Significant Changes to Australia’s Fair Work Act

What it means for your business

Australia’s employment laws are undergoing some of the most substantial reforms seen in recent years, with the introduction of the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) and the Fair Work Legislation Amendment (Closing Loopholes) Act 2024 (Cth). These changes, which are rolling out now until 2025, aim to address some grey areas in the legislation and enhance worker protections. Here’s a detailed look at these significant updates.

Casual employment redefined

From 26 August 2024, the definition of casual employment will shift. Rather than just considering what their contract says, it will consider a ‘multi-factor’ test that considers the entire employment relationship. This new definition emphasises the absence of a guaranteed ongoing work arrangement and the entitlement to casual loading for true casuals.

Employers must assess work relationships to determine casual status accurately, which may involve reviewing rosters, hours of work, and the integration of employees into the business. Providing a Casual Employment Information Statement (CEIS) at the start of employment and periodically thereafter is required. Misclassifying casual employees can lead to significant penalties, so a thorough review is crucial. The Fair Work Ombudsman (FWO) provides resources to guide this process.1

Right to disconnect

The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024, introduces a ‘right to disconnect’ for Australian employees under the Fair Work Act 2009. From 26 August 2024 for non-small business employers (and 26 August 2025 for small businesses), employees will gain the right to refuse work-related communications outside their working hours, unless it is unreasonable. This new right protects employees’ work-life balance and prohibits employers from taking adverse action against employees exercising this right.

Employers must prepare by training staff and reviewing contracts and policies to ensure compliance. Disputes regarding the ‘right to disconnect’ will be handled by the Fair Work Commission.

Adjustments in employee and independent contractor definitions

The Fair Work Act added new definitions for ’employee’ and ‘independent contractor’. These are taking the real substance, practical reality, and true nature of the working relationship into account. These changes aim to categorise workers more accurately, which could lead to potentially reclassifying some independent contractors as employees, thus affecting their rights and protections.

Employers must carefully assess their working relationships to ensure compliance with these updated definitions, impacting how work is contracted and performed. These legislative changes in the Fair Work Act are designed to address evolving employment practices and relationships, ensuring that employment laws remain relevant and fair in the modern workplace.

Increased civil penalties for underpayments

From 27 February 2024, the maximum civil penalties for underpayments and sham contracting will increase five-fold, up to $469,500 for companies. These penalties are applicable even for unintentional violations. For corporations, the maximum fine would be either 1,500 penalty units, which is currently $469,500 (a substantial increase from $93,900), or three times the underpayment amount. Considering the recent high-profile cases of underpayment, this represents a considerable escalation.

Furthermore, the legislation simplifies the criteria for a “serious contravention.” Instead of requiring a “systematic pattern of conduct,” it now suffices for the action to have been committed knowingly or recklessly. For serious contraventions, the highest fine will be the greater of 15,000 penalty units, now $4,695,000, or triple the underpayment.

Federal offense of wage theft

Starting 1 January 2025, a new federal criminal offense of “wage theft” targets employers who underpay employees. Penalties include up to 10 years imprisonment for individuals and fines up to $7.8 million for corporations. Employers can avoid prosecution by self-reporting underpayments and entering into a cooperation agreement with the Fair Work Ombudsman. Additionally, civil penalties for underpayments have been significantly increased, with the maximum penalty for “serious contraventions” raised to $4.7 million, without needing to prove a systematic pattern of conduct. 1

Sexual harassment changes

The amendments introduce robust measures to combat workplace sexual harassment. Employers must develop and implement comprehensive sexual harassment policies, including mandatory training for all employees. These policies should outline clear procedures for reporting and addressing complaints, ensuring confidentiality. This proactive approach aims to create a safer and more inclusive workplace environment.

Simplification of employee deductions

Since 30 December 2023, employees can authorise recurring deductions from their wages without needing to update their consent each time the amount changes. This change aims to reduce administrative burdens, simplifying salary management for both employees and employers.2

Compliance strategies

To navigate these changes effectively, it is recommended that businesses adopt several compliance strategies:

1. Review contracts and policies:

  • Casual employment definitions: Update contracts to reflect the new definition and ensure casual employees receive appropriate entitlements.
  • Employee deductions: Ensure all wage deductions comply with NES standards.

2. Training and information:

  • Sexual harassment prevention: Implement a comprehensive policy and provide mandatory training on recognising, preventing, and reporting sexual harassment.
  • Right to disconnect: Educate managers and employees on the new right, establishing clear guidelines for after-hours communication.

3. Clear and accessible procedures:

  • Sexual harassment complaints: Establish procedures for reporting complaints, ensuring confidentiality.
  • General inquiries: Develop a system for employees to inquire about their rights and obligations under the updated Fair Work Act.

4. Staying informed:

  • Subscribe to Fair Work Ombudsman updates: Receive ongoing legislative updates via email.
  • Monitor legal developments: Keep abreast of changes related to the right to disconnect and fixed-term contracts.

These legislative updates represent a significant shift in Australia’s employment landscape. By following the suggested outlined compliance strategies and staying updated on upcoming legislation, businesses can ensure compliance and foster positive employer-employee relations. For more detailed information, visit the Fair Work Ombudsman website.2

1. Fair Work Ombudsman, Legislation, https://www.fairwork.gov.au/about-us/legislation   

2. Fair Work Ombudsman, https://www.fairwork.gov.au

Other References:

Australian Taxation Office, https://www.ato.gov.au

Retirement Essentials, https://retirementessentials.com.au

Industry Super, https://www.industrysuper.com

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