Fair Work update: Major changes to Employment Law

Introduction

Delivering on its promise of substantial workplace relations reforms, the Federal Government has completed two of the three significant rounds of changes to the Fair Work Act 2009 (Cth) ('The Fair Work Act') and related legislation, and has introduced a Bill that would take a third significant round of reform.

Some of the changes are relatively uncontroversial, while others are likely to significantly change the industrial relations landscape in Australia.

In this article, we highlight recent changes to employment laws that are most relevant to small and medium businesses. We also take a look at the Government's recent Fair Work Legislation (Closing Loopholes) Bill 2023, which has been introduced into the House of Representatives. Whilst the latest Bill is still the subject of intense negotiations and will almost certainly change from its current form, looking at the Bill nonetheless provides a view of where the Government plans to take industrial relations in Australia over this term of the Parliament.

1. Restrictions on fixed term contracts

With effect from 6 December 2023, the Fair Work Act will restrict employers' use of fixed term and maximum term employment contracts.

Under the new law, an employer can only use a fixed term contract, or a series of fixed term contracts, for permanent employees if:

a. The contract, or series of contracts, does not exceed two (2) years in duration; and

b. The contract is not renewable more than once.

This means that an employer could offer an employee a fixed or maximum term contract for 12 months, renewable for another 12 months.

However, an employer could not offer an employee a three (3) year contract, or a series of three (3) by six (6) month contracts.

There are a handful of exceptions, including where:

a. The employee is engaged under the term of the contract to perform only a distinct and identifiable task involving specialised skills (for example, requiring superior technical skills at a senior level);

b. The employee is engaged under the contract to undertake work during emergency circumstances or during a temporary absence of another employee (e.g. a parental leave position);

c. In the year that the contract is entered into, the amount of the employee's earnings under the contract is above the high income threshold for that year (currently set at $167,500.00); or

d. The contract relates to a position for the performance of work that:

i. is funded in whole or part by government funding; and

ii. the funding is payable for a period of more than two (2) years; and

iii. there are no reasonable prospects that the funding will be renewed after the end of that period.

2. Prohibition on pay secrecy

Employees now have a positive workplace right to disclose their remuneration and terms and conditions of employment that impact on remuneration. They also have a positive right to ask other employees about their remuneration and terms and conditions of employment that impact on remuneration.

Further, employers are now prohibited from having pay secrecy clauses in employment contracts.

We recommend that employers review their employment agreement templates and ensure that there are no clauses that seek to prevent employees discussing their pay and conditions.

Any clauses in existing contracts will be unenforceable and it will be unlawful to enter new contract with said clauses.

3. Requests for flexible working arrangements

Permanent and regular casual employees employed for 12months or more can make requests for flexible working arrangements, where they:

• are the parent, or have responsibility for the care of, a child who is school aged or younger
• are a carer (under the Carer Recognition Act 2010)
• have a disability
• are 55 years or older
• are pregnant
• are experiencing family or domestic violence, or
• provide care and support to an immediate family or household member who is experiencing family or domestic violence.

The process for approving, varying or rejecting requests for flexible working arrangements has been updated. In summary, under the revised process, employers will need to do the following when approving, varying or rejecting requests for flexible working arrangements:

The employer must respond to an employee's request for flexible working arrangements in writing within 21 days.

The employer must discuss the request with the employee if they plan to refuse a request or request a variation to the request.

An employer can only refuse a request where they have reasonable business grounds, they have genuinely tried to reach agreement with the employee, and they have considered the effects on the employee of not granting the request.

Further, a new dispute resolution procedure allows an employee to challenge an employer's refusal to grant their request in the Fair Work Commission (FWC). The FWC has the power to conciliate and arbitrate disputes.

4. Unpaid parental leave requests

Permanent and regular casual employees employed for 12 months of more can take unpaid parental leave for 12 months, and request an additional 12 months.

The process for approving, varying or rejecting request for extensions to unpaid parental leave has been updated in substantially the same manner as the process for approving, varying or rejecting requests for flexible working arrangements described above.

Further, as with requests for flexible working arrangements, a new dispute resolution procedure allows an employee to challenge an employer's refusal to grant their request for extended parental leave in the FWC. The FWC has the power to conciliate and arbitrate disputes.

5. Paid family and domestic violence leave

Paid family and domestic violence leave entitlements are now incorporated as part of the National Employment Standards in the Fair Work Act.

Under the changes, all employees are entitled to up to 10 days paid domestic violence leave.

There are also new rules about how family and domestic violence leave is recorded on pay slips. In particular, a period that an employee has taken as period of family and domestic violence leave is not to be recorded on their pay slip as either:

a. Family and domestic violence leave; or

b. any other type of leave

Instead, the leave must be recorded as if the employee is either receiving ordinary pay or some other kind of performance-based payment (in effect, treating the employee, for payment purposes, as if they are at work).

6. Unpaid parental leave

Unpaid parental leave entitlements have changed, to allow employees to take up to 100 days leave flexibly (up from 6 weeks) across a 24-month period.

Parents can now take their leave concurrently (previously there were limits on how much leave parents could take concurrently).

From 1 July 2023, there are also changes to the Government's paid parental leave scheme. Families can now access up to 100 days of paid parental leave, shared between both parents (where the family consists of two parents). The leave can be taken flexibly.

7. Respect@Work

A new prohibition of harassment based on sex was added to the federal Sex Discrimination Act by the previous government.

Under this change, it is prohibited to subject a person to a workplace environment that is hostile on the grounds of sex.

In addition, an employer now has a positive duty under the federal law to proactively take reasonable and proportionate measures to eliminate unlawful sex discrimination. The Respect@Work obligation is similar to existing provisions in the Victorian Equal Opportunity Act 2010.

8. Equal Remuneration

Under the Workplace Gender Equality Act 2012 (Cth), any employer with 100 or more employees is required to report their gender pay gap to the Workplace Gender Equality Agency.

From January 2024, employers covered by the Workplace Gender Equality Act are required to provide gender-based remuneration reports to the Agency.

In addition, employers are required to advise employees, relevant unions and shareholders when a gender-based remuneration report is lodged, and provide access to the report. Salary details are not included in the report.

9. Enterprise agreements and industrial bargaining

Changes to the BOOT

Changes have been made to the definition of the Better Off Overall Test, known as the BOOT.

Under the changes, the FWC may have regard to reasonably foreseeable patterns or kinds of work that employees may perform in assessing whether employees will better off overall compared to the Award.

Importantly, the FWC can now reconsider whether an Enterprise Agreement that is already in force passes the BOOT in circumstances where employees are working patterns of work not contemplated by the FWC when the FWC originally approved the Enterprise Agreement. This means that an existing Enterprise Agreement may be subject to review if an employee or union believes that the Enterprise Agreement no longer passes the BOOT test with respect to particular employees, compared to the relevant Award, because of changes in employees' pattern of work.

Multi-Enterprise Agreements - Single Interest EmployerBargaining Stream

One of more of the controversial changes introduced in the first tranche of reforms is the new single interest employer bargaining stream for Enterprise Agreements. This allows employees employed by different employers and their unions to bargain for the one Enterprise Agreement.

Two or more employers are single interest employers if the employers are:

1. engaged in a joint venture or common enterprise, or
2. related bodies corporate, or
3. specified in a single interest employer authorisation that is in operation in relation to the proposed enterprise agreement concerned.

The first two categories are relatively narrow. The question is how common it will be for unions to able to utilise the third category and obtain a single interest employer authorisation.

For the Fair Work Commission to be satisfied that it should make a single interest employer authorisation, it must find that the employers have a common interest. Common interest means that the businesses:

i. Carry on similar businesses as franchisees of the one franchisor;

ii. Have clearly identifiable common interests with other employers; or

iii. The employers' operations are reasonably comparable.

Factors that may be relevant in assessing common interests include geographical location, regulatory regime and the nature of the business(for example, the size, scope and employment conditions of the businesses).Further, the Fair Work Act has a rebuttable presumption that employers with more than fifty employees share a common interest, with the employees required to argue the contrary if they oppose a single interest employer authorisation.

Single interest employer authorisations can only be approved if the majority of employees of an employer support the authorisation (in circumstance where the employers oppose the authorisation), suggesting that they may be most common in industries that already have unionised workforces.

They do not apply to employers who have less than 20employees.

It remains to be seen how extensively the new single interest employer stream will be used by unions to negotiate Enterprise Agreements that apply across multiple employers within an industry.

10. In the pipeline

The Government's new bill, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, would introduce a number of further significant changes, if passed in its current form.

Definition of who is an employee

Historically, the question of who is an employee has been a matter for the common law. It is a question that most often comes up in the context of determining whether a worker is an employee or independent contractor.

The High Court, in the 2022 decisions of CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2, ruled that the question of whether a worker is an employee or independent contractor would ordinarily be determined based on an assessment of the rights and obligations of the parties set out in the written contract between the parties. This meant that a well-crafted contract could provide a business with significant certainty.

The Government is proposing, in effect, to reverse the High Court's approach with the insertion of a new definition of employment in the Fair Work Act. Under the new definition, to determine if a person is an employee, it would be necessary to consider 'the real substance, practical reality and true nature of the relationship between the individual and the person 'based on the 'totality of the relationship' and how the contract is performed in practice. In practice, this would entail making an assessment of the relationship as it plays out in practice over time, which would inevitably introduce a level of uncertainty for businesses compared to the current state of the law.

Definition of who is a casual employee

Similarly, the Government is proposing to redefine the definition of a casual employee following both an earlier decision of the High Court and changes to the Fair Work Act made by the previous Coalition Government.

Under the new definition, whether a person is a casual employee would still depend on whether the employment relationship is characterised by an absence of a firm advanced commitment to continuing and indefinite work at the commencement of the employment relationship, as is the case currently.

However, this would be assessed on the basis of the practical reality of the employment relationship, including whether the employee is likely to have a regular pattern of work and is likely to be offered continuing work, even if the employer is not contractually required tooffer regular or ongoing work.

There would also be updated casual conversion provisions, and new prohibitions on misrepresenting employment as casual employment when, in fact, the employment was not casual employment under the new definition.

Same Job Same Pay and Labour Hire

In one of more of the controversial moves of the Bill, the Government is proposing a new 'Same Job, Same Pay' provisions that would require businesses with Enterprise Agreements (the host business), and their labour hire providers, to provide the same (or better) conditions to labour hireworkers as the host business does for their direct employees.

The provisions would apply where the Fair Work Commission has made a regulated labour hire arrangement order.

These changes will have the largest impact on large employers, but small and medium businesses that have Enterprise Agreements and use labour hire providers should also take note of the proposed changes.

Wage theft

The Government is proposing to introduce new wage theft provisions that would criminalise the intentional underpayment of employees, with penalties of up to 10 years imprisonment.

Currently, underpaying employees can result in civil, but not criminal, penalties under the Fair Work Act (noting that Victoria has its own wage theft legislation).

Regulation of the gig economy - new road transport industry regulations

The Government's proposed reforms would introduce new measures to regulate the road transport industry, including the gig economy.

Under the new regime, the Fair Work Commission would be empowered to set minimum standards for indepdendent contractors working in the road transport industry. This would include workers obtaining work through digital platforms such as Uber.

If passed, we would expect a level of convergence between the conditions of employees covered by the Road Transport Industry Award 2020and other applicable Awards, and the conditions of independent contractors working in the road transport industry.

How Sharrock Pitman Legal can assist you

Our legal team includes Accredited Specialists in Workplace Relations (Samuel Ellemor) and Commercial Law (Mitchell Zadow).

As a boutique, commercial law practice, our primary, specialised focus is on caring for people in business and providing effective solutions to their vast array of legal needs.

If we can provide advice or assist you with your employment law queries, please do not hesitate to contact us on 1300 205 506 or email sp@sharrockpitman.com.au.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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