The Australian Government’s “Closing Loopholes” industrial relations reforms: What they mean for your business

On 4 September 2023, the Federal Government introduced the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Cth) (Bill) in the House of Representatives. The Bill was significant, with the first reading of the Bill running to 278 pages and covering 28 distinct parts. It proposed reforms that would have a substantial impact on employers, employees, principals, and contractors. In many respects, the Bill proposed even more significant change than was contained within the pages of the Secure Jobs, Better Pay amending legislation which commenced on 6 December 2022. 

Progress has been swift since the initial tabling of the Bill, and much has changed.

On 29 November 2023, Federal Government amendments passed the House of Representatives. The most significant of these related to casual employment, same job, same pay orders (also known as regulated labour hire arrangement orders), minimum standards for employee-like workers and Fair Work Commission powers in the context of intractable bargaining. 

On 7 December 2023, the Federal Government announced a deal struck with independent Senators and the Greens to split the Bill into two parts. The first tranche passed both Houses that same day, and received Royal Assent on 14 December 2023. This first tranche included the parts of the Bill that dealt with ‘same job, same pay’ for labour hire workers, workplace delegate rights (except those relating to regulated workers), criminalisation of intentional wage and superannuation theft, protections for certain employees with PTSD, enhanced discrimination protections, regulation of silica-related disease, changes to the small business redundancy exemption, amendments regarding conciliation conferences related to industrial action, a new federal criminal offence of industrial manslaughter and right of entry changes for union officials assisting health and safety representatives. The remaining parts have been split out into Fair Work Legislation Amendment (Closing Loopholes No. 2) Bill 2023 (Bill #2) for debate in Parliament in early 2024. This second tranche includes changes to intractable bargaining powers, provisions relating to multi-enterprise agreements, casual employment, the definition of employee, workplace delegate rights for regulated workers, and minimum standards for digital platform and road transport workers (among others). 

The Senate has also referred the reforms to the Senate Education and Employment Legislation Committee. The Committee held public hearings, sought stakeholders’ submissions, and tabled its report on 1 February 2024. See here for our analysis of the report.

On 8 February 2024, the Senate passed Bill #2 with a series of amendments, which were accepted and passed by the House of Representatives on 12 February 2024. Bill #2 received Royal Assent on 26 February 2024. This second tranche of ‘Closing Loopholes’ legislation included changes to intractable bargaining powers, provisions relating to multi-enterprise agreements, casual employment, the definition of employee, protections and minimum standards for digital platform and road transport workers (including workplace delegate rights), and a new ‘right to disconnect’ (among others). Bill #2 also mandates a review the amendments' effectiveness within 2 years after the day on which it receives Royal Assent.

This suite of legislation is a clear indication of the Federal Government’s continuing robust agenda for industrial relations reform.

Our thoughts on the top 5 likely implications of the reforms are as follows: 

1. Compliance costs for business will increase. This is an incredibly complex piece of regulation, imposing various ‘multi factor’ tests that need to be deciphered before compliance minimums can be understood. Is a worker a casual? Is a worker an employee or contractor? Is a worker an employee-like worker? Is a refusal to respond to contact outside of an employee’s working hours reasonable? Should the FWC make a same job, same pay order? Each of these have complex and different 'multi-factor' tests.
    
2. Make friends with a good IR lawyer - you will need them. Much of the new regulation involves new FWC jurisdiction to determine conditions and resolve disputes, and there will be lots more FWC applications, such as applications for ‘stop orders’ relating to the new ‘right to disconnect’, orders to ensure same pay for the same job, for minimum standards for employee-like workers, to deal with unfair services contract terms or about casual conversion rights. Employers/principals will need to defend these applications, otherwise they are effectively writing a blank cheque. The breadth of these new powers and obligations is well beyond what business groups have been lobbying for (e.g. same job same pay orders even potentially extend to internal group entities).
    
3. Some road transport workers and digital labour platform workers (employee-like workers) will have extensive minimum standards and protection from unfair termination/deactivation, and businesses in those industries will find themselves having to navigate a new system of collective bargaining with these workers.
    
4. Unions are back at the centre of the IR system and have been given tools to ensure this endures for the longer term. As an example, union delegates will have rights to paid leave for delegate training and employers must provide reasonable facilities and time for them to communicate with and represent members. Unions are also central to many of the new jurisdictions and powers set out in the reforms.
    
5. Labour costs will increase. Almost overnight, many businesses will need to re-think engagement of labour hire and contractors given the new same job, same pay orders. There will also be limited ability to wind existing enterprise agreement conditions back absent agreement from all bargaining representatives, given prohibitions on the FWC including less favourable terms in intractable bargaining workplace determinations. This will likely translate to lower profit margins and higher costs of goods and services.

It is clear that Australian businesses will need to give these reforms significant attention.

Summary of key Closing Loopholes reforms

Our full summary provides an overview of the key elements of the reforms and what they mean for Australian employers.

Download our summary of the reforms

Download our summary of the reforms – with the last round of Senate amendments on Bill #2 marked up

Download infographic

Further insights

Over the course of the last few months, we have been keeping a close eye on industrial relations reform. Some of our insights can be found on our Australian Industrial Relations and Workplace Reform Hub, or on our dedicated industrial relations video podcast, InsideIR.

Please don’t hesitate to reach out to a member of our team if you would like to discuss the reforms, or how best to deal with them, including if a tailored briefing session would be of interest.