Loopholes closed? What employers should know about changes starting today

It’s back to the future for the assessment of employees versus contractors, with a legislated return to the ‘multi-factorial test’ that applied prior to the High Court’s contract-focused decisions in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.

From today, whether an individual is an employee or contractor will once again be determined by reference to “the real substance, practical reality and true nature of the relationship”. The relationship must be assessed by reference to the totality of the relationship, not only the terms of the contract, but also other factors including (without limitation) how the contract is performed in practice.

Individuals who earn more than the contractor high income threshold (currently $175,000) can opt out of the new definition in certain circumstances so that it does not apply to their working relationship (notice requirements apply).

Employees will have an enforceable workplace right to refuse to monitor, read or respond to contact, or attempted contact, outside of the employee’s working hours, both from employers and third parties (client, customer, supplier and the like, where the contact is work-related), unless that refusal is unreasonable. For employees of small businesses, this right commences on 26 August 2025.

Each modern award has also been varied to include the right to disconnect (the model term is available here and each award’s variation determination can be accessed here). The model term does not go much further than the legislated position, but does recognise the potential interaction with existing stand by arrangements, roster changes and potential recalls to work.

Whether a refusal is unreasonable will depend on the context. Relevant factors include:

• the reason for the contact or attempted contact, and how it is made;
• the level of disruption the contact or attempted contact causes the employee (with a telephone call likely to be more disruptive than a text message, and both more disruptive than an email);
• the nature of the employee’s role and level of responsibility;
• the extent to which the employee is compensated (monetarily or otherwise) to be available out-of-hours or for working additional hours; and
• the employee’s personal circumstances (including family/caring responsibilities and which may change over time).

If a dispute about the right is unresolved at the workplace level, the employee or employer can apply to the Fair Work Commission (FWC) to make a ‘stop order’ or otherwise deal with the dispute. For example, the FWC may make a preventative order if satisfied the employee’s refusal is:

• unreasonable, and there is a risk of that refusal continuing; or
• reasonable, and there is a risk the employer may discipline or continue to require the employee to engage with contact (despite a refusal).

The right to disconnect is a workplace right under the Fair Work Act, meaning employees can make general protections claims if they believe adverse action was taken against them because they exercised this right (or could do so in future).

Under the new definition of ‘casual employee’ (FW Act section 15A), an employee will be a casual only if:

• their employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work (‘character limb’); and
• they would be entitled to a casual loading or specific casual rate of pay.

Casual employees (within the meaning of the former section 15A) who commenced with an employer before today will be taken to be casuals within the meaning of new section 15A from today.

Importantly, among other things:

• The character limb is to be assessed against multiple factors – not only the contract – including the real substance, practical reality and true nature of the relationship.
• Employees commencing as casuals will remain so unless their employment changes in one of four ways: (1) the new ‘employee choice’ conversion pathway; (2) a FWC order; (3) by the terms of an industrial instrument; or (4) by accepting an alternative (not casual) employment offer.
• The new ‘employee choice’ conversion pathway will replace the previous conversion pathways, including employer offers, from 26 February 2025 (for small business employers from 26 August 2025). Under the new pathway, eligible casual employees employed for at least 6 months* can notify their employer if they believe they are no longer a casual employee under the framework. Employer consultation and response requirements apply. For casuals employed before today, the existing employer offer pathway remains applicable until 25 February 2025.
• If unresolved at the workplace level, disputes about conversion can be referred to the FWC for resolution, generally first by means other than arbitration. At arbitration stage, the FWC can make any orders it considers fair and reasonable (non-compliance may attract a civil penalty).
• A range of workplace rights attach to the new framework. This means employees can make general protections claims if they believe adverse action was taken against them because they exercised such a right.
• Employers must now also give casual employees the Casual Employment Information Statement (CEIS) on commencement and as soon as practicable after 6, 12 and every subsequent 12 months of employment*.

*Different arrangements apply to small business employers.

From today, the FWC has jurisdiction to hear claims to vary or set aside unfair contract terms agreed with eligible independent contractors.

Who is an eligible independent contractor? A contractor engaged under a ‘services contract’ earning less than the contractor high-income threshold (currently $175,000).  The services contract must have been made on or after today (26 August 2024).  Contracts already in existence can only be challenged using the existing Independent Contractors Act 2006 (Cth) regime.

Which terms can the FWC consider? Terms that would relate to workplace relations matters if the independent contractor were an employee e.g. remuneration, termination, disputes, leave, and matters dealt with under the FW Act.

Which terms might be ‘unfair’? The FWC will consider various terms unfair including those that:

• provide lower compensation than would be required in an equivalent employment scenario;
• impose a harsh, unjust or unreasonable requirement on a party to the contract;
• display a significant power imbalance between the parties; or
• are not reasonably necessary to protect the legitimate interests of a party to the contract.

On 15 December 2023, new workplace rights and protections for workplace delegates were introduced.

From today, most of these rights and protections now also extend to workplace delegates of ‘regulated workers’ (i.e. ‘employee-like’ workers and regulated road transport contractors).

Workplace delegates - who are persons appointed or elected to represent union members in the workplace - now have the right to represent the industrial interests of current and prospective union members who are either or both employees and regulated workers (members). This extends to disputes with the relevant employer or regulated business.

Workplace delegates are entitled to reasonable communication with members about their industrial interests, and for the purpose of representing those interests:

• in relation to members who are employees, reasonable access to the workplace and workplace facilities, 
• in relation to members who are regulated workers, reasonable access to workplace facilities of the regulated business, and
• delegates who are employees of non-small business employers are also entitled to access reasonable paid time for related training during normal work hours.

In determining what is reasonable in respect of these entitlements, regard must be had to the size, nature, resources and facilities of the employer or regulated business. Employers and regulated businesses bear the onus of proving the conduct is not unreasonable. Non-compliance may attract a civil penalty.

Corresponding protections for workplace delegates (when acting in their delegate capacity) now also apply in relation to employers’ and regulated businesses’ conduct.

Modern awards were updated on 1 July 2024 to include a delegates’ rights term (available here), and enterprise agreements voted on from that date must also now include such a term.

From today, the FWC has the power to regulate the working conditions of specific kinds of workers including certain workers in the gig economy (‘employee-like workers’) and the road transport industry. 

Among other things, the reforms establish the FWC’s jurisdiction to make binding minimum standards orders for employee-like workers and regulated road transport contractors (as well as non-binding minimum standards guidelines). These two types of ‘regulated workers’ are now separately defined in the FW Act, although some entities’ workers may be capable of coming within both categories.

Minimum standards orders set by the FWC (on its own initiative or by application) can include terms about payment, deductions, record-keeping and insurance, though they cannot include certain terms such as overtime rates, rostering arrangements or terms that would change the status of the workers covered by the standards. The FWC has indicated that at least initially it does not intend to commence applications on its own motion.

The reforms relating to ‘regulated workers’ also establish:

• the ability for representative organisations and operators/businesses to make collective agreements in relation to employee-like workers and regulated road transport industry contractors, with corresponding new powers for the FWC;
• the FWC’s power to make road transport contractual chain orders and guidelines to set minimum standards for persons in a road transport contractual chain (a chain which includes a broader array of parties connected to the road transport contract in addition to regulated road transport contractors). These sorts of orders may include terms about matters such as payment times and fuel levies;
• an unfair deactivation regime, allowing employee-like workers to apply to the FWC if they have been unfairly deactivated from a digital labour platform; and
• an unfair termination regime, allowing road transport contractors to apply to the FWC if their services contract has been unfairly terminated.

As part of the unfair deactivation and termination regimes, the application of any relevant processes in an applicable code (which are yet to be developed) will factor into the FWC’s assessment of any unfair deactivation/termination claim.  To commence either claim a worker must have worked for a digital labour platform or a road transport business for at least 6 months from today, so practically applications cannot be validly commenced until 25 February 2025.