Contents

Introduction

1️⃣ Determining Employee Status: Employee v. Independent Contractor

➲ The High Court's Radical Change to the Rules [Current Law]

2️⃣ Respect@Work

➲ New Employer Positive Duty to Prevent a Sexual Discrimination Culture + More ... [Current Law]

3️⃣ Job_Security@Work

➲ Fixed or Maximum Term Employment Contracts > 2 Years / 2 Contracts [Penalties from 6 Dec 2023]

4️⃣ Watch Out for the Sunsetting of Old Zombie Agreements!

➲ Notice to Affected Employees is required [On or Before 6 June 2023]

5️⃣ Gender Pay Equity + Prohibiting Pay Secrecy [Penalties from 7 June 2023]

6️⃣ Expansion of Valid Grounds for Flexible Work Requests [From 6 June 2023]

7️⃣ Migrant Workers' To be Protected Under FW Act Even if Working Illegally

Introduction

This 2023 Australian Employment Law Bulletin cherry-picks 7 recent developments (some radical) from the hundreds of recent changes (even more amendments are set to be made law in the second half of 2023 one of which will extend the protections of the Fair Work Act (FW Act) to migrants, even if they are working illegally).

The recent comprehensive legislative amendments implement, amongst other things, the recommendations made by the Australian Human Rights Commission (AHRC) in its Respect@Work Report as well as the Fair Work Legislative Amendment (Secure Jobs, Better Pay) Act 2022 (SJBP Act).

Of critical significance to employers are two recent High Court decisions that have radically upended the longstanding rules for determining employee v. independent contractor status when there is a written contract.

1️⃣ Determining Employee Status: Employee v. Independent Contractor

➲ The High Court's Radical Change to the Rules [Current Law]

Introducing Certainty into the Categorisation of Employment Status

As a result of two recent High Court of Australia decisions it is now much easier to engage workers as independent contractors by using a well drafted written contract even if:

⚓️ Under the longstanding old rules for determining employment status they would have been clearly categorised as employees; and

⚓️ Have no business of their own.

Traditionally the substance of the working arrangement took precedence over the agreed contractual terms such that the substance or reality of the working arrangement could override the contractual arrangements.

From now on, the majority of the High Court have effectively flipped the old rules on their head, at least where there is a written contract.

The written contract is now the governor of employment status, not the substance of the working arrangement.

This is regardless of whether the worker has their own business or was in a weaker bargaining position at the time the contract was executed.

Consequently, what may have previously been held to an employee working arrangement is likely to be upheld as a valid independent contractor agreement.

Importantly, this radical change provides certainty around this previously grey area of worker contracting where an employer had to be conservative out of necessity as they could have been found at anytime to have been retrospectively engaging workers as employees, with potentially devastating financial consequences ensuing if the reclassification was applied retrospectively across their entire workforce.

The Larger the Employer the Higher the Stakes

If a recategorisation of employment status from independent contractor to employee is made by a Court, the employer is exposed to a potentially huge liability due to the fact that work arrangements are typically systemised and applied consistently commonly across the employer's entire workforce.

If you think about larger employers in the gig economy, if one independent contractor is held to be an employee then it's very likely that all all their contractors would be declared employees as well.

An employer having an independent contractor reclassified as an employee instantly becomes liable to provide retrospectively for all of the additional employee entitlements (not payable to independent contractors) from the start of their employment through to the present day.

These new obligations then continue to extend into the future of their employment.

The New Rule is that Written Contracts Take Precedence

➲ The Deliveroo Decision

In Deliveroo Australia Pty Ltd v. Franco [2022] FWCFB 156 a full bench of the FWC held that a food delivery worker was an independent contractor based solely on the terms of his Contract with Deliveroo. Had the old rules been applied, the substance of the arrangement would have caused him to be declared an employee.

Under the new rules the focus needs to shift towards ensuring carefully drafted Contracts with workers as it is now possible that even where in substance there is an Independent Contractor arrangement being undertaken, a mistake or oversight in the drafting of the Contract can now inadvertently cause the worker to be categorized as an employee with the same potentially devastating financial consequences for every Contract that contains the error.

Therefore More Careful Drafting of Written Contracts is Required

➲ The ZG Ops Decision

In ZG Operations Australia Pty Ltd v. Jamsek [2022] HCA 2 the two workers were found by the majority of the High Court to be employees solely due to the fact that the Contract provided the employer with the legal right to control their work and did not do enough to make it clear that the workers were not working in and for the employer's business. The actual reality of the working arrangement was not considered.

A more carefully drafted written Contract would have caused a different finding by the Court.

What if there is No written Contract?

Where there is no written Contract, or only a partial written Contract the old law where the actual working arrangements take precedence still applies.

2️⃣ Respect@Work

➲ New Employer Positive Duty to Prevent a Sexual Discrimination Culture + More ... [Current Law]

The recent implementation of the recommendations made by the Australian Human Rights Commission (AHRC) in its Respect@Work Report mean that the following reforms are already law and currently apply in Australian workplaces:

⚖️ Employer Responsibilities or "Positive Duty" to take reasonable and proportionate proactive measures (as far as possible) to eliminate sexual discrimination; and to

⚖️ Prevent a Sexual Discrimination Culture or in legal language, having a workplace environment that is hostile on the ground of sex;

⚖️ The introduction of a lower threshold from 'Seriously Demeaning' down to 'Demeaning' for a finding of sexual harassment; and

⚖️ An expansion of the AHRC's investigative powers effective from December 2023.

Sample Proative Steps

The Explanatory Memorandum lists the following as sample proactive steps that could be taken by employers to eliminate sexual discrimination:

✅ Implementing Policies and Procedures;

✅ Collecting and Monitoring Data;

✅ Providing Appropriate Support to Workers; and

✅ Delivering Training and Education on a Regular Basis.

Reasonable and Proportionate Measures

The Factors that MUST be considered in determining whether employers have taken reasonable and proportionate measures include:

➲ The size of the employer's business;

➲ The nature of the employer's business;

➲ The business owner's resources;

➲ The practicality and costs involved to elimate the conduct; and

➲ Any other relevant circumstances.

3️⃣ JobSecurity@Work

➲ Fixed or Maximum Term Employment Contracts > 2 Years / 2 Contracts [Penalties from 6 Dec 2023]

Employers MUST now take care to consider new 'Job Security' legislative limitations effective 6 December 2023 (allowing a 12-month grace period from employers to adjust their employment practices) on their ability to offer Fixed or Maximum Term Employment for a period of more than 2 years or more than 2 consecutive contracts.

❌ No maximum term employment contract that exceeds > 2 years;

❌ The prohibition Includes an employment contract with an option to extend or renew the period of employment more than once, or for a total period that exceeds > 2 years;

Consecutive fixed or maximum term contracts will be prohibited where each contract is for an identifiable period, the job or position is substantially the same in both the past and current contracts, and there is 'Substantial Continuity' (ie., for example: where there is a break between the contracts such as a short period of unpaid leave or a break between teaching semesters and it is expected thaht the employment will continue) between the contracts.

❌ This effectively means that the prohibition will apply when the 'Employment Relationship' exceeds > two contracts, even if it doesn't exceed > 2 years in duration.

‍The 2 Year / 2 Contact Prohibition does not apply in the following circumstances:

✅ To avoid unintended consequences, the 2 contract prohibition does not apply to 'Casual Employees' who renew contracts on a shift by shift basis;

✅ The employee is contracted to perform a distinct and identifiable task involving specialised skills;

✅ There is a training arrangement;

✅ The contract is to provide essential emergency work, cover a period of peak demand, or to act in a vacant position due to a temporary absence (eg., illness or parental leave).

✅ The contract pays a salary in excess of the 'Fair Work High Income Threshold' (currently $162k) or an equivalent pro-rata amount where the employee is not full-time;

✅ The work is funded by a government funded scheme of a kind prescribed by regulation and certain conditions are met;

✅ The work relates to a governance position that is time-limited by the governing rules of a corporation;

✅ A Modern Award allows for the relevant fixed term contract (for example the Modern Awards covering schools and higher education);

✅ The contract is within a class prescribed by regulation; and

Contracts which are not fixed-term or do not have a maximum term

✅ An indefinite employment contract with provision for termination on notice.

Breach of a Civil Remedy Provision

If an employer enters a prohibited fixed or maximum term employment contract after 6 December 2023 they are in breach of a Civil Remedy Provision.

A prohibited contract is still enforceable, except that any term that provides for the termination of the contract at the end of the fixed term will have no effect, and the contract will operate in the same manner as an indefinite employment contract.

Fixed Term Contract Information Statement

The Fair Work Ombudsman is to produce a Fixed Term Contract Information Statement which employers need to provide to each fixed term employee at the time of making the contract, even if the contract falls within the specified legislative exceptions.

4️⃣ Watch Out for the Sunsetting of Old Zombie Agreements!

➲ Notice to Affected Employees is required [Before 6 June 2023]

Really this is something your business at least needs to be aware of as there is now an obligation under the Secure Jobs Better Pay Act (SJBP Act) for an employer covered by an old Zombie Agreement to give Notice to affected employees of the sunsetting arrangements before the 6 June 2023 deadline.

What is a Zombie Agreement?

The following kinds of agreements have come to be known as Zombie Agreements which due to their age may contain terms and conditions substantially different (and often less beneficial) from what employees would otherwise be entitled to under their relevant Modern Awards:

⚖️ Agreement-based transitional instuments made before the FW Act;

⚖️ Division 2B State employment agreements; and

⚖️ Any enterprise agreements made under the FW Act during the "bridging period" in the second half of 2009.

What are the Sunsetting Arrangements?

All Zombie Agreements will automtically 'sunset" or terminate at the end of the 12-month grace period ending on 6 June 2023, unless an application is made to the FWC to extend the life of the Zombie Agreement for up to 4 years and the FWC is satisfied that bargaining for a new agreement has commenced and is still in progress, or whether extending the life of the Zombie Agreement would pass the leave employees Better Off Overall Test (known as BOOT) as compared to the relevant Modern Award.

5️⃣ Gender Pay Equity + Prohibiting Pay Secrecy [Penalties from 7 June 2023]

Mandatory Equal Remuneration Orders

One of the substantial changes increases the power of the FWC to make orders on its own initiative (or on application) to ensure 'Equal Remuneration' (ER) for both men and women where the work is of equal or comparable value.

Remuneration is not defined within the FW Act but is interpreted to cover everything (monetary and non-monetary) paid as consideration for work completed under an employment contract.

The FWC is now obliged (it MUST) make an 'Equal Remuneration' order if it is satisfied there is a lack or ER, whereas previously there was a discretion to refuse to make an ER order.

Pay Secrecy Provisions Void + Unenforceable from 7 December 2022 | Penalties from 7 June 2023

The SJBP Act has amended the FW Act to prohibit pay secrecy provisions in employment contracts commencing 7 December 2022.

Employers have a grace period until 7 June 2023 after which they will be subject to penalties if they include a pay secrecy clause in any employment contracts entered after the deadline.

New Workplace Rights to Reduce Employer Enforced Pay Secrecy

⚖️ Employees MUST be free to choose to disclose or not disclose their remuneration and other relevant employment conditions used to determine their remuneration;

⚖️ Employees MAY ask other employees (from the same or different employer) about their remuneration and other relevant employment conditions such as hours worked, but there cannot compel an answer.

6️⃣ Expansion of Valid Grounds for Flexible Work Requests [From 6 June 2023]

From 6 June 2023 the two previously valid grounds (related to family and domestic violence) for making a Flexible Work Request will be expanded to include:

⚖️ Abusive and Threatening Behavior; and

⚖️ Pregnant Employees.

The revised process places additional obligations on employers, under threat of penalties if they are not complied with, when considering whether to grant Flexible Work Requests (such as requiring the employer to state what alternative changes to working arrangements they would accept), and make it easier for employees to challenge refusals, whereas previously the refusal could only be challenged if the employer agreed to arbitration.

7️⃣ Migrant Workers' Taskforce Recommendations

In 2019 a cross-agency Migrant Workers' Taskforce made 22 recommendations for further reform, some of which have already been implemented. The Albanese Government have foreshadowed new legislation that will implement the recommendation to extend the FW Act protections to migrant workers, even if they are working illegally.

Source: Stewart's Guide to Employment Law 7th Edition and Supplement - February 2023 by Andrew Stewart published by The Federation Press.

‍Social Sharing Image: Courtesy of Joanna Kosinska on Unsplash

Credits: This blog article was written by James D. Ford Esq., GAICD CIPP/US | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This blog article is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.