Important Changes to the Fair Work Act: 26 August 2024

Author: Zeinab Farhat, Progressive Legal

There are a range of new workplace laws which have come into effect today as part of the “Closing Loopholes” reforms which amend the Fair Work Act 2009 (Cth) pursuant to the Closing Loopholes (No.2) Act 2024 (Cth).

The reforms are extensive and affect almost every employee and employer in Australia, so it is important that everyone is across these changes. Below is a brief snapshot of just some of the key changes which have come into effect today.

Definition of casual employee and casual employment generally 

The Act revises the definition of a “casual employee”

Previously, a casual employee was considered a casual employee if they accept a job offer where they know there is no firm advance commitment to continuing work in accordance with an agreed pattern of work.

Essentially, the previous definition of “casual employee” gave employers certainty if they had a casual employment contract in place that the employee would be deemed a casual employee in those circumstances.  

The Act now substitutes this definition in s 15A

A casual employee is taken to be a casual where the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work (s 15A(1)(a)) and the employee is paid casual loading or a specific rate of pay for that casual worker (whether as prescribed under an industrial instrument, or employment contract) (s 15A(1)(b)).  

The Act outlines a range of indicia in determining whether s 15A(1)(a) and s 15A(1)(b) are satisfied

The indicia ultimately place higher burdens on employers to consider the totality of the employment relationship and not merely rely on the terms of an employment contract.

One pertinent example of this is the indicia prescribed by s 15A(2)(a) which states that satisfaction of s 15A(1)(a) is to be assessed in consideration of the “basis of the real substance, practical reality and true nature of relationship”. 

This is no doubt a broader assessment of the employee’s role. 

Firm advance commitment

Some further factors which indicate the presence of a firm advance commitment include, without limitation: whether the employee has a regular pattern of work, whether the employees are refusing the work and whether there are permanent employees performing the same kind of work.

The new definition is applicable on or after 26 August 2024

The new definition of casual employee only applies to employees who are employed on or after 26 August 2024, or, who have their employment status change on or after 26 August 2024.

An employee deemed as casual employee prior to 26 August 2024 will remain a casual under the previous Fair Work Act definition, unless they move to permanent roles after 26 August 2024.

When an employee isn’t a casual employee

The Act also clarifies that an employee is NOT a casual employee if, the contract of employment includes a term that provides the contract will end at the end of an identifiable period, the employee is a member of academic staff or teaching staff at a higher education institution, the employee is covered by the Education Industry-Academic Staff-Award 2020 or the Higher Education Industry-General Staff-Award 2020, and the employee is not a State public sector employee (s 15A(4)).

When a casual employee remains a casual employee

The Act confirms that the casual employee remains a casual employee until a “specified event” occurs, such as (but not limited to), where the employees employment status is changed to PT/FT in accordance with the employee choice provision under the Fair Work Act ((s 15A(5)).

This means that employers can feel more comfortable knowing that their casual workers will not become permanent employees at a random point in time.  

Definition of “employment” and high-income contractors can “opt out” 

The Act contains a new “ordinary meaning” definition of “employee” and “employer”. This now means that the definition of “employee” and “employer” involves an assessment of the “real substance, practical reality and true nature of the relationship between the individual and the person” (s 15AA(1)). This change is particularly relevant where there is ambiguity in whether a person is an employee or a contractor.

In order to make the assessment prescribed by s 15AA, regard is had to the totality of the relationship, including the terms of any contract governing the employment relationship and the performance of that contact in practice (s 15AA(2)(b)). The statutory codification of this multi-factorial test now means that the entirety of the relationship will be considered, including post contractual conduct.

These amendments seek to remove the uncertainty that employers have had due to previous High Court decisions which focused primarily on the contractor’s agreement when considering whether someone was a contractor or employee.

These changes are only relevant for the determination of entitlements under the Fair Work Act and do not apply for the purposes of other consideration such as tax, superannuation etc. In those circumstances, the current tests apply.

Contractors who earn more than $175,000 a year can issue an “opt out notice” such that their contractor status is retained despite the implementation of this new s 15AA definition. These contractors may also elect to issue a revocation of that “opt out” notice at any time.

Introduction of a “right to disconnect”  

Employees now have a positive right to refuse to monitor, read or respond to contact or attempted contact from their employer or related third parties outside of their working hours, unless that refusal is unreasonable (s 333M).

To determine whether the employee’s refusal is unreasonable, the reason for contact, method of contact, level of disruption caused by the contact, amount of compensation for additional work hours, role, responsibility within the business, and personal circumstances of the employee must be considered.

The Act permits employees and employers to apply to the Fair Work Commission to deal with such a dispute (S 333N(3)), however, parties have to try to resolve the mater at the workplace level first (s 333N(2)).

The Act also provides that modern awards must include a right to disconnect.

Why does this new right matter?

If your business relies on employees being available out of hours, it is important to get across this right, including updating any internal policies and familiarising yourself with the dispute process in preparation for any potential employee claims being lodged with the Fair Work Commission.

The commencement of these provisions come into effect for all business on 26 August (except small businesses). The provisions commence on 26 August 2025 for small business. 

Unfair contracts for Independent Contractors  

The Fair Work Commission also has a new jurisdiction which allows independent contractors who earn less than the high-income threshold ($175,000) to raise a dispute in relation to unfair contracts. 

It’s now empowered to make orders to vary or set aside contracts whether they include unfair workplace terms. This includes, without limitation, matters such as pay, hours of work, leave etc.

What actions should I take as a business owner?

If you are a business owner, it is imperative that you get across these changes now that they have come into force. In particular, the introduction of a “right to disconnect” is likely to bring out a significant rise in disputes against employers who contact employees outside of working hours, it is expected that the Fair Work Commission will see an influx in these disputes arising.