In this Insight, we summarise these upcoming changes and the steps employers should take now in preparation.
Definition of Employee
A new statutory definition of “employee” will be inserted into the FW Act. This new definition will require courts and tribunals to ascertain the “real substance, practical reality and true nature” of the working relationship between parties to determine whether an employment relationship exists between the parties. To do this, the changes will require courts and tribunals to look beyond the written contract and consider the “totality” of the relationship.
The purpose of these changes is to reverse the findings of the High Court in the Personnel Contracting and Jamsek decisions. In these decisions, the High Court essentially held that where there is a written contract in place between the parties, the validity of which is not challenged, the question of whether a worker is an employee or contractor is to be answered by reference to the terms and conditions contained in that written contract. That will no longer be the correct approach as a result of the aforementioned change to the definition of “employee”.
Casual Employment
A new statutory definition of “casual employee” will also be inserted into the FW Act. Under this new definition, an employee will be classified as a “casual” if the following two conditions are met:
- the employment relationship is characterised by an absence of a firm commitment to continuing and indefinite work; and
- the employee is entitled to a casual loading, or a specific rate of pay for casual employees under the terms of a fair work instrument or agreement.
Whether the employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work is to be assessed by reference to:
- the real substance, practical reality and true nature of the employment relationship;
- whether there is an inability of the employer to elect to offer, or not offer, work or an inability of the employee to elect to accept or reject work (and whether this occurs in practice);
- whether, having regard to the nature of the employer’s enterprise, it is reasonably likely that there will be future availability of continuing work of the kind usually performed by the employee;
- whether there are permanent employees performing the same kind of work in the employer’s enterprise that is usually performed by the employee; and
- whether there is a regular pattern of work for the employee.
The rules in relation to “casual conversion” will also be varied. Under the new rules, a casual employee will be able to give their employer a written notification of their choice to convert to permanent employment if certain requirements have been met, including that the employee believes they no longer meet the requirements for classification as a casual employee, have been employed for at least 6 months and there has been no dispute in the last 6 months in relation to their casual employment status.
The employer must respond to the notification within 21 days but must consult with the employee before doing so. The employer may accept the notification (in which case, the response must confirm whether the employee will be engaged on a full-time or part-time basis, the employee’s hours of work after the change, and the date the change will take effect). The employer may only reject the notification if the employee is still, in fact, a casual employee as defined in the FW Act, if “fair and reasonable operational grounds” exist for the rejection, or if accepting the notification would result in the employer’s failure to follow legally required recruitment or selection processes.
Independent Contractors and Unfair Contract Terms
Independent contractors who earn above the “contractor high income threshold” (which has not yet been determined) will have the right to opt out of the new statutory definition of “employee”. The opt out notice must be in writing and can be revoked at any time.
Further, independent contractors who earn below the “contractor high income threshold” will be able to apply to the Fair Work Commission if they believe their services contract contains an unfair or harsh contract term. The FWC will be able to determine whether the particular term is unfair or harsh and may make an order to set aside, amend or vary all or part of the contract.
Right to Disconnect
The “right to disconnect” will also take effect on and from 26 August 2024 (except for small business employers, where it will be delayed for a further 12 months). This will give employees an express workplace right to refuse to monitor, read or respond to contact their employer or third parties (such as clients) outside of their working hours, unless the refusal is unreasonable. We published an Insight on the “right to disconnect” earlier this year, which can be accessed here.
Next Steps
In preparation for these upcoming changes, employers should review their arrangements with their contractors and consider the risk of these arrangements falling within the scope of the new definition of “employee”. The same should be done in respect of their casual working arrangements. The template employment and contractor agreements should also be reviewed and updated as necessary.
Preparatory steps should be taken in respect of the “right to disconnect” including training managers and supervisors in respect of the new restrictions, reviewing and updating any relevant policies and procedures, and otherwise reviewing employees’ after-work activity to understand the extent of “after hours” contact with employees.
Addisons’ employment law team can assist employers in their preparations for these upcoming changes.