Legal development

Status of the Closing the Loopholes Bill – What next for IR reform?

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    What you need to know

    • Yesterday, the Federal Government reached an agreement with the Greens and cross-benches in the Senate to split the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 into two – with the Parliament passing the first Bill which included reforms on labour hire ('same job, same pay') and criminalisation of wage theft.
    • The provisions on labour hire include the amendments agreed by the Government last week with industry associations to provide an exclusion for service providers from the scope of the laws.
    • Other provisions that were passed include: anti-discrimination protections for workers subjected to family and domestic violence; clarifying the small business redundancy pay exemption; safety provisions providing a new Commonwealth industrial manslaughter offence (applicable to Commonwealth departments, agencies and non-Commonwealth licensees), and Commonwealth first responder PTSD workers' compensation provisions.
    • The other parts of the Bill will be dealt with in a Closing Loopholes No. 2 Bill in the 2024. These include those parts concerning regulation of the gig economy and road transport industry, amendments relating to casual employment conversion, and further changes to the bargaining regime.

    What you need to do

    • The labour hire provisions commence upon assent of the legislation. Any orders made by the Fair Work Commission for 'same job, same pay' (called "regulated labour hire arrangement orders") are not able to commence until 1 November 2024.
    • Hosts and labour hire providers should carefully consider the new labour hire laws and be prepared for applications to be filed by interested unions once the laws commence, or for similar claims to be pressed in bargaining in the shadow of that new regime.
    • The criminalisation of wage theft provisions will not commence until 1 January 2025.

    Labour hire arrangements

    The Closing Loopholes Bill includes the amendments reached between the Government and certain employer associations concerning a form of exclusion of service contractors.

    The amendments provide that the Fair Work Commission must not make a regulated labour hire arrangement order unless it is satisfied that the performance of work is not, or will not be, for the provision of a service rather than the supply of labour. There are a range of matters that the FWC must consider in determining whether it is satisfied that the contract is for the provision of a service.

    These include:

    • the involvement of the employer in matters relating to the performance of the work
    • the extent to which, in practice, the employer (or someone acting on behalf of the employer) directs, supervises or controls the regulated employees when they perform the work – including managing rosters, assigning tasks or reviewing the quality of the work
    • the extent to which the regulated employees use/will use systems, plant or structures of the employer
    • the extent to which either the employer or another person is/will be subject to industry or professional standards or responsibilities in relation to the regulated employees; and
    • the extent to which the work is of a specialist or expert nature.

    The factors listed above were in the Bill previously, but were only required to be considered by the FWC if submissions were made about those matters. The amendments now require the FWC to consider the above matters irrespective of whether they are raised by a party.

    The labour hire provisions also include a number of other amendments from the initial Bill including:

    • Capturing joint venture arrangements - extending the kind of work to be covered by the new provisions to expressly capture joint venture or common enterprise arrangements (including that the FWC could consider the nature of the regulated host's interests in the joint venture or common enterprise and the pay arrangements of employees of any other people engaged in the joint venture or common enterprise)
    • Multiple employers covered under the same order – in an application for a regulated labour hire arrangement order, the FWC may determine that the order should apply to multiple employers that the FWC is satisfied supply or will supply employees to the regulated host, and those additional regulated employees. The FWC will also be able to make a variation to an existing order to cover new employers that commence supplying employees to the regulated host
    • Replacement instruments – where a regulated labour hire arrangement order is in force, and the host employment instrument covered by the order ceases to apply to the regulated host due to another instrument commencing, the new instrument is taken to be the host instrument covered by the order. This may arise, for example, where an enterprise agreement has passed its nominal expiry date and a replacement enterprise agreement is approved by the FWC for the host. In that case, the new enterprise agreement will become the host instrument
    • New positive obligations on the regulated host – the provisions also provide for a number of additional obligations on the regulated host, including:

    Giving notice of a new enterprise agreement or other instrument

    The host must give written notice to all employers covered by the regulated labour hire arrangement order if the host's employees approve a covered employment instrument (eg they vote to approve a new enterprise agreement), or any other approval of a covered employment instrument occurs (other than approval by the FWC), and that instrument would become the host employment instrument under the order

    Applying to the FWC to vary an order where new employers supply employees to do the same work

    If the host becomes aware that a new employer will start to supply employees to perform the same work that is subject to an order, the host must apply to the FWC for an order varying the regulated labour hire arrangement order to cover those new employers and their employees. Once this application is made, the host must give written notice of the application to each of the new employers; and

    Notifying tenderers of the existence of a regulated labour hire arrangement order

    From the start of the tender process, the host must ensure that all prospective tenderers are advised in writing that they could become covered by an existing regulated labour hire arrangement order and that they would be required to pay employees in accordance with the new provisions.

    • Termination payments for labour hire workers – the provisions specify how the applicable rate of pay is to be determined by the employer where an employee who is covered by a regulated labour hire arrangement order, is terminated;
    • Anti-avoidance – the provisions include a new civil remedy provision where a person, alone or with others, enters into, begins to carry out or carries out a scheme for the sole or dominant purpose of avoiding the application of a regulated labour hire arrangement order that has been made, even if that order is not in force yet. A contravention of this new provision carries a penalty of 60 penalty units, or 600 penalty units for a serious contravention.

    What's next?

    The separate Closing Loopholes Bill No. 2 will continue to progress in the Senate. The Senate Education and Employment Legislation Committee is due to deliver its report on the Bill by 1 February 2024, and presumably will still do so albeit only on the provisions that now remain in this second Bill.

    Authors: Trent Sebbens, Partner and Roanize Irish, Lawyer.

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