and indefinite work.
Recent amendments to the FW Act that commence in December 2023 will limit the use of fixed term contracts generally (pp. 32–35), but those limitations will not apply to casual employees or to seasonal work, such as in the ski industry or horticulture (p. 33).
The Bill aims to prevent casual employment being used to undermine the limits on fixed term contracts. Proposed subsection 15A(4) of the FW Act provides that, generally, an employee is not a casual employee if they are engaged on a fixed term contract (whether or not the contract also includes a term that provides other circumstances in which the contract can be terminated earlier). According to the Explanatory Memorandum this means ‘generally, a casual employee cannot be engaged on a fixed term contract’.
It appears that the Bill will also prevent the use of fixed-term contracts being used to undermine the proposed definition of casual employee (by avoiding circumstances where a firm advance commitment to continuing and indefinite work arises or exists by the use of back-to-back fixed-term contracts).
Exemption: seasonal and shift-by-shift casuals
Whilst the Bill will limit fixed-term contracts being used to engage casual employees, proposed paragraph 15(4)(b) excludes fixed-term contracts that operate on the basis of a specified season or the completion of specified shifts (e.g. shift work). This means that casual employees can be engaged under a fixed-term contract for:
- the duration of a season (such as a fruit picking season) or
- on a shift-by-shift basis (for example as a labourer)
without the risk of a firm advance commitment to continuing and indefinite work arising.
Need for a specified event
As noted above, prior to the 2021 Amending Act which inserted a definition of casual employee, a divergence existed between the:
- employee being treated by their employer as a casual (that is, engaged and paid as a casual employee) and
- the employee not actually being a casual as a matter of law.
In particular, this divergence between the law and industrial practices of employers raised concerns about casual employment transforming into full-time or part-time employment at some (uncertain) point during the employment relationship. This created a degree of uncertainty about when such a transformation might be found to have occurred by a court or tribunal. The FW Act in its current form addresses that concern by giving primacy to the terms of an employment contract and the nature of the initial engagement of an employee over any substantive analysis of the employment relationship.
The Bill takes a different approach, by providing that an employee remains a casual employee until a specified event occurs. The Explanatory Memorandum notes that where an employee is ‘correctly classified as a casual employee on engagement’, then they will remain a casual employee until such time that a specified event has occurred. Proposed subsection 15(5) of the FW Act provides that a ‘specified event’ is one of the following:
- the employee’s employment status is changed or converted to full-time or part-time employment under:
- the casual conversion provisions of the FW Act
- an order of the FWC under the Bill’s new arbitration powers
- the terms of an industrial instrument such as a modern award or enterprise agreement or
- the employee accepts an alternative offer of employment by the employer (that is not casual employment) and commences work in this role.
When viewed in the context of the employee choice framework and proposed changes to the casual conversion regime (discussed below) this means casual employment cannot unexpectedly transform into full-time or part-time employment at some unspecified point during the employment relationship. Such a change only happens if a specified event occurs. Importantly, the effect of proposed section 66K of the FW Act is that where the a employment status of a casual employee changes to full-time or part-time, the change applies only after the specified event has occurred. This means that even where casual employment transforms into full-time or part-time employment, it does not do so retrospectively.
Methods for changing from casual to permanent employment
There will be two methods by which employees can seek to change their employment status from casual to permanent:
- a new employee choice process and
- the existing (but amended) casual conversion process.
Employee choice pathway
The Bill proposes a framework for employee-initiated changes to, or conversion of, casual employment designed to:
- be quick, flexible and informal
- address the needs of employers and employees and
- provide for the resolution of disputes to support employee choice about their employment status.
Item 6 in Part 1 of Schedule 1 inserts proposed Subdivision B—Employee choice about casual employment into Division 4A of Part 2-2 of the FW Act. New Subdivision B contains proposed sections 66AAB–66AAD.
A casual employee who believes that they are no longer a casual employee can give a written notification (employee choice notice) to their employer stating they would like to change their employment status to full-time or part-time employment.
A casual employee is eligible to give an employee choice notice only if they have been employed for at least six months at the time the notice is given (notice date) (or 12 months for small business employers).
A casual employee will not be eligible to give notice to their employer if any of the events listed in proposed paragraph 66AAB(d) have occurred in the six months before the notice date. These events include, but are not limited to:
- receiving a response from the employer not accepting a previous notification and
- the employee declining an offer for casual conversion made by their employer.
According to the Explanatory Memorandum, ‘this feature of the framework would protect employers against repeated attempts by a casual employee to change or convert their employment status within a six-month period’ (p. 60).
When can an employer refuse an employee choice notice?
The Bill provides limited grounds under which an employer can refuse to accept an employee choice notice, including where the employee still meets the proposed definition of casual employeeand also:
- accepting the employee choice notice would be impracticable because substantial changes to the employee’s terms and conditions would be reasonably necessary to ensure the employer does not contravene a term a fair work instrument that would apply to the employee as a full‑time or part-time employee (a substantial change is a change that significantly affects the way the employee would need to work) or
- accepting the notification would result in the employer not complying with a recruitment or selection process required by or under a law of the Commonwealth or a state or territory.
The Explanatory Memorandum gives the following example of where change of status may be impractical:
where the relevant fair work instrument would require minimum hours of engagement for part-time employment that are more than the employee is usually rostered to work as a casual employee of the employer.
Responding to an employee notice
An employer must respond, in writing, within 21 days after the employee choice notification is given by the employee either accepting or refusing the notice. However, prior to providing a formal response the employer must:
- consult with the employee about the employee choice notification and
- if they intend to accept the employee choice notification, consult with the employee about specified matters such as whether the employee is changing to full-time or part-time employment, the hours of work, and the day that the change takes effect.
If the employer does not accept employee choice notification, they are required to provide both detailed reasons for the refusal and a statement outlining:
- how the employee and employer can attempt to resolve the dispute (discussed below) and
- that if those attempts to resolve the dispute are unsuccessful, that the employee can apply to the FWC to resolve the dispute by arbitration and make appropriate orders (discussed below).
If the employer accepts an employee choice notification, they are required to provide a written response outlining whether the employee is changing to full-time or part-time employment, the hours of work, and the day that the change takes effect.
The day that the change takes effect must be either:
- the first day of the employee’s first full pay period that starts after the day the employer response is given or
- another day agreed to by the employee and employer.
Proposed section 66K of the FW Act provides that from that day, then they will be taken to be a full-time or part-time employee for all purposes, including under FW Act and the employee’s contract of employment.
Current casual conversion process
The FW Act includes, within the National Employment Standards (NES), a right for eligible casual employees to convert to permanent status. The right has two elements: mandatory employer offers of conversion and the right for casual employees to make a request for casual conversion.
Item 7 in Part 1 of Schedule 1 inserts a new heading being Subdivision C—Offers and requests for casual conversion into Division 4A of Part 2-2 of the FW Act. Items 8–15 amend the existing rules about casual conversion.
Employer offers of conversion
Existing subsection 66B(1) of the FW Act provides that an employer (other than a small business employer) must make a casual conversion offer in writing where:
- an employee has been employed for a period of 12 months and
- during at least the last six months of that period, the employee worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or part-time employee.
Grounds to refuse casual conversion
Importantly, a casual conversion offer is not required where there are reasonable grounds not to make the offer. This includes where it is known or foreseeable that:
- the employee’s position will cease to exist within 12 months (or the hours of work which the employee is required to perform will be significantly reduced in that period)
- there will be a significant change in the days or times of work (or both) which cannot be accommodated within the days or times the employee is available to work or
- making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a state or a territory.
Where an employer determines a casual conversion offer will not be made, the employee must be notified in writing and given reasons for the decision. Further, casual employees who have been employed for 12 months but do not meet the 6-month regularity requirement must also be given notice that they will not be made an offer of casual conversion, and why.
Where an employer is required to make a causal conversion offer, the employee must give a response accepting or declining the offer within 21 days.
Employee casual conversion requests
Casual employees can make a request for casual conversion where they have been employed for at least 12 months and have worked a regular pattern of hours during the previous six months on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or part-time employee. This request can be made provided that, in the six months prior to the employee’s request:
- an employer offer has not already been made and rejected
- the employer has not notified the employee that a conversion offer would not be made on reasonable grounds or
- the employer has not already rejected a conversion request.
The employer must give the employee a written response within 21 days of receiving the request for casual conversion, stating whether the request is granted or refused. The employer must not refuse the request unless the employee has been consulted with and there are reasonable grounds to reject the request. These grounds reflect those set out above in relation to where an offer of casual conversion is not required.
Current mechanism for resolving disputes about casual conversion
The FW Act currently provides a process for resolution of disputes between an employer and an employee in relation to the casual conversion provisions. In the first instance, the parties must attempt to resolve the dispute at the workplace level through discussion between the parties. If these discussions fail, then a party can refer the dispute to the FWC, which is required to deal with the dispute by any method it considers appropriate, including by mediation, conciliation, making a recommendation or expressing an opinion. The dispute can also be dealt with by binding arbitration, but only with the parties’ consent.
The existing dispute resolution provisions do not apply where a procedure is provided for under an employee’s contract, written agreement or applicable fair work instrument.
Interaction between existing casual conversion process and employee choice notices
The Bill addresses the interaction between the employee choice notice regime and the existing casual conversion provisions by providing that a casual employee cannot make a casual conversion request if, in the period of six months before giving the request to their employer, the employee:
- had given an employee choice notice or
- refused an offer of casual conversion by their employer.
Dealing with disputes about employee choice notifications and casual conversion requests
Item 15 repeals and replaces section 66M to create a new regime to resolve disputes about employee choice notices and casual conversion requests. In summary:
- an employee and employer must first attempt to resolve the dispute at the workplace level by discussion between them, including via any applicable process contained in a modern award or enterprise agreement
- if workplace level discussions and dispute resolution mechanisms do not resolve the dispute, a party may refer the dispute to the FWC who may deal with it by any method it considers appropriate, including by mediation, conciliation, making a recommendation or expressing an opinion and
- If the dispute cannot be resolved by those means, then the FWC may deal with the dispute by mandatory, binding arbitration (discussed below).
Arbitration of disputes about employee choice notifications and casual conversion requests
The Bill will allow the FWC to resolve disputes about employee choice notices and casual conversion requests by mandatory, binding arbitration in accordance with proposed section 66MA of the FW Act. Before making an order, the FWC must:
- consider that making the order would be fair and reasonable, taking into account the objects of the FW Act and Division 4A
- not make an order if it would be inconsistent with a provision of the FW Act or a term of a fair work instrument that applies to the employer and employee
- have regard to whether a substantial change to the employee’s terms and conditions would be reasonably necessary to ensure the employer does not contravene the term of a fair work instrument that would apply to the employee as a full-time or part-time employee and
- disregard the conduct of the employer and employee that occurred after the employee gave the notification to the employer.
In terms of the types of orders the FWC can make, proposed subsection 66MA(1) provides the FWC can make ‘any orders it considers appropriate’ but also specifically provides that:
- in relation to employee choice notices the FWC can make an order that the employee:
- continues to be treated as a casual employee or
- that they are treated as a full-time/part-time employee from a specified date and
- in relation to casual conversion requests:
- order the employer to make the employee a casual conversion offer or
- order the employer to grant a request for casual conversion request (including where the employer did not respond within the required 21-day timeframe).
As an integrity measure, the Bill provides that contravening an order made by the FWC under the proposed arbitration regime is a civil remedy provision attracting a maximum penalty of 300 penalty units. This currently equates to $93,900.
Anti-avoidance and protective measures
The Bill includes various anti-avoidance and protective measures related to the changes to casual employment including:
- providing that an employer must not change an employee's pattern of work or terminate their employment to avoid any right or obligation under the proposed employee choice notice regime or existing casual conversion regime
- introducing new civil penalty provisions (that largely mirror the existing FW Act sham contracting civil penalties) regarding:
- misrepresenting employment as casual employment
- dismissing an employee to engage them as a casual employee and
- making misrepresentations to engage an individual as a casual employee.
Commencement of changes
The changes will commence on 1 July 2024. Importantly however, the application and transitional provisions in proposed Part 15 to Schedule 1 of the FW Act provide that the new definition of casual employee will apply from 1 July 2024, including to employment relationships entered into before then. However, conduct of the employer and employee before then is to be disregarded, as are particular contractual terms, in assessing the nature of the relationship and for aspects of the casual conversion process.
In addition, an employee who was a casual employee before 1 July 2024 under the existing definition of casual employee in section 15A is taken to be a casual employee on and after 1 July 2024.
Position of non-government parties/independents
The Opposition has urged the Government to ‘scrap this legislation and go back to the drawing board’, partly because:
small businesses are very worried about the implications of the latest proposed laws particularly how they might affect casual workers… This legislation will strangle businesses.
At the time of writing none of other non-government parties or Independents appear to have expressed a view on proposed changes to the definition of casual employment.
Position of major interest groups
The Australian Council of Trade Unions (ACTU) secretary Sally McManus reportedly said the union movement opposes the small business exemptions, the changes are modest and should have gone further.
The Institute of Public Affairs (IPA), the Business Council of Australia (BCA), and other industry groups have argued that the changes to the definition of casual work will create risk and make it harder to engage casual employees. For example, the IPA argues:
The consequence of this change will clearly be that casual workers who have had regular patterns of work will have their lives disrupted by a more randomised work schedule and will likely have less employment opportunities.
Law firm Seyfarth Shaw argues that the Bill is an attempt to stamp out casual employment and removes certainty for employers.
Key issue #2: test to determine employment status
Australian law differentiates between employees and independent contractors. The FW Act is overwhelmingly concerned with, and regulates, the terms and conditions of employment (rather than ‘work’). The FW Act, which governs most employers and employees in Australia, provides that the term ‘employee’ (generally) has its ordinary meaning (that is, the common law meaning).
This means the common law definition of employee and employer primarily determines whether a ‘worker’ is an employee and therefore entitled to the NES and various other protections provided by the FW Act to employees (such as protection from unfair dismissal).
Multi-factorial test to determine if an employment relationship exists
Prior to the decisions of the High Court in Personnel Contracting and Jamsek, courts and tribunals used a multi-factorial test for determining whether a worker was an employee or independent contractor. The multi-factorial test considered the ‘substance and reality’ or ‘totality’ of the relationship by considering a variety of factors, including both the conduct of the parties and the terms of any written contract. The below table outlines the various factors which were considered when characterising a relationship between parties as either an employment relationship or principal-independent contractor relationship, prior to the decisions in Personnel Contracting and Jamsek.
Table 1: Australian indicia of employment or independent contracting
|Employee vs independent contractor
|Right of control over the worker
- the employer has a right to control the worker’s work
- the worker must perform any work the payer reasonably directs within their skill
- the person who pays the worker prescribes the times and locations for the performance of the work
- the worker maintains a high level of discretion and flexibility as to how the work is to be performed, even if the contract contains precise terms as to the material to be used and the methods of performance
- the worker can refuse work not agreed to in the contract
- the worker sets their own hours of work
|Own business / employer’s business dichotomy
- the worker is serving in the business of the employer and is not carrying on their own business (the ‘business ‘integration’ or ‘organisation’ test)
- the work of the worker creates goodwill or saleable assets for the employer’s business
- the worker advertises their services to the public at large
- the fact that the worker contracts through a corporate vehicle is a strong indication that the contract is not an employment contract for personal service
- the worker creates goodwill or saleable assets for their own business
||The commercial risk is borne by the payer, as is the responsibility for any loss occasioned by poor workmanship or negligence of the employee
||The worker bears the risk of the commercial loss or profit, and the responsibility and liability for any poor workmanship or injury sustained in performance of the task
|Terms and circumstances of the formation of the contract
||The terms and circumstances of a contract's formation are significant to the proper characterisation of the relationship between the parties. However, parties cannot deem the relationship between themselves to be something that it is not. That is, the description of a worker as an employee or contractor does not change the character of the relationship established by their rights and obligations under the contract: Personnel Contracting.
|A contract for services (“results contracts”) vs a contract of service (employment contract)
- the remuneration is in the form of a salary or wages
- the person who pays the worker has discretion in relation to task allocation
- employer has the right to suspend or dismiss the worker
- the worker receives benefits such as annual, sick and long service leave
- the worker receives other benefits which are prescribed under an appropriate award for employees in that industry
- payment to the worker is based upon performance of the contract
- the contract is for a given result
- the worker provides invoices after the completion of tasks
- the payer may only terminate the contract for breach
- the contract does not include leave provisions
|Location where work is performed
- the worker generally works at the business premises of the employer
- work is performed at the worker’s premises or other locations as required
|Provision of tools and equipment and payment of business expenses
- the person who pays the worker provides the equipment and materials for the work
- any use of the worker’s own equipment or materials is compensated for by reimbursement or by an allowance
- the worker does not spend a significant portion of their pay on business expenses
- the worker provides their own equipment and assets
- the worker incurs their own expenses
- the worker spends a significant portion of their remuneration on business expenses
|Whether the work can be delegated or subcontracted
||A worker has no inherent right to delegate his/her tasks to another, though there may be power to delegate some duties to other employees
||The worker has an unlimited power of delegation.
||Requirement to wear uniform
- no requirement to wear uniform or
- prohibition on wearing a uniform
|Taxation, superannuation, insurance
||Employer responsible for taxation, superannuation, workers compensation/WHS insurance.
||Responsible for own PAYG tax, superannuation, workers compensation/WHS insurance, registered for GST.
||Exclusivity is more appropriate to an employment relationship (under which the employee owes a duty of good faith and fidelity under the employment contract).
||Non-exclusive work is not necessarily an indicator of a contracting relationship as it is also a common feature of casual employment (see Personnel Contracting).
Source: see footnote 85.
Common law position following the Jamsek and Personnel Contracting
In early 2022 the High Court decisions in Personnel Contracting and Jamsek held that whether an individual is an employee or independent contractor is to be determined primarily by reference to the terms of any contract that comprehensively sets out the right and obligations of the parties, with limited exceptions (such as where a contract is a sham, or has been varied or rendered unenforceable, or subject to an estoppel). Further, whilst the majority acknowledged that it may, in some circumstances, be appropriate to consider the ‘totality of the relationship’ by reference to various indicia of employment, it was noted that consideration of such matters must be concerned with the rights and obligations under the contract and not simply how the relationship operated.
This meant Personnel Contracting and Jamsek confirmed the primacy of written contracts in determining whether a worker is an employee or independent contractor, and in doing so largely overturned the long-standing multi-factorial test.
Why are changes needed?
The Senate Economics Reference Committee, in its March 2022 report Systemic, sustained and shameful: Unlawful underpayment of employees' remuneration (p. 60) noted in relation to Jamsek and Personnel Contracting that:
Businesses welcomed this decision, citing greater certainty for employers, with the decision giving support to Uber and Deliveroo's claims that their drivers are not employees, however it is expected to encourage the engagement of more contractors in insecure employment arrangements in the longer term, and, with clever contract drafting, ensure that businesses avoid meeting minimum pay and conditions. [emphasis added]
The RIS explains why the Government considers restoring the multi-factorial test is necessary:
The decisions in Jamsek and Personnel Contracting most significantly impact those workers who, prior to these two decisions, were on the border between employment and independent contracting. These workers are more likely to be those with low bargaining power who do not genuinely run their own business. As a result of the contract-centric approach espoused in Jamsek and Personnel Contracting, these workers are now more likely to be found to be independent contractors than under the multi-factorial test previously applied. [emphasis added]
Where a worker is classified as an independent contractor, they will not be entitled to the NES and various other protections provided by the FW Act to employees, such as minimum wages and protection from unfair dismissal. In this regard, the Explanatory Memorandum suggests that the proposed change:
- is necessary to ‘ensure workers are correctly categorised, even in the face of a carefully drafted contract which may not fully reflect how the contract is performed in practice’ and
- is consistent with the approach to determining if an employment relationship exists set out in Article 9 of the ILO’s Employment Relationship Recommendation, 2006 (No. 198).
What is the intended impact of the changes?
The RIS states that the intended impact of the proposed change is to:
discourage businesses from attempting to avoid a relationship of employment via carefully drafted contracts and ensure that workers are classified appropriately in the future.
What are the changes?
Item 237 in Part 15 of Schedule 1 to the Bill inserts proposed subsection 15AA into the FW Act. The section sets out the manner for determining the meaning of the terms employee and employer for the purposes of the FW Act.
Under proposed subsection 15AA(1), whether a worker is an employee of a person (including businesses) or is an employer is to be determined by ‘ascertaining the real substance, practical reality, and true nature of the relationship’. Proposed subsection 15AA(2) provides that when determining ‘the real substance, practical reality, and true nature of the relationship’:
- the totality of the relationship between the individual and the person following must be considered and
- regard must be had not only to the terms of the contract governing the relationship, but also other factors relating to the totality of the relationship including, but not limited to, how the contract is performed in practice.
The Note to proposed subsection 15AA(2) states that proposed section 15AA was enacted ‘as a response’ (that is, to undo) the common law tests set out by the High Court in Personnel Contracting and Jamsek (discussed above) in the context of the FW Act.
Issue: changes do not apply to all employer and employees
Proposed subsection 15AA(3) states that the restored multi-factorial test would not apply to employers and employees who are national system employers and employees by virtue of the States’ referrals of industrial relations power under sections 30C, 30D, 30M and 30N of the FW Act. In these cases, the common law test for employment as provided for in Personnel Contracting and Jamsek will continue to apply. Likewise, the various workplace protections in Part 3-1 of the FW Act will not apply to employers and employees who are national system employers and employees by virtue of the States’ referrals of industrial relations power under sections 30G and 30R.
Issue: change will only apply to the Fair Work Act
Whilst the codification of the multi-factorial test by proposed section 15AA would apply to determining employment status under the FW Act, it will only apply in that context. This means the contractual primacy test applied by Personnel Contracting and Jamsek will continue to apply to employees and employers under other laws, including:
- other workplace laws (to the extent that those laws adopt the ordinary meaning of employee and employer) and
- taxation and superannuation laws (to the extent that those laws adopt the ordinary meaning of employee and employer).
This means that one effect of proposed section 15AA will be to increase the situations where different tests are applied to determine if an individual is an employee in different contexts such as superannuation, under the FW Act and workers’ compensation schemes.
In this regard, whilst previously many employer organisations supported the multi-factorial test prior to the High Court’s decisions in early 2022 some had suggested that any legislative reform should, ideally, result in a single uniform test based on the multi-factorial test not only for FW Act matters but also potentially to taxation and superannuation matters.
Commencement of changes
The proposed interpretive principle for determining the ordinary meaning of ‘employee’ and ‘employer’ for the purposes of the FW Act will commence the day after the Bill receives Royal Assent. In addition, the Bill contains substantive transitional provisions. Whilst not explored in detail in this Bills Digest, in general:
- the proposed interpretive principle for determining the ordinary meaning of ‘employee’ and ‘employer’ will apply to existing relationships between an individual and a person entered into before commencement of proposed section 15AA, as well as those entered into on or after the commencement and
- fair work instruments made before and after the commencement of proposed section 15AA will be taken to include a reference to an employer and employee within the meaning of the revised definition.
Readers are referred to pages 263 to 267 of the Explanatory Memorandum for further details.
The consultation processes for the proposed codification of the ‘multi-factorial’ test previously applied by courts and tribunals to determine if a worker is an employee or independent contractor for the purposes of the FW Act is detailed at pages 31 to 33 of the RIS for the measure. In summary this appears to have, in relation to the proposed section 15AA of the FW Act, included:
- ‘initial discussions to understand stakeholders’ high-level positions on… the most appropriate definition of 'employee' under the Fair Work Act’ between August 2022 and March 2023
- ‘confidential briefings and discussion on the details of the measures being considered for introduction in the second half of 2023 were held by the Department with key business and union representatives’ on 16 June 2023 and
- confidential consultation on draft legislation occurred between 16 and 18 August 2023 with state and territory officials and members of the COIL (a subcommittee of the National Workplace Relations Consultative Committee).
Position of non-government parties/independents
During the second reading debate in the House of Representatives, a number of Opposition members argued that proposed codification of the ‘multi-factorial’ test previously applied by courts and tribunals to determine if a worker is an employee or independent contractor was unnecessary, an ‘attack on businesses and subcontractors’ and undermines the ability of workers to elect to be engaged as an independent contractor or employee.
Bob Katter MP argues the Bill ‘doesn’t go far enough’ and has proposed a second reading amendment, calling on the Government to:
(a) remove corporate oversight from the ATO and ASIC:
(b) place corporate oversight with the Fair Work Commission or a similar “oversight and enforcement” body, and;
(c) provide this oversight and enforcement body with the resources, accountability and powers to adequately protect employees and contractors, subcontractors and suppliers from corporate wrong doing.
At the time of writing none of the other non-government parties or independents appear to have expressed a view on proposed codification of the ‘multi-factorial’ test to determine if a worker is an employee or independent contractor.
Position of major interest groups
The Law Council of Australia (LCA) has acknowledged the need to strengthen protections for independent contractors. Whilst the Master Builders Association (MBA) has expressed concerns about the measure, the Housing Industry Australia (HIA) states:
We are pleased the Government has listened to HIA’s concerns that reforms to industrial relations laws cannot and should not impact the status quo in the residential building industry. Protecting the rights of independent contractors is critical. Under the proposed laws a worker must be operating via a digital platform and be ‘employee-like’ to become subject to the Fair Work Commission’s proposed new powers to set minimum standards. Claims that the Commission will be able to force independent contractors to become employees don’t appear to hold much weight.
The Australian Chamber of Commerce and Industry (ACCI) expressed concerns about the proposed codification of the ‘multi-factorial’ test to determine if a worker is an employee or independent contractor, arguing:
The scope of changes will impact a broad range of contractor arrangements. This goes well beyond the election commitment to set minimum standards for the rideshare and food delivery sectors .
Key issue #3: minimum standards for ‘gig’ economy workers
Part 16 of Schedule 1 to the Bill deals with ‘gig’ economy workers, including both those that obtain work via digital labour platforms and certain non-employee road transport contractors.
What is the ‘gig’ economy?
The ‘gig’ economy is characterised by workers contracting to complete short-term task-based work via digital labour platforms (DLPs) which facilitate labour transactions between workers and businesses. The rapid rise of the gig economy represents risks and opportunities for gig economy workers, many of whom are characterised as independent contractors rather than employees and therefore lack many workplace entitlements and protections (for example, the NES), as the table below sets out.
Table 2: Workplace entitlements and protections of employees and independent contractors
|Unfair dismissal protection
||X – only where deeming provisions in state legislation applies
||X – only if authorised by the Australian Competition and Consumer Commission
|Covered by work health and safety laws
||Usually (p. 451) but not always (pp. 69 – 77; 141).
Source: As compiled by the Parliamentary Library.
Independent contractors are, unlike employees, responsible for their own income tax, GST, insurance, and superannuation. Generally where a gig economy worker is an independent contractor the impact is a lack of access to the above entitlements (pp. 4, 69), poor job security, and lower overall income and superannuation.
Given the recent changes to how the common law determines if a worker is an employee or independent contractor discussed earlier in this Digest and the increase in the number of gig economy workers generally, there is a risk that the number of gig economy workers without access to workplace entitlements may increase in both real and proportional terms. Increasing numbers of gig economy workers having no or low superannuation balance (p. 8) will result in lower retirement income levels (p. 17) and will, in the long-term, put pressure on Australia’s social security system (p. 8) and, as a result, the Australian budget (pp. 24–25).
Context of proposed reforms to regulation of non-employee ‘gig’ workers
Even before the recent changes to how the common law determines if a worker is an employee or independent contractor discussed earlier in this Digest, the increase in the number of gig economy workers brought into question:
Various reform models aimed at addressing the above issues have been proposed including:
Part 16 of Schedule 1 to the Bill attempts to address the issues posed by the growth of the gig economy via elements of the first and last models above:
- creating a new category of worker-business relationship, the regulated worker (comprised of employee-like workers and non-employee road transport contractors) and
- extending certain entitlements and protections to those regulated workers.
Regulating digital labour platform operators and gig workers
The Bill aims to improve the job security and income of gig workers primarily by regulating digital labour platform (DLP) operators and providing various powers to the FWC. Most notably, this includes making minimum standards orders (MSOs)—similar in many respects to modern awards—that will set the minimum terms and conditions for gig economy workers obtaining work via a DLP.
Digital labour platform operators and digital platform work
The Bill empowers the FWC to, among other things, regulate DLP operators and employee-like workers performing digital platform work. The Bill’s definition of a DLP is broad: an online enabled application, website or system (platform) operated to arrange, allocate or facilitate the provision of labour services, where the operator of platform:
- engages independent contractors directly or indirectly through the platform or
- acts as an intermediary for or on behalf of more than one distinct but interdependent sets of users who interact with the independent contractors or the operator via platform and
- the operator of platform processes aggregated payments referable to the work performed by the independent contractors.
In turn, the Bill’s defines a DLP operator as the operator of a DLP that enters into or facilitates a services contract where work is performed by employee-like workers. This means, that in effect, the Bill’s definition of a DLP operator centres on (but is not limited to) whether the DLP operator facilitates labour transactions (digital platform work) between workers and businesses or individuals seeking to have tasks completed or services provided.
Digital platform work is defined as work performed by an independent contractor under a services contract facilitated by a DLP, or work specified by the regulations. The regulations can also specify that digital platform work does not include prescribed work. Absent coverage by such exclusionary regulations, it appears that Bill will capture most existing gig economy platforms operating in Australia, such as:
- Uber (private transport)
- Uber Eats, Deliveroo and Menulog (meal delivery)
- Freelancer, Fiverr, OneFlare, Hipages and Airtasker (task-based services).
Issue: key definitions can be expanded by regulations
The Bill allows regulations to prescribe an online ‘application, website or system’ as being or not being a DLP. This essentially grants the Minister the power to regulate gig economy platforms that fall outside the Bill’s definition of a DLP or exclude those that are captured (subject to Parliamentary disallowance of the regulations). In this regard the Explanatory Memorandum notes:
The definition of digital labour platform is intended to be deliberately broad to ensure that it can capture new market structures and forms of work as they emerge. It is not intended to capture online classifieds where there is not a payment processed, or digital platforms that facilitate the sale of goods.
The Bill also allows regulations to prescribe when work is or is not digital platform work.
Relevant to the gig economy, the Bill defines an employee-like worker as a person who performs digital platform work provided that the person performs all, or a significant majority, of the digital platform work to be performed under the services contract and does not perform any work under the services contract as an employee.
This will capture individuals contracting in their personal capacities, directors of body corporates/family members of directors, trustees and partners of partnerships, provided the person satisfies one or more of the following characteristics:
- low bargaining power (in relation to the services contract under which the work is performed)
- receives remuneration at or below the rate of an employee performing comparable work
- a low degree of authority over the performance of the work or
- other characteristics as are prescribed by the regulations.
This means an employee-like worker captures some, but not all, independent contractors performing digital platform work through a DLP.
The Bill allows the regulations to both prescribe additional characteristics of employee-like workers, as well as whether a person must have all, only one, or some of any such prescribed characteristics. This means that the regulations can expand the definition of an employee-like worker. In this regard the Explanatory Memorandum notes:
The intended effect of these provisions is not to capture persons that have a high degree of bargaining power, are comparatively well paid and have a significant degree of authority over their work, regardless of whether they perform work on a digital platform. It is intended, for example, that skilled tradespeople would not be captured even if they work on a digital platform. [emphasis added]
The Fair Work Commission can set minimum standards
Proposed Chapter 3A of the FW Act will enable the FWC to make, vary and revoke:
- minimum standards orders (MSOs) and
- minimum standards guidelines (MSGs).
Like modern awards, MSOs will set binding minimum standards for specified employee-like workers and DLP operators in relation to certain matters, including in relation to minimum rates of pay (which DLP operators must comply with). As MSGs only set non-binding minimum standards, they are not examined in this Bills Digest.
Who can initiate the making, varying or revoking of an MSO?
The Bill enables the FWC to make, vary or revoke an MSO on its own initiative or in response to an application by one of the following:
- an organisation that represents the interests of either a worker or business that would be covered by the MSO
- a business that would be covered by the MSO (that is, a DLP operator) or
- the Minister.
Any such application must specify the class of employee-like workers to be covered by the MSO. This can be done in various way, including but not limited to by reference to a particular industry or sector, or part of an industry or sector, or particular kinds of work.
Issue: persons who can apply for a minimum standards order
Notably, whilst the Bill allows a business to apply for an MSO, it does not allow an employee-like worker to do so.
In addition, unlike the case with enterprise agreements and modern awards under the FW Act, the Bill allows the Minister to apply for an MSO, effectively allowing the Government of the day to intervene directly in the regulation of industrial relations between certain businesses and workers performing specific types of work by initiating the creation of an MSO. This contrasts with the existing mechanisms under the FW Act which largely leave the creation of other types of industrial instruments or making of orders regulating specific forms of work and employers up to relevant industrial participants, or the FWC, to initiate.
Contents of MSOs
The Bill sets out what must be included in an MSO, namely the type of digital platform work, the DLP operator(s) and the employee-like workers to be covered and terms that:
- specify the DLP operator(s) primarily responsible for providing the entitlements of employee-like workers and
- provide a dispute settlement procedure.
The Bill provides that an MSO must not include terms related to various matters including overtime, rostering or work health and safety (WHS). Most notably however, an MSO must not include a term that would change the form of engagement of a covered employee-like worker (for example, from an independent contractor to an employee, discussed in detail below).
The Bill provides the FWC with the discretion to include a range of matters including but not limited to payment terms, deductions, working time, consultation, and insurance.
Issue: minimum standards orders cannot change employment status
In addition to providing that an MSO must not include a term that would change the form of engagement or status of a covered employee-like worker, the Bill also specifically stipulates that:
- the effect of an MSO or MSG applying to or covering a person must be disregarded for the purposes of ascertaining the ‘real substance, practical reality and true nature of the relationship’ between an individual and a person (relevant for determining if a worker is an employee or independent contractor as well as if an employee is a casual employee) and
- when making an MSO or MSG, the FWC must have regard to the need for an MSO to not change the form of engagement of employee-like workers from independent contractor to employee.
This means that, despite the changes to the definition of casual employee and the proposed interpretive principle for determining the ordinary meaning of ‘employee’ and ‘employer’, MSOs and MSGs cannot result in an employee-like worker being ‘deemed’ to be an employee or otherwise alter the relationship between the employee-like worker and another person.
Compliance with MSOs
As with modern awards and enterprise agreements, the Bill provides that a person must not contravene a term of an MSO. Where this occurs, the maximum civil penalty that a court can impose would be 60 penalty units for a normal contravention (currently equivalent to $18,780) and 600 penalty units for a serious contravention (currently equivalent to $187,800).
As such, MSOs will operate in a similar manner to modern awards by setting minimum terms and conditions of engagement that will apply to employee-like workers on specified DLPs, and the relevant DLP operator(s) will then be responsible for ensuring that the employee-like workers receive their correct entitlements, including minimum rates of pay.
Digital platform operators and unions can make collective agreements
Proposed Part 3A-4—Collective agreements for regulated workers of new Chapter 3A of the FW Act creates a new regime for DLP operators and organisations (unions) that represent the interests of employee-like workers to negotiate a new form of industrial instrument: a collective agreement. Once negotiated and approved by the FWC, such a collective agreement can set the terms and conditions that will apply to workers engaged on the relevant DLP.
The negotiating and making of a collective agreement is, in some ways, a streamlined process with some similarities to the making of enterprise agreements under the FW Act.
First, a consultation notice may be issued by either the DLP operator business or an organisation (union) who represents the employee-like workers notifying the other party of:
- the intention to ‘try to make a collective agreement’
- the business and class of employee-like workers the collective agreement will cover
- the organisation (union) that will sign the proposed collective agreement on behalf of the relevant employee-like workers and
- the matters that are proposed to be dealt with by the collective agreement.
Second, the consultation notice must:
- be given to the FWC, which must publish it on its website and
- where both negotiation parties consent, ‘reasonable efforts’ must be made to give a notice to each eligible employee-like worker who would be covered by the proposed collective agreement.
An eligible employee-like worker is an employee-like worker who performed work via the relevant DLP within 28 days prior to the consultation notice being issued.
Third, the parties then attempt to negotiate the terms of the proposed collective agreement. Where there is a dispute, a party can, with the consent of the other party, apply to the FWC to deal with a dispute. The FWC must then deal with the dispute, other than by arbitration.
This means that unlike some other forms of industrial instruments, a DLP operator cannot be compelled to sign a proposed collective agreement that it does not agree with.
Fourth, when the parties sign the proposed collective agreement, the agreement is ‘made’. It is then open to one of the parties to, with the consent of the other negotiation party, apply to the FWC to have the collective agreement registered, provided:
- the terms of the proposed collective agreement and its effect has been explained to eligible employee-like workers and
- the proposed collective agreement is more beneficial than any relevant MSO that applies.
Finally, the FWC must register a collective agreement if it is satisfied that it has terms that:
- enable the FWC or another independent person to settle disputes under the collective agreement (including allowing for the representation of covered employee-like workers)
- provide for the period of operation of the collective agreement and how to terminate it before the end of that period.
As with modern awards and enterprise agreements, once registered the FWC must publish the collective agreement on its website.
Contents of a collective agreement
The contents of a collective agreement are largely left to the negotiating parties. The contents can include:
- the terms and conditions on which employee-like workers perform digital platform work and
- how the collective agreement will operate.
Whilst no content is specifically prohibited from being included in a collective agreement, the Bill provides that a term of a collective agreement has no effect to the extent that it deals with matters that ‘are primarily of a commercial nature’ that do not affect the terms and conditions of engagement of workers covered by the agreement. However, the inclusion of such terms does not prevent the agreement being a collective agreement.
Varying or terminating a collective agreement
The Bill enables either a business or organisation covered by the collective agreement to apply to the FWC to vary the agreement. This is similar to the process of making a collective agreement noted above, including that the proposed variation to the collective agreement is more beneficial than any relevant MSO that applies.
The Bill allows a collective agreement to be terminated before the end of its operation in accordance with the relevant terms pertaining to termination, provided both parties consent to notify the FWC of the termination.
Compliance with collective agreements
As with modern awards and enterprise agreements, the Bill provides that a person must not contravene a term of a collective agreement. Where this occurs, the maximum civil penalty that a court can impose would be 60 penalty units for a normal contravention (currently equivalent to $18,780) and 600 penalty units for a serious contravention (currently equivalent to $187,800).
As such, collective agreements will operate in a similar manner to enterprise agreements by setting minimum terms and conditions of engagement that are superior to those contained in an MSO:
- that apply to specified businesses and employee-like workers on specified DLPs and
- under which the relevant businesses are responsible for ensuring that the employee-like workers receive their correct entitlements, including minimum rates of pay.
Protection from unfair deactivation and other adverse action
Proposed Part 3A-3—Unfair deactivation or unfair termination of regulated workers in new Chapter 3A of the FW Act, attempts to address various issues posed by the growth of the gig economy, especially in terms of job and income security, by extending certain entitlements and protections to regulated workers. Notably this includes:
- protection from ‘unfair deactivation’ (for employee-like workers) and ‘unfair termination’ (for regulated road transport contractors), which are both similar to existing unfair dismissal laws
- protection from adverse action (by expanding the FW Act’s general protections regime) and
- the availability of protected industrial action.
The Bill proposes an unfair deactivation regime for employee-like workers similar to the FW Act’s existing unfair dismissal regime.
Which employee-like workers are protected?
The Bill provides that the protections apply to employee-like workers who have been performing work through, or arranged via, a DLP on a regular basis for at least six months. Regulated road transport contractors are not covered (but have access to the proposed unfair termination regime instead).
When is an employee-like worker unfairly deactivated?
A person is deactivated where they performed digital platform work through the DLP and:
- their access to the DLP has been modified, suspended or terminated and
- they can no longer perform digital platform work, or their ability to do so is so significantly altered that in effect they can no longer perform such work.
The Bill provides that in considering whether a person’s deactivation was unfair, the FWC must take into account:
- whether there is a valid reason for the deactivation, related to the person’s capacity or conduct and
- whether any relevant processes specified in the Digital Platform Deactivation Code (DLPD Code) were followed and
- any other matters that the FWC considers relevant.
In relation to the existence of a valid reason for deactivation, proposed subsection 536LH(2) explicitly provides that deactivation ‘because of serious misconduct of the person who was deactivated is not unfair’. [emphasis added]
Digital Platform Deactivation Code
The Bill requires that the Minister makes, by legislative instrument, the DLPD Code. Proposed subsection 536LJ(2) sets out the matters that the DLPD Code must, at a minimum, deal with. These include:
- the circumstances in which work is performed on a regular basis
- what may constitute a valid reason for deactivation and
- rights of response to deactivations and internal processes to be followed for deactivations (including what should be communicated to an employee-like worker by a DLP operator in relation to deactivations).
Critically, a person’s deactivation is not unfair if the DLP operator complies with the DLPD.
How are unfair deactivation claims are handled?
As with the existing unfair dismissal regime, a person can apply to the FWC for an order to remedy an unfair deactivation within 21 days of their deactivation, or a longer period allowed by the FWC. However, a person must not make an application unless the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the contractor high income threshold.
The FWC can then deal with the matter by conducting conferences or holding hearings. The Bill enables the FWC to dismiss applications and make costs orders as appropriate (including against lawyers and paid agents).
If the FWC determines that a deactivation was unfair, the available remedies include:
- ordering that the employee-like worker be reactivated (that is, return their access to the DLP as if they had not been deactivated) and
- making orders to restore lost pay.
Importantly however, the FWC is specifically prohibited from making compensation orders by proposed subsection 536LP(3).
An ‘anti-phoenixing’ measure is also included. Proposed subsection 536LQ(2) provides:
- if the DLP from which the person was deactivated (the original DLP) no longer exists and
- a similar DLP is operated by an associated entity of the operator of the original DLP (the second DLP)
the FWC may make an order that the associated entity provide access to the second DLP on terms and conditions no less favourable than those immediately before the person’s access to the original DLP was terminated or suspended.
This means that where a business closes a DLP and it, or a related entity (for example, a wholly owned subsidiary) sets up a new DLP, the FWC can issue orders that will ensure that a deactivated employee-like worker will have access to that new DLP. This will ensure that DLP operators cannot evade their obligation to not unfairly deactivate employee-like workers by replacing one DLP with another, whilst barring certain employee-like workers from the second DLP.
The Bill proposes an unfair termination regime for regulated road transport contractors similar to the FW Act’s existing unfair dismissal regime.
Which regulated road transport contractors are protected?
The Bill provides that regulated road transport contractors who earn less than the contractor high income threshold (to be specified in regulations) and who have performed work for 12 months will be protected from unfair termination. Employee-like workers are not covered (but have access to the proposed unfair deactivation regime instead).
When is a regulated road transport contractors unfairly terminated?
A regulated road transport contractor is terminated when the relevant services contract is terminated by, or as a result of conduct of, the road transport business which they were contracted to.
The Bill provides that in considering whether a person’s termination was unfair, the FWC must take into account:
- whether there is not a valid reason for the termination, related to the person’s capacity or conduct and
- whether any relevant processes specified in the Road Transport Industry Termination Code (RIT Code) were followed
- any other matters that the FWC considers relevant.
The Bill explicitly provides that termination ‘because of serious misconduct of the person’ who was terminated is a valid reason for such a termination.
The Road Transport Industry Termination Code
The Bill allows the Minister to make, by legislative instrument, the RIT Code. If made, the RIT Code must, at a minimum, deal with:
- what may constitute a valid reason for termination and
- rights of response to terminations and internal processes to be followed for terminations (including communications between regulated road transport contractors and road transport businesses in relation to terminations).
Critically, a person’s termination is not unfair if the road transport business complies with the RIT Code.
How are unfair termination claims are handled?
As with the existing unfair dismissal regime, a person can apply to the FWC for an order to remedy an unfair deactivation within 21 days of their deactivation, or a longer period allowed by the FWC. The FWC can then deal with the matter in the same was as unfair deactivation matters discussed above.
If the FWC determines that a termination was unfair, the available remedies include:
- ordering that a new services contact be entered into
- making orders to restore lost pay or
- ordering compensation in lieu of entering into a new services contract.
An ‘anti-phoenixing’ measure in equivalent terms to unfair deactivation matters is also included.
This means that where a road transport business closes down and a related entity (for example, a wholly owned subsidiary) is set up, the new road transport business can be ordered to enter into a new services contract with the regulated road transport contractor. The ‘anti-phoenixing’ measure does not apply to orders for lost pay or compensation.
Protection from adverse action
Under the FW Act’s ‘general protections’ regime an employer or person must not take ‘adverse action’ against an employee or independent contractor or prospective employee/independent contractor:
- because of various protected attributes or
- where they exercise (or seek to exercise) a ‘workplace right’.
Examples of adverse action include terminating an employee or independent contractor, refusing to hire someone and discrimination on the basis of various protected attributes. The Bill will expand the existing general protections to include adverse action taken by various gig economy participants.
For example, in relation to DLP operators, the Bill will expand the existing general protections regime to include where a DLP operator:
- terminates the contract of an employee-like worker
- injures an employee-like worker in relation to the terms and conditions of their contract
- alters the position of an employee-like worker to their prejudice
- refuses to make use of the services offered by the employee-like worker
- refuses to provide the employee-like worker with access to the DLP or
- discriminates against an employee-like worker in relation to the terms and conditions of their access to a DLP.
In relation to employee-like workers, the Bill applies the general protections regime to employee-like workers taking protected industrial action against the DLP operator.
Commencement of changes
The changes discussed above in relation to employee-like workers will commence on 1 July 2024. Transitional provisions provide that in relation to the proposed unfair deactivation and unfair termination regimes, periods prior to 1 July 2024 will not count towards the minimum working period (6 and 12 months respectively).
The consultation processes for the proposed gig-worker reforms is detailed at pages 31 to 33 of the RIS for this measure. In summary this appears to have, in relation employee-like worker, included:
- ‘initial discussions to understand stakeholders’ high-level positions on… allowing the Fair Work Commission to set standards for ‘employee-like’ workers… [and] for workers in the road transport industry’ between August 2022 and March 2023
- from 13 April 2023 to 23 May 2023: public consultation seeking submissions in response to the ‘Employee-like forms of work and stronger protections for independent contractors’ consultation paper, followed by ‘bilateral and group discussions held with stakeholders to discuss responses to the consultation paper’
- ‘confidential briefings and discussion on the details of the measures being considered for introduction in the second half of 2023 were held by the Department with key business and union representatives’ on 16 June 2023 and
- confidential consultation on draft legislation occurred between 16 and 18 August 2023 with state and territory officials and members of the COIL (a subcommittee of the National Workplace Relations Consultative Committee).
The table below summarises the discussions and submissions regarding the proposed reforms.
Table 3: ‘gig’ economy related reform consultation participants
||Stakeholders met with
|Other businesses and business/ industry representatives
|Unions and worker representatives
|Academics and community organisations
|Australian Government agencies
|State and territory governments
Source: Explanatory Memorandum, Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, RIS for the Minimum standards and increased access to dispute resolution for independent contractors, p. 33.
Position of non-government parties/independents
During the second reading debate in the House of Representatives, a number of Opposition members argued variously that the proposed ability of the FWC to set minimum standards for ‘gig’ economy workers would:
- impose ‘additional costs to tech companies’ providing services to Australians which ‘will be pushed on to consumers and the businesses that rely on their services’ and will ‘threaten the viability of Australia's vibrant platform economy’
- ‘shift power to unions who seek to control those who are part of the gig economy’ and
- ‘drive people into regular employment in bigger businesses.’
At the time of writing none of other non-government parties or independents appear to have expressed a view on allowing the FWC to set minimum standards for ‘gig’ economy workers.
Position of major interest groups
Unions appear to be supportive of the changes to gig economy worker regulation, with the ACTU reportedly seeking to expand the minimum conditions for gig workers to independent contractors working offline.
In its submission to the Department of Employment and Workplace Relations in relation to a series of issues papers on a range of industrial relations matters, the Law Council of Australia (LCA) acknowledged the need to strengthen protections for independent contractors, including those operating through online platforms in the gig economy. The LCA also supported calls for the FWC to develop minimum standards for independent contractors, including those in the road transport industry.
The Australian Chamber of Commerce and Industry (ACCI) stated that changes to gig platforms and independent contractor arrangements will increase costs and will harm innovation in the marketplace, and that a new body within the FWC for the road transport industry will cause owner drivers to lose the flexibility to set rates and conditions. The AIG and the National Farmers Federation have also been critical of changes to regulation of the road transport industry.
Key issue #4: ‘same job, same pay’ reforms
Part 6 of Schedule 1 to the Bill deals with pay disparity between the employees of a host business and labour hire workers supplied by another business but who are performing the same or similar work for the host business.
What is labour hire?
Labour hire arrangements typically involve a ‘triangular relationship’ in which a labour hire business supplies the labour of a worker to a third party (the host employer), for an agreed fee. In simple terms:
- the labour hire agency supplies workers to the host company for a certain period for a fee and
- the host company directs the work performed by the worker(s).
Importantly, labour hire workers are generally employees (or independent contractors) of the labour hire agency, not the host company. The diagram below illustrates the relationships.
Figure 1: Triangular Labour Hire Arrangements
Models of labour hire
Labour hire arrangements can be categorised into three broad types. The first are relief arrangements (sometimes called ‘temping’). This is where employees of a labour hire agency work for a short period of time, providing relief to an organisation with staff shortages (for example, when employees are absent on some form of leave). Generally, the host organisation provides little or no job-specific training to the labour hire workers.
The second are augment arrangements. This is where the labour hire agency provides its employees to a host organisation during times of peak seasonal demand or for a key project. Generally, the host organisation provides job-specific training to the labour hire workers.
Third, there are outsourcing arrangements. This is where a labour hire agency provides employees to work in an outsourced part of the business of a client organisation. This can include:
- to fill specific functions within the business by engaging labour hire workers with particular skills, such as maintenance
- as a longer-term supplement (rather than augment during peak periods) to an ongoing workforce, with ongoing and labour hire employees working alongside each other performing the same work or
- to entirely replace an ongoing workforce.
How are the terms and conditions of labour hire workers currently determined?
The terms and conditions of employment that apply to an employee are determined by the FW Act, National Employment Standards (NES), any applicable modern award or enterprise agreement and their employment contract.
Critically – and relevantly to the measure proposed by the Bill – currently the terms and conditions that apply to an employee are determined by who they are employed by, not where they perform work or ‘who’ they perform work for. In the case of labour hire, whilst they are often viewed as ‘working’ for the host company or ‘working’ for the employer at the host company (or both), they are employed by the labour hire agency. This means that currently, the terms and conditions that apply to labour hire workers are those that apply to employees of their employer (the labour hire agency), not the host company where they work.
How can labour hire be used to lower an employer’s labour costs?
Labour hire agencies supply their employees to a host company for a fee. To be profitable, the fee charged by the labour hire company must be higher than total of:
- the wages they pay to the employees they provide to the host company
- the indirect costs attributable to the employees (insurance for example) and
- other costs associated with the employees (superannuation, provision for leave, payroll tax for example).
Generally, the fee charged by a labour hire company will be higher than what the host company would incur if they directly recruited the workers. However, this is not always the case. In larger, highly unionised workplaces with a long history of enterprise bargaining, the enterprise agreement wages may be substantially higher than the relevant wages payable under a modern award or enterprise agreement applying to a labour hire provider.
Where a ‘gap’ between the wages payable to employees of a host company and the fee charged by labour hire providers exists, using an outsourcing arrangement becomes more financially attractive to the host company as that gap increases. This is what creates an incentive in certain industries for host companies with (generally) large workforces to use labour hire as a mechanism to lower overall labour costs. This contrasts with industries and (often smaller) employers without a long history of enterprise bargaining and/or reliance on modern awards, where using such a strategy would result in either higher or similar, but not lower, overall labour costs.
The Bill would allow the FWC to make labour hire orders to ensure pay parity between employees of a labour hire agency and employees of the host company at which they work, and in doing so remove the financial incentive that exists in certain industries and employers to lower overall wage costs by using an outsourcing arrangement labour hire model, without undermining the ability of other employers to use traditional relief or augment labour hire models.
Regulated labour hire arrangement orders
Item 73 in Part 6 of Schedule 1 to the Bill inserts proposed Part 2-7A—Regulated labour hire arrangement orders into Chapter 2 of the FW Act. The new Part 2-7A will allow the FWC to make a regulated labour hire arrangement order (labour hire order) requiring employers who supply their employees to perform work for a regulated host to pay their employees the same rate of pay as employees of the regulated host who perform work of the same kind (the protected rate of pay).
Regulated hosts and regulated employees
The Bill defines a regulated host in a manner that effectively captures businesses that are national system employers (as defined in the FW Act) that enter into an arrangement with a labour hire provider to provide one or more employees to perform work for them.
In turn, a regulated employee is effectively defined as a national system employee (as defined in the FW Act) employed by a labour hire provider who performs work for a regulated host.
As such, the Bill primarily regulates host companies (regulated hosts) and labour hire workers (called regulated employees) who perform work for them under an arrangement with a labour hire provider.
Who can initiate the making of a labour hire order?
The Bill enables the FWC to make a labour hire order in response to an application by:
- a regulated employee or an employee of a regulated host
- an employee organisation (trade union) that is entitled to represent the interests of either a regulated employee or an employee of a regulated host or
- the regulated host.
When can a labour hire order be made?
The Bill provides that the FWC must only make a labour hire order where an employer (labour hire employer) supplies or will supply, either directly or indirectly a regulated employee to perform work for a regulated host (that is not a small business employer) and:
- a covered employment instrument (an industrial instrument other than a modern award, such as an enterprise agreement) applies to the regulated host (called a host employment instrument) and
- that instrument would apply to the regulated employees if they were employed by the regulated host to perform work of that kind.
Even if the above is satisfied, the FWC must not make a labour hire order if it is satisfied that it is not ‘fair and reasonable’ to do so, having regard to any of the following five matters (but only if submissions were made regarding them).
The first matter that the FWC must consider is the pay arrangements that apply to employees of the regulated host (or its related bodies corporate), including:
- the rate of pay payable to the regulated employees if the labour hire order were made
- whether the host employment instrument applies only to a particular class of employees and
- whether, in practice, the host has ever actually engaged employees under the host employment instrument to perform work of the same classification as would be performed under the labour hire arrangement by the regulated employees.
The second matter is whether the work performed by the regulated employees is part of the provision of a specific service, rather than the supply of labour, having regard to various factors (for example, the extent to which the work is of a specialist or expert nature).
The third matter is the history of the industrial arrangements applying to the regulated host and labour hire employer. The Explanatory Memorandum notes:
This would include considering previous regulated labour hire orders and bargaining related to any covered employment instrument applying to each party. It may also include how staff have been previously engaged by a regulated host to perform certain work.
The fourth matter is the corporate relationship between the regulated host and the labour hire employer, including whether they are related bodies corporate, or engaged in a joint venture or a common enterprise.
The fifth matter is the terms and nature of the labour hire arrangement, including how long it will or has operated, the location of the work being performed, the industry the work is performed in and how many employees are engaged to perform work for the regulated host as part of the arrangement. Finally, the FWC can also take into account any other matters it considers relevant.
Contents of labour hire orders
The Bill sets out what a labour hire order must specify, including the names of the parties covered by the order, the relevant host employment instrument and the date the order commences. In addition, a labour hire order may also specify when it ceases to be in force.
Whilst not explicitly stated, the obligation for a labour hire employer to pay at least the protected rate of pay implies that a labour hire order will, by virtue of identifying the relevant host employment instrument and regulated employees covered by the order, also indirectly identify the relevant rates of pay required to be paid under the order (the protected rate pay).
Compliance with labour hire orders
As with modern awards and enterprise agreements, the Bill provides that a person must not pay a regulated employee less than the protected rate of pay payable as a result of the labour hire order. Where this occurs, the maximum civil penalty that a court can impose would be 60 penalty units for normal contravention (currently equivalent to $18,780) and 600 penalty units for a serious contravention (currently equivalent to $187,800).
A defence for not paying at least the protected rate of pay is available where a regulated host provides the labour hire employer with incorrect information regarding the rate of pay payable to the employee under the host employment instrument and the employer reasonably relies on the information for the purposes of working out the protected rate of pay for the regulated employee.
Rate of pay payable under a labour hire order
The effect of making a labour hire order is that a labour hire employer must pay a regulated employee no less than the protected rate of pay: the full rate of pay to which they would have been entitled under the host employment instrument, including loadings and overtime.
The Bill deals with situations where the host employment instrument does not provide for casual employment by providing that where this occurs, the protected rate of pay for a casual is the full rate of pay to which a permanent employee would be entitled plus a loading of 25%.
Exceptions from requirement to pay the protected rate of pay
The Bill provides that a labour hire employer does not have to pay the protected rate of pay because of a labour hire order where the regulated employee is employed:
- under a training arrangement or
- to perform services for the regulated host under a short-term arrangement (less than 3 months, or another period determined by the FWC).
In regard to short-term arrangements, the exception can be overturned by a short-term arrangement determination, as discussed below.
Short-term arrangement determinations
The Bill enables the FWC to make, upon application, various determinations about short-term arrangements (less than three months in duration, unless a longer period is determined by the FWC), namely:
- the short-term arrangement is not exempt from the obligation to pay the protected rate of pay
- determining that the exemption from the obligation to pay the protected rate of pay applies for a period of less than three months
- determining that the exemption from the obligation to pay the protected rate of pay applies for a period of more than three months, including on a recurring basis in consecutive years.
In relation to recurring exemptions, the Explanatory Memorandum provides the following examples: surges in staffing requirements occurring around the Christmas period, snow season or harvest period that occur every year for a period of more than three months.
Applications for a short-term arrangement determination can be made by the regulated host, the employer or a regulated employee of the employer who is performing or is to perform work for the regulated host, or an employee organisation.
Before making a short-term arrangement determination the FWC must seek and then consider submissions from any other party that could have applied for the determination. Having done so, the FWC can only make a short-term arrangement determination where it is satisfied that there are exceptional circumstances that justify making the order having regard to various matters including:
- the purpose of the proposed exemption period, including whether the application requests that the period be specified to satisfy the need for short term or surge workforce demands (for example, to satisfy a seasonal or genuine short-term need for workers)
- the circumstances of the relevant parties
- the industry in which the work is performed and
- any other matters it considers relevant.
The Explanatory Memorandum notes that if an application is made for a longer or recurring exemption period, then ‘a greater justification will be required the longer the period or the greater the number of recurring surge periods sought in the application’.
Alternative protected rate of pay orders
The Bill enables the FWC to make an alternative protected rate of pay order (alternative pay order) on application by an employee, the labour hire employer, the regulated host or an employee organisation (trade union). Alternative pay orders are designed to deal with situations where:
- the regulated host has multiple enterprise agreements covering the same kinds of work, that apply to different employees in different circumstances (for example, in different locations, or by reference to when they commenced employment) or
- an industrial instrument that applies to a related body corporate of the regulated host would apply to a person employed by the related body corporate to perform work of that kind.
The Explanatory Memorandum notes that it is intended that the FWC will only make an alternative pay order in circumstances where:
- a different covered employment instrument would be more appropriately applied to a regulated employee’s employment as part of a labour hire arrangement and
- where the alternative covered employment instrument applies to one of the parties participating in or arranging for the labour hire arrangement.
When can an alternative pay order can be made?
Before making an alternative pay order the FWC must seek the views of the labour-hire employer, the regulated host, the employer to which the alternative covered employment instrument to be specified in the order applies (if not the regulated host), the employee, employees to whom the alternative covered employment instrument to be specified in the alternative pay order applies and employee organisations (trade unions).
An alternative pay order can be made when the FWC is satisfied that:
- requiring a labour hire employer to pay the regulated employee at the protected rate of pay arising under the host employment instrument would be unreasonable, for example, because the rates would be insufficient or excessive and
- there is an appropriate alternative covered employment instrument that could be the subject of an alternative pay order.
In doing so, the FWC is required to have regard to, among other things:
- whether the host employment instrument covered by the labour hire order applies only to a particular class of employees (including whether it applies to all of the relevant regulated employees to be engaged under a regulated labour hire arrangement) and
- whether the host employment instrument has ever applied to an employee at a classification that would be applicable to the relevant regulated employee or group of regulated employees.
The Explanatory Memorandum notes that if the host employment instrument has previously applied to employees at the same classification as the regulated employee, it may weigh against the making of an alternative pay order. Alternatively, where the host employment instrument would apply to a class of employees that would not generally include the regulated employee, it may support the view that an alternative covered employment instrument might be more appropriately applied to the regulated employee.
Effect of making an alternative pay order
An alternative pay order specifies how the alternative protected rate of pay is calculated and that the labour hire employer must pay the rate of pay worked out in that way to the regulated employee. In effect, where a labour hire order is already in force at the time the alternative pay order is made, the alternative pay order applies instead of the labour hire order (but only to work performed once the alternative pay order comes into force).
Compliance alternative pay orders
As with modern awards and enterprise agreements, the Bill provides that a person must not pay a regulated employee less than amount specified in an alternative pay order. Where this occurs, the maximum civil penalty that a court can impose would be 60 penalty units for a normal contravention (currently equivalent to $18,780) and 600 penalty units for a serious contravention (currently equivalent to $187,800).
Part 6 of Schedule 1 makes related changes to facilitate the making of labour hire orders and alternative pay orders including:
- requiring regulated hosts, on request, to provide relevant information on pay rates to enable employers to comply with a labour hire order by paying the correct protected rate of pay
- allowing the FWC to resolves disputes, including by mandatory arbitration, about the operation of labour hire orders (including how the protected rate of pay is to be calculated) and
- various anti-avoidance measures attracting civil penalties for breaches, such as:
- schemes with the sole or dominant purpose to prevent the FWC from making a labour hire order (and the FWC is prevented from making the order)
- engaging successive employees for periods that enliven the short-term arrangement exemption and avoid paying employees relevant rates of pay under labour hire or alternative pay orders and
- dismissing labour hire employees and engaging other workers as independent contractors to perform the same work to avoid paying employees relevant rates of pay under labour hire or alternative pay orders.
Readers are referred to the Explanatory Memorandum for details on those measures.
Commencement of changes, transitional and application provisions
The proposed changes commence the day after the Bill receives the Royal Assent. Transitional and application provisions include:
- the requirement for labour hire employers to pay regulated workers the protected rate of pay under a labour hire order will apply from 1 November 2024, including labour hire arrangements entered into before that date
- the anti-avoidance measures apply retrospectively to conduct engaged in (including beginning schemes to prevent the FWC from making a labour hire order) from 4 September 2023.
The consultation processes for the proposed ‘same job, same pay’ reforms are detailed at pages 28 to 35 of the relevant RIS. In summary this appears to have included:
- initial consultations ‘undertaken in 2022’ by the department with ‘over 40 stakeholders including employers, peak industry and employer groups, labour hire providers, unions and state and territory governments across 15 consultation meetings’
- ‘more detailed consultations’ occurred from February to August 2023 with ‘more than 45 consultation sessions on this proposal, held with over 75 stakeholders’
- from 13 April 2023 to 12 May 2023: public consultation seeking submissions in response to the ‘Same Job, Same Pay consultation paper’ consultation paper (all consultation sessions and written submissions are treated by the department as confidential to ‘encourage stakeholders to provide frank feedback about proposals and potential impacts on corporate arrangements, individual businesses, and the broader economy’)
- meetings of the NWRCC and of Workplace Relations Ministers to discuss the Government’s proposals at a high level on 8 June 2023, chaired by the Minister for Employment and Workplace Relations and
- further consultations with key employer and union stakeholders on 16 June 2023.
Position of non-government parties/independents
During the second reading debate in the House of Representatives, a number of Opposition members argued variously that the proposed ‘same job, same pay’ reform would:
- ‘mean a labour hire worker who is brand-new to the business will, by law, have to be paid the same as the employee with decades of experience’
- result in increased costs being passed onto consumers by businesses
- discourage ‘different forms of employment’ and
- ‘is cumbersome and clunky’ and does not ‘compare like with like’.
At the time of writing none of other non-government parties or independents appear to have expressed a view on the ‘same job, same pay’ reforms.
Position of major interest groups
Minerals Council chief executive Tania Constable has argued that the labour-hire changes would harm investment in Australia and result in higher costs across the economy. The Australian Chamber of Commerce and Industry (ACCI) has said the government should ‘stop demonising’ labour hire and has supported the exemptions for small businesses and training arrangements.
Prior to the introduction of the Bill, Master Builders Australia (MBA) argued that employee-like reforms will increase costs and red tape for small businesses using independent contractors and harm independent contractors outside the gig industry
ACTU secretary Sally McManus said claims that there would be additional costs incurred through the new laws and passed on to consumers were misleading.
In the context of a submission to the Department of Employment and Workplace Relations in relation to a consultation on a series of issues papers on a range of industrial relations matters, the Law Council of Australia endorsed the principle of ‘same job, same pay’.
Key issue #5: criminalising wage theft
Parts 10 and 14 and Division 3 of Part 11 of Schedule 1 of the Bill deal with ‘wage theft’.
What is wage theft?
Whilst definitions differ, the term ‘wage theft’ can be said to refer to both the underpayment of wages as well as the non-payment of wages (both intentional and non-intentional). The Queensland Parliament Education, Employment and Small Business Committee’s inquiry into the cost of wage theft in Queensland, defined wage theft as:
The underpayment or non-payment of wages or entitlements to a worker by an employer, encapsulating any of a range of activities that deny workers their legal entitlements.
Various inquiries and reports at the state and Commonwealth level have examined wage theft in recent years including:
- Senate Education and Employment References Committee, ‘Chapter 6: wage theft’, Corporate Avoidance of the Fair Work Act, 6 September 2017
- Senate Standing Committee on Economics, Superbad – Wage Theft and Non-compliance of the Superannuation Guarantee, 2 May 2017
- Senate Education and Employment References Committee, Wage Theft? What Wage Theft?!: The Exploitation of General and Specialist Cleaners Working in Retail Chains for Contracting or Subcontracting Cleaning Companies, November 2018
- Queensland Education, Employment, and Small Business Committee, A Fair Day’s Pay for a Fair Day’s Work? Exposing the True Cost of Wage Theft in Queensland, Report, 9, November 2018
- A Fels AO and D Cousins AM, ‘Report of the Migrants Workers’ Taskforce’, Australian Government, March 2019
- T Beech, Inquiry into Wage Theft in Western Australia, June 2019 and
- Senate Economics References Committee, ‘Systemic, sustained and shameful: Unlawful underpayment of employees' remuneration’, March 2022.
This Bills Digest does not examine the above reports. However, their contents and recommendations highlight the contemporary and ongoing concerns regarding wage theft which the Bill attempts to address.
Application of existing criminal laws to wage theft cases and recent reforms
Most states and territories have criminal legislation that could be applied to cases of deliberate underpayment or non-payment of wages. These offences are usually part of the family of offences related to fraud, dishonestly obtaining a financial benefit or obtaining a financial advantage by deceit.
Whilst the general criminal law in the states and territories has been successfully applied in relation to what is colloquially termed wage theft, such cases appear to be uncommon. This, and on-going concern about the prevalence of wage theft in Australia has prompted some states to pass specific criminal laws dealing with wage theft, including:
In addition to the above, Western Australia introduced a Bill aimed in part at tackling wage theft by using civil penalty provisions and enhanced regulatory powers. The drafting of the Bill’s wage theft offence differs from both the Queensland and Victorian laws and the wage theft offence included in the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 as introduced (see pages 62 to 67 of the relevant Bills Digest).
Proposed criminal wage theft offence
Item 220 in Part 14 of Schedule 1 to the Bill inserts proposed section 327A into Part 2-9—Other terms and conditions of employment of the FW Act, which is intended to criminalise wage theft. It provides that an employer commits an offence where:
- the employer is required to pay an amount (a required amount) to, on behalf of, or for the benefit of, an employee under the FW Act or a specified instrument (for example, an enterprise agreement, modern award or an order of the FWC, but not an employment contract) and
- the required amount is not a contribution payable to a superannuation fund for the benefit of the employee or certain other amounts (long service leave under state or territory legislation, leave for victims of crime and paid jury service / emergency services leave) and
- the employer engages in conduct and
- the conduct results in a failure to pay the required amount to, on behalf of, or for the benefit of, the employee in full on or before the day when the required amount is due for payment.
Fault elements of the proposed criminal wage theft offence
As is standard with all Commonwealth criminal offence provisions, proposed section 327A includes fault elements that must be proved in a prosecution beyond a reasonable doubt. Those elements are:
- absolute liability applies to the physical elements in proposed paragraphs 327A(1)(a) and (b) – that is, the requirement to pay the required amount and
- intention applies for the elements of the offence at proposed paragraphs 327A(1)(c) and (d). That is:
- that the employer intentionally engaged in the relevant conduct (an act or omission) and
- the employer intended that their conduct would result in a failure to pay the required amount in full on or before the day when the required amount is due for payment.
In relation to absolute liability attaching to elements of the offence, the Explanatory Memorandum notes:
Section 6.2 of the Criminal Code provides that the prosecution is not required to prove any fault element in relation to any offence or physical element of an offence which is expressly provided to be of absolute liability. Where absolute liability applies to an element of an offence or the complete offence, the defence of mistake of fact under section 9.2 of the Criminal Code is not available to the defendant. Absolute liability is appropriate in situations where it is not sensible to place on the prosecution the onus of demonstrating a fault element and where the mistake of fact defence should not be available to a defendant. Absolute liability applies to the physical elements in proposed paragraphs (1)(a) and (b) because in most applicable instances the person concerned will not possess any fault element concerning these physical elements, and accordingly the offence would become almost unenforceable if the prosecution were obliged to demonstrate fault… The defence of mistake of fact should not be available to the defendant for paragraphs (1)(a) and (1)(b) and accordingly absolute liability, and not strict liability, is the appropriate application.
In relation to the intention fault element that applies to aspects of the offence, the Explanatory Memorandum notes:
For new paragraph 327A(1)(c) [the employer intentionally engaged in the relevant conduct: an act or omission] the prosecution will have to prove beyond reasonable doubt that the defendant intentionally engaged in the relevant conduct. A failure to make a payment, for example, due to a banking error would not be caught by the provision. For clarity, the term ‘engage in conduct’ will be defined in section 12 to mean: do an act or omit to perform an act… For new paragraph 327A(1)(d) [the employer intended their conduct would result in a failure to pay the required amount on time], the prosecution will have to prove beyond reasonable doubt that the defendant intended that their conduct would result in a failure to pay the required amount to, on behalf of, or for the benefit of, the employee in full on or before the day when the required amount is due for payment.
For there to be an offence, the person must mean to bring about the result (that is, a failure to pay the required amount), or be aware that result will occur in the ordinary course of events (refer to section 5.2 of the Criminal Code). This makes clear that underpayments that are accidental, inadvertent or based on a genuine mistake are not caught by the provision. For example, if an employer genuinely misclassifies an employee and pays them an hourly rate of $25 per hour instead of $30 per hour (for the correct classification), the resulting failure to pay the required amount ($30 per hour) was not intentional and would not be caught by the provision. If, however, an employer paid an employee $10 per hour, knowing it was below the minimum wage, the resulting failure to pay the required amount (whatever it may be) would be intentional, and caught by the provision. Exact knowledge of the required amount (to a dollars and cents value) would not be required to establish the offence. [emphasis added]
Proposed penalties for criminal wage theft
Proposed subsection 327A(5) of the FW Act provides that the wage theft offence is punishable on conviction by a fine for body corporates and a term of imprisonment of not more than 10 years and/or a fine for individuals. In comparison, the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 as introduced would have imposed a maximum penalty of 4 years imprisonment, and existing state offences impose a maximum sentence of 10 years (see page 65 of the relevant Bills Digest).
Proposed subsection 327A(6) provides that the maximum amount of a fine will depend on whether a Court is able to determine the underpayment amount (the difference between the required amount and the amount the employer actually paid), as follows:
- Where a Court can determine the underpayment amount—the greater of:
- if a Court cannot determine the underpayment amount, then maximum penalty is 5,000 penalty units for an individual or 25,000 penalty units for a body corporate.
Penalties for multiple offences
The Bill deals with situations where multiple wage theft offences are committed as part of a ‘course of conduct’ so that:
- if a person is found guilty of committing two or more wage theft offences (the aggregated offences) and
- the aggregated offences arose out of a course of conduct by the person
then the person is taken for sentencing purposes to have been found guilty of a single offence.
The Explanatory Memorandum clarifies that the intention is that a course of conduct may occur in relation to groups of employees who have been underpaid in the same manner over time, not just in relation to a single employee.
Where an employer is found guilty of aggregated offences that arose out of a course of conduct, the Bill provides that when calculating penalties based on the underpayment amount, if multiple offences are grouped and penalised as a single offence, then the corresponding underpayments must also be aggregated (that is, added up together) for purposes of applying these penalties.
Abrogation of privilege against self-incrimination
Both the common law and international human rights law deal with self-incrimination. The common law provides a ‘privilege’ against self-incrimination: a person cannot be required to answer questions or produce material which may incriminate them. This is a key component of the common law right to be presumed innocent. It is also an element of the rights to a fair hearing and to be presumed innocent under international human rights law. Accordingly, where legislation abrogates the ‘privilege’ against self-incrimination, generally the following safeguards must be provided:
- 'use' and 'derivative use' immunity, to prevent information obtained directly or indirectly from being used in criminal proceedings against the person who provided the information and
- restrictions on the sharing of information obtained with law enforcement agencies.
The FW Act provides that functions of the Fair Work Ombudsman (FWO) include monitoring compliance with the FW Act, and inquiring into, and investigating any act or practice that may be contrary to the Act (that is, investigating offences against the FW Act). The Bill includes amendments to ensure the FWO has new, specific functions of investigating various proposed offences (including the proposed wage theft offence) and ‘related offence provisions’ in the Crimes Act 1914 and Criminal Code Act 1995, that deal with ancillary and similar liability, insofar as they relate to offences against the FW Act.
Under the FW Act, employers must keep certain records – including pay slips. In practice obtaining such records is often central to the FWO (or an employee) establishing that underpayment has occurred in civil proceedings. To this end, the FW Act enables the FWO to issue a notice requiring a person to produce records or documents. Where this occurs, existing subsection 713(3) provides that where a person gives information, produces a record or document, or answers a question, when required by a FWO notice, any information or answer given, or record or document produced, is not admissible in evidence against the individual in proceedings, other than various offences related to providing false or misleading information and documents or obstructing a Commonwealth official).
Given that the FWO will be a key investigatory agency for alleged breaches of the proposed criminal wage theft offence, the Bill would provide that privilege against self-incrimination is abrogated in relation to two classes of documents:
- employee records required to be made and kept under section 535 of the FW Act (this includes various remuneration related matters including the rate of remuneration paid to the employee and if the employee is entitled to be paid loadings, penalty rates or overtime rates) and
- a copy of a pay slip that was created in relation to an employee under section 536 of the FW Act.
As a result, such employee records and copies of pay slips may be used in evidence in wage theft offence matters. The Explanatory Memorandum notes that the privilege against self-incrimination would ‘significantly impair’ the ability of the FWO ‘to effectively investigate the new wage theft criminal offence’ and ‘providing immunity would mean the regulator [FWO] is unable to properly discharge their function in respect of criminal underpayments’.
Proposed ‘safe harbours’ against the proposed criminal wage theft offence
Other than complying with the FW Act, the Bill provides two ‘safe harbour’ mechanisms for employers to avoid criminal prosecution for the proposed wage theft offence:
- compliance with a voluntary small business wage compliance code (VSB wage Code) or
- entering into a cooperation agreement with the FWO if the relevant requirements are met.
The Bill allows the FWO to enter into a cooperation agreement with a person that self-reports to the FWO the possible commission of the proposed wage theft offence or related offences. The Explanatory Memorandum notes that the framework for making a cooperation agreement is intended to provide a person with the opportunity to access ‘safe harbour’ from potential criminal prosecution if:
- they have engaged in conduct that amounts to the possible commission of the new wage theft offence or related offence and self-reported their conduct to the FWO and
- if, after having regard to a range of matters, the FWO decides to enter into a cooperation agreement with the person.
The matters that the FWO must have regard to when deciding whether to enter into a cooperation agreement include but are not limited to:
- whether, in the FWO’s view, the person has made a voluntary, frank and complete disclosure of the conduct (to the extent of the person’s knowledge at the time of the disclosure)
- the nature and level of detail of the disclosure and
- the person’s history of compliance with the FW Act.
The effect of making such a cooperation agreement is that the FWO must not refer the conduct engaged in by the person that is covered by the agreement to the CDPP or the AFP for possible criminal prosecution while the cooperation agreement is in force. However, whilst a cooperation agreement is in force, it does not prevent the FWO instituting or continuing civil proceedings in relation to the self-reported conduct, or conduct engaged in by any other person from being referred to the CDPP or the AFP for action in relation to a possible offence.
Readers are referred to the Explanatory Memorandum for further details about the duration, variation and termination of cooperative agreements.
Voluntary small business wage compliance code
The Bill enables the Minister to declare, by legislative instrument, a voluntary small business wage compliance code (the VSB wage Code). It is intended that compliance with the VSB wage Code will provide assurance to small business employers that they will not be referred for criminal prosecution for wage theft under the FW Act.
Under the Bill, where a small business employer has underpaid an employee and wishes to seek assurance from the FWO, the small business employer will need to satisfy the FWO that it has complied with the VSB wage Code in relation to that underpayment. The Explanatory Memorandum notes that this could include evidence that the small business employer has rectified any systemic issue that contributed to underpaying affected employees and that required payments have been made to those employees.
If the FWO is satisfied that a small business employer has complied with the VSB wage Code the FWO must not:
- refer any conduct that resulted in the failure to pay to the CDPP or the AFP for action in relation to a possible breach of the proposed wage theft offence or
- enter into a cooperation agreement with the employer that covers any conduct that resulted in the ‘failure to pay’.
Compliance or otherwise with the VSB wage Code does not prevent the FWO from:
- commencing or continuing civil proceedings
- giving a compliance notice in relation to the conduct, or
- to accept an enforceable undertaking in relation to the conduct.
Readers are referred to the Explanatory Memorandum for further details about intended operation and effect of the VSB wage Code.
Increases to civil penalties
Amendments in Parts 11 and 14 of Schedule 1 of the Bill will:
- significantly increase civil penalty provisions for certain contraventions of the FW Act and
- introduce ‘recklessness’ as an element of what constitutes a serious contravention and, by doing so, effectively ‘lowering the bar’ for proving serious contraventions.
Change to meaning of serious contravention
Currently a serious contravention of a civil offence provision in the FW Act is defined as where:
- the person knowingly contravened the provision and
- the person’s conduct constituting the contravention was part of a systematic pattern of conduct relating to one or more other persons.
The Bill will amend the concept of a serious contravention to be where:
- the person knowingly contravened the provision and
- the person was reckless as to whether the contravention would occur.
Item 148 in Part 11 of Schedule 1 to the Bill repeals existing subsections 557A(2) to (5) which contain the current requirement that ‘the person’s conduct constituting the contravention was part of a systematic pattern of conduct relating to one or more other persons’ and related provisions for determining if a systematic pattern of conduct existed.
In addition, item 148 inserts proposed subsection 557A(2) into the FW Act so that a person is reckless as to whether a contravention would occur if:
- the person is aware of a substantial risk that the contravention would occur and
- having regard to the circumstances known to the person, it is unjustifiable to take the risk.
The Explanatory Memorandum notes:
The definition is specific to the provision, and adopts a ‘subjective belief’ test, commensurate to the test that is typically used in the criminal law. The higher evidentiary bar posed by using the ‘subjective belief’ test for recklessness reflects the seriousness of these kinds of contraventions, which attract relatively high civil pecuniary penalties under the FW Act. The insertion of this provision is not intended to affect the operation of how ‘recklessness’ fault elements operate elsewhere in the FW Act, as the term is intended to take its meaning from the individual purpose and context of each provision.
The effect of the amendments will be to ‘lower the bar’ for proving serious contraventions, compared to the existing high barrier the ‘systematic pattern of conduct’ imposes.
Other increases to maximum civil penalties
The Bill makes numerous amendments to the maximum amount of civil pecuniary penalties that can be imposed for various contraventions. Whilst not explored in detail, in summary the Bill would:
- increase civil pecuniary penalties that apply to contraventions (including serious contraventions) of wage exploitation-related provisions by five times
- increase the civil pecuniary penalty for failure to comply with a compliance notice by 10 times so that it is consistent with other penalties and
- enable the maximum penalty for a contravention to be determined by reference to three times the value of the underpayment (if relevant) in certain circumstances.
Readers are referred to pages 138 to 143 of the Explanatory Memorandum for further details about specific provisions amended, and the resulting maximum penalty amounts.
Commencement of changes
The new criminal offence for wage theft will commence on the earlier of a day fixed by Proclamation or 1 January 2025. The proposed criminal wage theft offence will only apply prospectively, that is, in relation to conduct that occurs after commencement. If part of a single course of conduct occurs before, and some after, commencement, only conduct that occurs afterwards may be subject to prosecution.
Readers are referred to the Explanatory Memorandum for further details about the commencement of other changes.
The consultation processes for the proposed criminal wage theft offence appears to have included:
Position of non-government parties/independents
In relation to the proposed wage theft offence, Opposition Member Aaron Violi noted:
The coalition has zero tolerance for any exploitation of workers, including underpayment of wages and entitlements by any employer. Deliberate rip-offs of workers are not acceptable and should have serious sanctions, but these should only apply to intentional conduct, not mistakes. Reforms around wage underpayments and theft should also come with reforms to simplify the workplace system to avoid underpayments in the first place. The Fair Work Act is already over 1,200 pages long, and this bill seeks to add over 200 extra pages to it. If those opposite were serious about wage theft, then why did they vote down the coalition's proposal to legislate a wage theft provision in the Fair Work Act in 2021? Why won't they separate wage theft out of this bill?
Other Opposition speakers in the second reading debate in the House of Representatives raised various concerns including that the Bill will ‘criminalise innocent mistakes and have them interpreted as wage theft for many small and family businesses’ and will make wage theft more likely, not less likely.
As noted earlier, Bob Katter MP has argued that the Bill does not go far enough and proposed a second reading amendment.
At the time of writing none of the other non-government parties or independents appear to have expressed a view on the proposed wage theft reform.
Position of major interest groups
Employer groups generally agreed that restrictions on wage theft were a good thing, and the ACCI supported the limitation of wage theft laws to deliberate and intentional conduct, but these groups generally argued that the Bill will not improve the rates of wage theft in Australia. For example, the ACCI noted:
ACCI welcomes the decision of government to limit wage theft laws to deliberate and intentional conduct only. Businesses trying to do the right thing and make a mistake should not face jail time or onerous penalties. That said, nothing announced today will improve the rates of underpayments in this country. We know that the key driver of non-compliance is Australia’s absurdly complex industrial relations system. A Byzantine awards system with different shifts, overtime, and penalty rates dramatically increases the chance that an employer makes a payment mistake. The reality is that many laws, regulations and agreements in the workplace are outdated, convoluted and complex, resulting in the under- and over-payment of employees. If the minister is serious about addressing underpayments, he should start by simplifying the awards system.”
The construction union’s national secretary, Zach Smith, stated that the national criminalisation of wage theft is an important first step but that the Bill should have also addressed unpaid superannuation.
Key issue #6: criminalising industrial manslaughter
WHS Model law
The WHS Act and Work Health and Safety Regulations 2011 are based on model laws underpinned by the Intergovernmental Agreement for Regulatory and Operational Reform in Occupational Health and Safety (IGA) signed in July 2008 by the Commonwealth, state and territory governments.
Once the components of the model WHS laws began to be finalised from 2011, each jurisdiction was able to implement the laws by passing legislation in their own Parliaments, incorporating minor variations as required. This means that WHS duties, obligations and processes are consistent in these jurisdictions, subject to minor variations. It is possible for the laws of different jurisdictions to apply concurrently.
Currently, no specific industrial manslaughter offence exists under the WHS Act. The 2018 Review of the model Work Health and Safety laws (the Boland Review) recommended that the model WHS laws be amended to provide for a new offence of industrial manslaughter (recommendation 23b). Marie Boland provided the following rationale for recommending the new offence of industrial manslaughter:
I consider that this new offence is required to address increasing community concerns that there should be a separate industrial manslaughter offence where there is a gross deviation from a reasonable standard of care that leads to a workplace death. It is also required to address the limitations of the criminal law when dealing with breaches of WHS duties. More broadly, the ACT and Queensland have already introduced industrial manslaughter provisions, with other jurisdictions considering it, and so this new offence also aims to enhance and maintain harmonisation of the WHS laws.
Existing industrial manslaughter legislation
In the absence of an industrial manslaughter offence in the model WHS laws, the states and territories have proceeded to enact legislation which is specific to their jurisdiction. Currently, only the Commonwealth, New South Wales and Tasmania do not have legislation in force that establishes an industrial manslaughter offence. The existing industrial manslaughter offences are set out in the table below.
Table 3: existing industrial manslaughter offences
|Australian Capital Territory
||Work Health and Safety Act 2011 (ACT), section 34A.
- imprisonment for 20 years for an individual, or
- $16,500,000 for a body corporate
||Work Health and Safety (National Uniform Legislation) Act 2011 (NT), section 34B.
- life imprisonment for an individual, or
- 65,000 penalty units for a body corporate ($11,440,000)
- imprisonment for 20 years for an individual or
- 100,000 penalty units for a body corporate ($15,480,000)
||Occupational Health and Safety Act 2004 (VIC), section 39G.
- imprisonment for 25 years for an individual or
- 100,000 penalty units for a body corporate ($19,231,000)
||Work Health and Safety Act 2020 (WA), section 30A.
- imprisonment for 20 years and a fine of $5,000,000 for an individual or
- a fine of $10,000,000 for a body corporate
||Gross negligence manslaughter
||Varies according to jurisdiction (between 20 and 25 years)
Source: As compiled by the Parliamentary Library.
Current offences and penalties
Offences under the WHS Act are expressed as being category 1, category 2, or category 3. Relevant to the Bill is the offence of Category 1 reckless conduct, which applies where a person with a health and safety duty exposes an individual to whom that duty is owed to a risk of death or serious injury or illness, and the person is reckless as to that risk. As such, it can potentially apply to workplace deaths where recklessness of a person with the relevant duty of care was a factor (industrial manslaughter).
The Criminal Code Act 1995 provides that a person is reckless with respect to a circumstance if he or she is aware of a substantial risk that the circumstance exists or will exist; and having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
The current maximum penalties for the existing Category 1 offence are:
- 5 years imprisonment and/or a fine of $300,000 for a natural person who is not conducting a business or undertaking, nor an officer of such a person
- 5 years imprisonment and/or a fine of $600,000 for a person conducting a business or undertaking, or an officer of such a person
- $3,000,000 for a body corporate.
What are the proposed changes?
Item 1 in Part 1 Schedule 4 to the Bill inserts proposed section 30A into the WHS Act to establish the offence of industrial manslaughter.
Proposed section 30A provides an offence of industrial manslaughter is committed where a person is conducting a business or undertaking (PCBU), or is an officer of a PCBU and
- the person has a health and safety duty
- the person intentionally engages in conduct
- the conduct breaches the health and safety duty
- the conduct causes the death of an individual (including where conduct substantially contributes to the death)
- the person was reckless, or negligent, as to whether the conduct would cause the death of an individual.
The Criminal Code provides that a person is negligent with respect to a physical element of an offence if his or her conduct involves such a great falling short of the standard of care that a reasonable person would exercise in the circumstances, and such a high risk that the physical element exists or will exist, that the conduct merits criminal punishment for the offence.
Where a person is charged with industrial manslaughter but found not guilty, that person may alternatively be found guilty of a Category 1 or Category 2 offence. This will occur where the evidence shows that a person has committed one of these offences, and the person has been accorded procedural fairness regarding the finding of guilt for a Category 1 or Category 2 offence.
No limitation period would apply to industrial manslaughter prosecutions, and the limitation period under section 232 of the WHS Act would not apply to alternative verdicts.
The maximum penalty in the case of an offence committed by an individual would be 25 years imprisonment. In the case of an offence committed by a body corporate, the maximum penalty would be $18,000,000. Under the Crimes Act 1914, unless a contrary intention is expressed, a court can impose a financial penalty instead of, or in addition to, a penalty of imprisonment. However, industrial manslaughter will be subject to an exception and a financial penalty will not be allowed to be imposed instead of a prison sentence.
Increases in penalties
Part 6 of Schedule 4 to the Bill makes various amendments to penalties for offences under the WHS Act generally. The Explanatory Memorandum to the Bill explains that Schedule 4 would increase all penalties in the WHS Act by 39.03% and provide for future indexing. The penalty applicable for a Category 1 offence would exceed the similar increase in recent amendments to the model Act. The Explanatory Memorandum states that:
The decision to depart from the model Act was made to ensure the coherence of the Commonwealth WHS offence penalty scheme. Workplace fatalities could be prosecuted as either an industrial manslaughter offence or a Category 1 offence. Adopting the model penalty for Category 1 would conflict with the principle set out in the Guide which holds that a penalty should be consistent with penalties of a similar kind or of a similar seriousness.
Commencement of changes
Part 1 of Schedule 4 to the Bill commences on 1 July 2024, and the new industrial manslaughter offence under section 30A of the WHS Act will only apply to conduct occurring on or after 1 July 2024. The changes increasing the maximum penalties for offences, including the increase to Category 1 penalties will commence the day after Royal Assent.
Position of non-government parties/independents
At the time of writing none of the non-government parties or independents appear to have expressed a view on the specific proposed industrial manslaughter offence.
Position of major interest groups
No major interest groups appear to have commented specifically on the industrial manslaughter provisions proposed in the Bill. However, in June 2023 the ACTU advocated for the inclusion of an industrial manslaughter offence in the WHS Act.
In October 2018, the Senate Standing Committee on Education and Employment reported on its inquiry into the framework surrounding the prevention, investigation and prosecution of industrial deaths in Australia.
Various stakeholders made submissions to this inquiry with regard to whether offences of industrial manslaughter should be introduced, noting that at that time, only Queensland and the Australian Capital Territory had enacted industrial manslaughter provisions.
In general, trade unions were supportive of the introduction of federal industrial manslaughter laws. The ACTU supports the inclusion of an industrial manslaughter offence as an ‘outcome‑based’ offence, stating:
As noted in the review of the Model WHS Laws the current criminal law is limited in its ability to respond effectively to work-related deaths caused by negligence in the workplace, in particular by larger corporations …
Another limitation of criminal manslaughter offences is the inability to sanction corporations. The inability to imprison a corporation has been a barrier to achieving justice for workers killed at work. The ability for courts to impose significant financial penalties is a critical element to effective industrial manslaughter provisions.
The Construction Forestry Maritime Mining and Energy Union (CFMMEU) argued that financial penalties alone are not an effective deterrent strategy to ensure better work health and safety outcomes. Instead, they opined that effective deterrence needs ‘to pierce the corporate veil’ so that corporate businesses are held to account.
Employer groups generally expressed concern about the introduction of industrial manslaughter offences. They submitted, for example:
- introducing a Commonwealth industrial manslaughter offence would lead to a misdirected focus on punishing wrongdoing (away from the core objective of WHS laws), undermine the efficacy of harmonised WHS laws and would overlap with general manslaughter offences 
- data indicates workplace injuries and fatalities are decreasing, and so the imposition of higher penalties under a new offence of industrial manslaughter is not warranted.
The Law Council of Australia submitted to the inquiry:
The offence of gross negligence manslaughter exists under common law. It has been noted that it is the crime most likely to be used to prosecute employers responsible for work-related deaths.
And that it
…is not convinced that a specific industrial manslaughter offence needs to be introduced into the Model WHS Laws, given existing criminal law and WHS offences (which already include offences that can give rise to jail sentences for those who recklessly cause death at a workplace).
Maurice Blackburn Lawyers supported the introduction of industrial manslaughter provisions across states and territories, based on national agreed standards. They provided the Committee with eleven case studies demonstrating the ‘lack of appropriate punishment meted to employers following a workplace death—simply as a result of inadequacies in current criminal law pertaining to senior management’.
Key Issue #7: first responders with PTSD and workers’ compensation
On 27 March 2018, the Senate referred an inquiry into the nature and underlying causes of mental health conditions experienced by first responders to the Education and Employment References Committee. The Committee published its report in February 2019. The report notes that ‘a number of witnesses and submitters called for presumptive legislation to be introduced, allowing first responders with PTSD to access compensation without first having to prove that their condition is work-related’.
First responders are liable to experience PTSD as a result of the characteristics of their employment, including the fact that first responders are exposed to trauma on a regular basis far beyond that experienced by the general population. In a study undertaken by Beyond Blue, cited by the inquiry report, first responders were found to have PTSD and high psychological distress at rates above those of the general population.
Current barriers to proving employment a cause of PTSD
As noted by the Committee in its inquiry report:
Claiming workers' compensation can be a daunting process, particularly if the injury concerned relates to mental health. At present, in most states first responders suffering PTSD are required to navigate this complex and adversarial system at a time when their mental health may be impeding their ability to navigate even basic daily interactions. The committee received substantial evidence which demonstrates that the process to make a claim for compensation—where first responders are required to relive their traumatic experiences, often on multiple occasions—has a tendency to exacerbate their psychological injury. [emphasis added]
Existing presumptive cause legislation
Some jurisdictions have introduced presumptive legislation.
The SRC Act applies to employees as defined in section 5. The term is defined to mean employees of the Australian government, employees of Australian government authorities and corporations, and employees of corporations otherwise licenced to self-insure under the SRC Act (generally former Commonwealth owned corporations).
Under the SRC Act, compensation may be paid to individuals suffering various injuries and diseases arising out of, or in the course of, employment. Section 7 of the SRC Act allows the Minister to specify certain situations in which employment will be presumed to have contributed, to a significant degree, to the contraction of a disease. While the Minister has, by legislative instrument, specified diseases and related types of employment under section 7, PTSD is not specified in this instrument, and so no presumption exists for first responders claiming workers’ compensation for PTSD under the SRC Act.
States and territories
Safe Work Australia, in its two-yearly comparison of workers’ compensation arrangements, published most recently in 2021 a table of presumptive legislation for PTSD and other diseases. In Queensland, Tasmania, Western Australia, and the Northern Territory, first responders are entitled to a presumption that their work caused PTSD when making a claim for workers’ compensation.
In the Australian Capital Territory, New South Wales, South Australia, and Victoria, where first responders claim workers’ compensation for PTSD, no presumption favouring these first responders currently exists under legislation.
Seven public hearings were held by the Senate Standing Committee on Education and Employment from July 2018 to November 2018, one in each state and one in the Australian Capital Territory. It is unclear if any specific consultations were undertaken after that time.
What are the proposed changes?
Item 2 in Schedule 3 to the Bill inserts proposed subsections 7(11) to (14) into the SRC Act to introduce a presumption regarding causation of PTSD suffered by first responders.
Under proposed subsection 7(11), where a person suffering from PTSD was employed as a first responder at any time before symptoms of PTSD became apparent, there is to be a presumption that the person’s employment as a first responder significantly contributed to the contraction of PTSD, unless the contrary is established.
Proposed definition of first responder
Proposed subsection 7(13) of the SRC Act defines an employee as a first responder if the employee is:
- an Australian Federal Police (AFP) employee, or the Commissioner or Deputy Commissioner of the AFP
- employed as a firefighter, an ambulance officer (including as a paramedic) or an emergency services communications operator or
- a member of an emergency service within the meaning of the Emergencies Act 2004 (ACT), where emergency service is defined to mean the ambulance service, the fire and rescue service, the rural fire service, or the SES.
The terms ‘firefighter’ and ‘ambulance officer’ are not further defined in this Bill.
Commencement of changes
Schedule 3 will commence 28 days after Royal Assent. The proposed changes would apply to an injury—being a disease or an aggravation of a disease—that is sustained by an employee after the commencement of Schedule 3. This would be determined in accordance with subsection 7(4) of the SRC Act.
Position of non-government parties/independents
Independent Senator David Pocock and Senator Jacqui Lambie of the Jacqui Lambie Network have called for the Bill to be split so that some provisions, such as provisions relating to workers’ compensation, can be dealt with this year. This is reportedly supported by employer groups, such as the Australian Chamber of Commerce and Industry, AiGroup, Minerals Council and Master Builders, as well as the Coalition.
According to Senator Jacqui Lambie:
police, ambulance officers and fire crews should not have to complete difficult processes to prove they are suffering from post-traumatic stress disorders related to their work. Senator Lambie said an expedited review of the laws could allow changes to come into force by January 1, 2024, instead of six months later. She also called for domestic violence measures, small business insolvency changes and assistance for people diagnosed with disease related to engineered stone to be progressed.
A number of Opposition members spoke in support of the measure during the second reading debate in the House of Representatives.
Position of major interest groups
The Australian Federal Police Association has expressed support for the measure. At the time of writing, it does not appear that any other major interest groups have commented directly on the measure.
However, in February 2019, the Senate Standing Committee on Education and Employment reported on its inquiry into the role of Commonwealth, state and territory Governments in addressing the high rates of mental health conditions experienced by first responders, emergency service workers and volunteers.
The Committee reported that a number of organisations for first responders made submissions that it is damaging, traumatic, and an impediment to recovery for first responders to engage with the workers’ compensation system.  Stakeholders said that employers have conflicts of interest in minimising the cost of workers’ compensation claims while also supporting staff, and there appeared to be an unwritten rule of stalling claims.
There was support for legislation to be introduced to establish a presumption in favour of first responders claiming workers’ compensation for PTSD.
|Matters not dealt with in this Bills Digest
||Location in the Bill
|Providing an exception to the operation of the small business redundancy exemption when a larger business downsizes to become a small business employer due to insolvency.
||Part 2, Schedule 1
|Enabling multiple franchisees to access the single-enterprise agreement bargaining stream.
||Part 3, Schedule 1
|Allowing supported bargaining and single interest employer enterprise agreements to be replaced by single-enterprise agreements at any time if certain conditions are met.
||Part 4, Schedule 1
|Allowing the FWC to make and vary enterprise agreement model terms for flexibility, consultation and dispute resolution in place of the existing provisions according to which these terms are made by regulation.
||Part 5, Schedule 1
|Providing a framework for workplace delegates’ rights and include protections for workplace delegates when seeking to exercise those rights (for example, by exercising right of entry).
||Part 7, Schedule 1
|Expanding general protections regime in the FW Act to provide protection against discrimination for employees who have been, or continue to be subjected to family and domestic violence.
||Part 8, Schedule 1
|Changing the defence to an allegation of ‘sham contracting’ (misrepresenting employment as an independent contractor arrangement) from ‘recklessness’ to one of ‘reasonableness’.
||Part 9, Schedule 1
|Enabling the FWC to provide a registered organisation with an exemption certificate which would waive the 24 hours’ notice requirement for entry under a right of entry permit if they reasonably suspect a member of their organisation has been, or is being, underpaid.
|Enabling the FWC to take action in relation to the future issue of such exemption certificates if those rights are misused by a registered organisation (for example, by imposing conditions, or banning their issue for a specified period).
|Clarifying that FWO compliance notices can require an employer to calculate the amount of an underpayment that is owed to an employee and that a court can order the recipient of the notice to comply with its terms.
|Repealing amendments made by the Fair Work (Registered Organisations) Amendment (Withdrawal from Amalgamations) Act 2020, relating to the withdrawal of parts of amalgamated organisations (demergers).
|Allowing the FWC to deal with disputes about unfair terms in services contracts to which an independent contractor is a party.
|Repealing a sunsetted clause regarding applications to vary modern awards if they are already being dealt with in a four yearly review.
|Extending the functions of the Asbestos Safety and Eradication Agency to address silica-related diseases.