The Federal Government’s most recent tranche of employment law changes (the Closing Loopholes Bill No 2) has now received Royal Assent, with several of the provisions now in effect.

These significant changes include a change to the definition of employment, and the introduction of new powers for the Fair Work Commission’s to deal with employment-like situations.  These changes will commence on 26 August 2024 (or earlier if determined by the Government).

Employee vs Independent Contractor – Changes to the definition of employment

Similar to casual employment, from 26 August 2024 (or potentially an earlier date if the Government chooses) the new legislation will also redefine what an employment relationship is.  This change shifts the focus away from the terms of the written contract, back to the “practical reality” of the relationship between the parties.  The new definition refers to the “ordinary meaning” of employment as being determined by “the real substance, practical reality and true nature of the relationship” between the individual and the company.

This change impacts the distinction between employees and independent contractors, with principals / employers once again needing to consider the “totality” of the relationship, including how the relationship is “performed in practice”.

It is important to note that existing contractors whose earnings exceed the high-income threshold may “opt out” of this definition of employment.

Ability of the Fair Work Commission to deal with employment-like situations

The changes also introduce new powers for the Fair Work Commission to make minimum standards orders or guidelines for work performed by ‘employee like’ or digital platform workers. To qualify as “employee-like” a digital platform worker must satisfy two of four criteria, being:

• The person has low bargaining power in negotiations in relation to the services contract.
• The person received remuneration at or below the rate of an employee performing comparable work.
• The person has a low degree of authority over the performance of the work.
• The person has such other characteristics as are prescribed by the regulations (which are yet to be published).

Workers who meet the “employee-like” definition will be able to have minimum terms and conditions set by the Commission in the form of a “minimum standards order”.  This order may include terms relation to payment terms, deductions, record-keeping, insurance, consultation, representation, delegates’ rights and cost recovery.

The Act will also provide a framework to enable “employee-like” workers to access consent-based collective agreements.

Similar changes will also be made for certain workers in the Road transport industry.  The Commission will have the power to make a “road transport contractual chain order” that sets minimum standards for certain road transport contractors similar to the minimum standards orders outlined above. The Commission will also be empowered to deal with disputes over a contractor’s services contract with a road transport business.

In addition, the changes allow “employee-like” digital platform workers and road transport contractors to access protections against unfair deactivation, and unfair termination respectively.