Federal Government secures deal on Closing Loopholes reforms

8 minute read 11.12.2023 Trent Forno, Gordon Williams, Kelly Halpin

The deal secures passage of the Government's labour hire and other less controversial reforms, leaving its other proposals for a Senate Inquiry and negotiation in 2024.

Key takeouts

The Government has again demonstrated its willingness to negotiate with the Cross Bench and minor parties to pass its IR reform agenda.

The Senate's Inquiry (due to report in February 2024) will consider the Government's remaining proposals on casual employees, regulated transport and gig economy workers and independent contractors in a separate Closing Loopholes Bill (No 2).

As part of ongoing discussions, the Government now says it is working with the Greens and the Cross Bench toward agreement on changes including to give Australian workers a right to disconnect.

Federal Government agrees to split Closing Loopholes reforms

Late last week, the Federal Government struck a deal with the Greens and a number of Senators to split the Government's proposed third round of industrial relations reform known as the Fair Work Act Legislation Amendment (Closing Loopholes Bill) 2023.

The deal means:

the Government's controversial 'labour hire' pay reforms (also known as 'Same Job, Same Pay') have now passed, along with some of the Government's less controversial changes including to introduce a new Federal industrial manslaughter offence; and
remaining aspects of the Government's reforms are now in a separate, new Fair Work Act Legislation Amendment (Closing Loopholes No 2) 2023 to be considered by the Senate's Inquiry in February 2024 – including the Government's proposals dealing with 'employee-like' gig worker and transport industry worker pay and conditions, casual employees and independent contractors (as discussed in our earlier updates on the Federal Government's third IR reform package and the Closing Loopholes Bill passing the House of Representatives).

In exchange for this deal, the Greens in particular say they will be pushing the Government to accept the Green's proposal to give Australian workers a statutory right to disconnect from 'unreasonable contact' from their employer outside of work hours. We set out the key changes introduced below, as well as those still to come in 2024.

Key changes – what you need to know

Labour hire

The Government's controversial 'labour hire' changes have now passed. Unions have welcomed the deal.

As a recap, the Government's proposed 'labour hire loophole' reforms are designed to address circumstances where employers have negotiated wages for their employees under an enterprise agreement, and then use labour hire to perform the work at lower rates.

The Fair Work Commission (FWC) will now have the power to make a regulated labour hire arrangement order requiring a labour hire provider to pay its employees the 'full rate of pay' received by the employees of the host employer who are performing, broadly, the same work.

The FWC will not be able to make a regulated labour hire arrangement order which relates to the provision of a service, rather than the supply of labour – for more information, read our recent Closing Loopholes Bill passes House of Representatives update.

The requirement to pay the protected rate of pay under a regulated labour hire arrangement will apply on or after 1 November 2024 regardless of whether any agreement for the performance of work is entered into before, on or after that day. Importantly though, anti-avoidance provisions will have retrospective effect – so that parties will not be able to avoid the application of these new provisions by, for example, engaging in conduct or entering into a scheme to avoid their operation on or after the day the Bill was first introduced (4 September 2023).

We recommend that organisations that have not already done so review their use of contingent labour if they have an enterprise agreement in place that would otherwise cover that contingent labour. This review should consider, among other things:

What is the purpose of the labour, and does your current strategy still make sense in light of the reforms?
What are the possible commercial implications of the FWC making a regulated labour hire arrangement order? How might it impact your enterprise bargaining strategy?

Wage theft

The Government's Federal wage theft proposals have also now passed, including amendments recently proposed by the Greens to criminalise superannuation underpayments. The earliest these reforms can commence is 1 January 2025 (and they will not commence at all until the Minister implements a Voluntary Small Business Wage Compliance Code).

Ensuring payroll compliance has become an increasingly significant issue for Australian workplaces and Boards – big and small – across all industries so organisations should not wait until then to consider payroll compliance. These changes raise already high stakes for Australian businesses, directors and senior leaders who face the prospect of significant fines for underpayments and, for individuals, who face potential personal liability including the prospect of imprisonment.

Workplace delegates' rights and right of entry

The Government's proposed changes requiring modern awards, enterprise agreements and workplace determinations to include a complying workplace delegates' right term have also now passed – these changes will now start after 1 July 2024. The term will broadly need to set out worker delegates' rights and entitlements the following – which workplace delegates will have from the day after the Bill receives royal assent – to:

represent members (and eligible members);
reasonable communication with members (and eligible members) in relation to their industrial interests;
reasonable access to the workplace and workplace facilities to represent those interests; and
reasonable access to paid time for related training during normal working hours (small businesses will be exempt from this training requirement).

Some employer groups have criticised the lack of clarity in these provisions. We can expect some degree of disputation around the provisions, at least until they are judicially considered.

The Government has also passed changes to allow a union official without a Fair Work Act 2009 entry permit to enter workplaces, on request from a Health and Safety Representative (under a 'State or Territory OHS law') to provide assistance.

Other 'less controversial' changes

The Senate has also passed the 'so called' non-controversial reforms in the Closing Loopholes Bill (with minor amendments). These changes, among other things, introduce:

Strengthened protections against unlawful discrimination based on family and domestic violence.
A new industrial manslaughter offence that will apply under the Commonwealth Work Health and Safety Act 2011 (Cth WHS Act) which covers Federal Government departments, public authorities and certain businesses licensed under the Comcare scheme. A person conducting a business or undertaking (PCBU), or officer of a PCBU, will have committed an offence if they intentionally engage in conduct that breaches a health and safety duty, and are reckless or negligent as to whether the conduct would cause the death of an individual. A maximum penalty of $18 million for bodies corporate and 25 years' imprisonment for individuals will apply.
Increased maximum penalties for category 1 breaches of the Cth WHS Act as well as increases for other WHS offences.
Changes to the Safety, Rehabilitation and Compensation Act 1988 (Cth) (SRC Act) (which deals with workers compensation and rehabilitation of employees of the Commonwealth and certain corporations – overseen by Comcare) to include a rebuttable presumption that post-traumatic stress disorder of first responders (and other employees declared by the Minister) was contributed to, to a significant degree, by their employment (intended to cover, for example, Commonwealth and ACT Government first responders including Australian Federal Police employees, ambulance officers, paramedics, firefighters, emergency service communications operatives, associated volunteers, and others). Under the changes last week, Comcare will also be required to prepare a Guide for Arranging Rehabilitation Assessments and Requiring Examinations to support the medical assessment process under the SRC Act.
Extend the functions of the Asbestos Safety and Eradication Agency to address silica related diseases.
Changes to address anomalies in the small business insolvency exemption for statutory redundancy entitlements where a larger business downsizes to a smaller business due to insolvency.

Future reforms

The following areas of reform to be split out into the separate Closing Loopholes Bill No 2 and subject to inquiry and negotiation in 2024 include:

casual employment (including sham casual employment provisions);
enabling multiple franchisees to access the single-enterprise stream;
transitioning from multi-enterprise agreements;
model flexibility, consultation and dispute terms for enterprise agreements to be developed by the FWC;
intractable bargaining workplace determinations;
exemption certificates related to right of entry for suspected underpayments;
penalties for civil remedy provisions in the Fair Work Act 2009;
definition of employment;
provisions relating to regulated workers (e.g. employee like gig workers and transport industry workers) and independent contractors (including the proposed establishment of a ‘small’ low-cost unfair contracts jurisdiction for independent contractors who earn less than the contractor high income threshold); and
amendments to the Coal Mining Industry (Long Service Leave) Administration Act 1992.

Where to from here

The Government has again shown its willingness to negotiate with the Senate to achieve its IR reform agenda – just as it did with its first round of reform in 2022 (Secure Jobs, Better Pay), and again in the lead up to Christmas.

Negotiations will continue with the Greens and Senators to secure passage of the Government's remaining proposals in 2024. Senator Lambie has described the remaining proposals as more complex and said that they will receive close scrutiny – this remains to be seen. Some employer and industry groups as well as the Opposition have certainly been critical of the lack of scrutiny to date.

If you would like to discuss the potential impact of these changes just passed and those still proposed, in the Closing Loopholes Bill No 2 for your business, please contact us.