The Fair Work Commission (FWC) has made its first ruling under the new Same Job, Same Pay framework, after finding that the labour hire workers employed by a Queensland coal mine performed essentially the same work under the same conditions as the mine’s permanent employees.

As a result, more than 300 labour hire workers servicing the mine are set to receive pay increases of up to $20,000 per year as of November this year, when Same Job, Same Pay orders will come into effect.

Particularly for organisations in heavily unionised sectors, this decision serves as a reminder to evaluate employment practices to ensure compliance with the new legislation.

Labour hire workers perform the same work, argues union

The employer in this case, a Queensland-based open-cut coal mine, currently employs approximately 350 permanent employees who are covered by an enterprise agreement, and supplements its workforce with approximately 320 labour hire workers. 

Earlier this year, the Mining and Energy Union (MEU) put forward an application under the Same Job, Same Pay framework arguing that the labour hire workers’ roles were indistinguishable from those of the permanent employees, and they were thus entitled to the pay rates set out in the host employer’s enterprise agreement.

In its ruling, the FWC noted that the labour hire workers and permanent employees attended the same pre-start meetings each day, performed the same production work using the same equipment, wore the same uniforms and followed the same procedure for requesting annual and personal leave, among other similarities.

“If they’re being treated the same as employees on the site in terms of the nature of the work itself and the operational aspects, that’s where it becomes very compelling,” says Aaron Goonrey, Partner at Pinsent Masons.

The FWC was ultimately satisfied that the labour hire employees were entitled to the same rate of pay as their permanent counterparts.

Significantly, neither the labour hire company nor the host employer opposed the application, acknowledging these similarities and accepting the order to bring the labour hire workers’ pay rates in line with the host employer’s enterprise agreement.

“The decision is not contentious in the facts – these people did the same role,” says Goonrey.

“But there will likely be some upcoming applications which will be more complicated because they will be defended by labour hire companies or by the host company.”

The MEU has expressed its intent to assess the circumstances for labour hire workers at each work site and make further applications under the Same Job, Same Pay framework.

“This decision is going to be part of the case law that helps guide employers who use labour hire companies in terms of how they can avoid an order like this being made,” he says.

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Understanding the Same Job, Same Pay framework

The Same Job, Same Pay legislation was passed by the Albanese government in December last year as part of the Closing Loopholes Bill. The laws are designed to prevent employers from using labour hire to undercut the wages and/or conditions afforded to permanent employees via their enterprise agreements.

The legislation applies to businesses which have 15 or more employees, are covered by an enterprise agreement, and whose workforce is supplemented with labour hire workers. Sectors like construction, manufacturing, transport and healthcare in particular are likely to be impacted.

Under the new laws, the FWC can order labour hire companies to pay workers the same amount that would be paid to them under the host employer’s enterprise agreement, if they have been working for the host employer for more than three months and perform the same work as permanent employees.  

While Same Job, Same Pay orders will not kick in until November this year, applications can still be submitted beforehand, as occurred in this case. Any pay increases ordered by the FWC will become effective in November.

Anti-avoidance provisions have also been put in place to prohibit schemes that prevent the FWC from making a Same Job, Same Pay order or avoid the application of an order. 

A possible example would be trying to engage labour hire workers as contractors to deprive them of the new protections, or intentionally turning over the workers to stay under the three-month placement period. Deliberate attempts like this to skirt the new laws or game the system could attract significant civil penalties. 

“If they’re being treated the same as employees on the site in terms of the nature of the work itself and the operational aspects, that’s where it becomes very compelling.” – Aaron Goonrey, Partner at Pinset Masons

Is this the end of labour hire? 

This ruling signals the first of many decisions with significant financial impact on employers who use labour hire, particularly in heavily unionised industries like mining. Goonrey says this may prompt some employers to reevaluate their use of labour hire and its benefits.

“A lot of companies that use labour hire may be resigned to the fact that they will now have to pay a premium for that labour hire. Or, they’ll go to market and employ employees directly, which is part of the reason [why this policy was introduced] – to try and give more permanency.”

With that said, he disagrees with the notion that this policy will signal a “death knell” for labour hire. 

“There will still be a place for labour hire. I think a lot of companies will simply say, ‘We’re willing to pay the premium just for that flexibility.’ And there are a number of companies that are already paying their labour hire providers the same as what they’re paying their employees.”

For employers who engage labour hire workers and have an enterprise agreement in place, Goonrey suggests conducting a thorough analysis of the makeup of the labour hire workforce and the potential ramifications of a Same Job, Same Pay order to determine whether it would be beneficial to adapt or reduce the use of labour hire.

“It will become a finance issue, an operational issue and ultimately a business issue… [So], realistically, what you should be doing is bringing all the relevant business stakeholders together – finance, HR, operational – and working out, if an application was made, how much would this cost you?

“You’re better off being armed with the information about what the ultimate cost could be, as opposed to saying, ‘Let’s wait and see what happens.’”

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Following the recent passing of the Fair Work Amendment (Closing Loopholes No 2) Bill, employers will soon be subject to new laws governing the conversion of casual workers to permanent status – the ‘employee choice’ framework.

These changes, effective from 26 August 2024, will introduce a new definition of casual employment, along with new pathways for casual workers to convert to permanent employment if they wish to.

The new definition of casual employment shifts the focus from the terms of the employment contract to the practical reality of the employment relationship. This means that rejecting a casual worker’s request to become permanent will be more complex, since HR will no longer be able to lean on contracts to establish casual status.

However, these laws will also make it more difficult for casual workers to gain the protections of permanent employment, as the framework is only available if the employee no longer satisfies the definition of a casual employee. There will also still be many instances where an employer has reasonable grounds to refuse a request. 

In preparation for the new legislation to come into effect, here are some key legal considerations to keep in mind when determining whether a casual worker is entitled to convert to permanent status.

Understanding new laws around casual conversion

One of the most significant changes coming from the new legislation is the removal of employers’ obligation to initiate casual conversion.

The process is transitioning from one which is reliant on the employer checking employment status and offering conversion accordingly to one that places the onus on employees to notify the employers that they no longer meet the definition of a casual and therefore should be permanent employees. 

For HR, this shift has the potential to eliminate much of the busywork involved in checking on the length and status of employment and offering conversion to employees who may not wish to become permanent. The changes reflect the reality that many workers, particularly in sectors like retail and hospitality, are casual by choice and do not wish to lose the casual loading or flexibility this status gives them. 

With that said, the upcoming legislation also has measures in place to allow workers who do wish to convert to permanent status to do so and gain protections such as paid leave, notice of termination and redundancy pay. 

This is likely to have most impact in industries such as aged care, community services, childcare and labour hire companies, where work tends to be predictable, but where it has traditionally been challenging for some workers to convert to permanent status.

Particularly for employers in these industries, it’s crucial to understand what will constitute reasonable grounds to refuse a request under the new laws. 

This is especially true in light of the increased anti-avoidance penalties for improperly engaging casual workers, which were introduced in February this year. 

Employers now face significant civil penalties (up to $93,900 for individuals and $469,500 for body corporates) for breaches, such as dismissing or threatening to dismiss an employee with the plan to re-engage them as casual, making false statements to persuade an individual to enter a casual employment contract or misrepresenting employment as casual. 

Read more about new laws for engaging casual workers and how they could impact your business here.

Grounds for refusing a casual conversion request  

Under the new employee choice framework, employers can reject a request if the employee still fits the new definition of a casual employee. Employers will also retain the ability to reject a request based on fair and reasonable operational grounds. 

These grounds are situations such as where converting a casual employee to a permanent status would cause significant disruption to the business operations or substantial changes would be required to the way in which the employer’s work is organised. 

For instance, if the work is highly weather-dependent or heavily influenced by varying customer demand, employers may argue that maintaining a casual, flexible workforce is essential. Industries such as quarrying, where operations can be halted due to weather, or retail, where the volume of work varies greatly, are typical examples of where these grounds might apply. 

“Even if an employee works a regular pattern of hours, this does not necessarily mean they are entitled to permanent employment.”

An employer can also reject a conversion request on the grounds that there is an absence of a firm advance commitment to continuing and indefinite (i.e. they still fall within the new definition of a casual employee).

Currently, the absence of a firm advance commitment is largely determined by the terms of a contract. Under the new legislation, to refuse a request on the basis that they still fit the definition of a casual employee, employers will need to demonstrate that there is no such commitment by assessing how the relationship plays out in reality and not just having regard to the terms of the contract.

This involves considering factors such as the employee’s ability to turn down shifts or the variability of their work hours. If an employee can decline work or if their schedule lacks consistency, that will support the notion that they still meet the casual employee definition. 

Another factor that may be relevant is how far in advance an employee is informed of their shifts and patterns of work. This issue was raised in Workpac vs Skene, a 2018 Federal Court case where a casual worker was found to fit the definition of a permanent employee in part because he was provided with 12-month rosters in advance.

Employers may also assess whether there are full- or part-time employees performing exactly the same work as the casual employee. If this is the case, this can indicate the presence of a firm advance commitment to continuing and definite work, potentially making them eligible for permanent employment.

Importantly, even if an employee works a regular pattern of hours, this does not necessarily mean they are entitled to permanent employment. 

Best practice for rejecting a casual conversion request

If an employer determines that the employee still meets the casual employee definition or they have fair and reasonable operational grounds kto refuse a request, it’s important to communicate this decision to the employee the right way.

When rejecting a request on the basis of fair and reasonable operational grounds, employers must clearly articulate the specific operational reasons for the rejection in writing, this might include outlining the business’s need for flexibility and any negative impact a permanent conversion might have. 

It’s important to thoroughly communicate the context of customer needs or other variables, and why the current casual arrangement is necessary for their operations. 

Providing clear and detailed written responses is crucial not only to avoid disputes, but also to help employees understand the decision, manage their expectations and avoid misunderstandings. 

While employment contracts are no longer the sole factor in determining whether an employee is casual or not, it remains important to include clear contractual terms that align with the new definition of a casual employee, and keep clear records of the casual loading that has been paid to employees based on their employment status. 

While the upcoming legislation aims to reduce the burden on employers whilst still providing a pathway for casual employees to convert to permanent status, employers may still have valid grounds to refuse these requests (such as because the employee still fits the casual definition, or due to fair and reasonable operational grounds). By assessing, documenting and clearly communicating their  reasons for rejection, employers can mitigate legal risk and maintain the necessary flexibility in their workforce.

Will Snow is a Director and Molly Shanahan is an Associate at Snow Legal.

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The Fair Work Amendment (Closing Loopholes No 2) Bill was recently passed, making significant changes to the Fair Work Act 2009 (FW Act). Among these changes is a new definition of ‘casual employee’ which will come into effect on 26 August 2024. 

Previously, under section 15A of the FW Act, the definition of casual employment was if:

1. An offer of employment by the employer is made on the basis of no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.
2. The person accepts the offer.  
3. The person is an employee as a result of the acceptance. 

The new definition of casual employment considers the practical reality of the relationship, as opposed to merely the terms in the employment contract (as was previously the case). Broadly put, the new definition encompasses an absence of a firm advance commitment to continuing and indefinite work, and in circumstances where the employee is entitled to a casual loading or specific rate of casual pay under an industrial instrument. 

There are a broad range of considerations to determine whether there is an absence of firm advance commitment to continuing and indefinite work, including the real substance, practical reality and true nature of the employment relationship, and whether: 

• There is an inability of the employer to elect to offer work, or an inability of the employee to accept or reject work.
• It is reasonably likely there will be future availability of continuing work.
• There are full-time or part-time employees performing the same kind of work.
• There is a regular pattern of work for the employee.
• These amendments acknowledge a firm advance can take a range of different forms, including in an employment contract, but importantly, through a mutual understanding or reasonable expectation.

New pathways for casual workers to convert to permanent employment

The changes also include a new pathway for employees to change to permanent employment status, previously known as casual conversion. The new pathway replaces the existing right to casual conversion. 

If an employee has been employed for six months (12 months in a small business), they can choose to change their employment status to permanent. There must be a specific event which clearly shows the transition, and it’s now up to the employee to initiate the shift to employment. 

The upside is that the onus is no longer on the employer to review and offer casual conversion.

“The new definition of casual employment considers the practical reality of the relationship, as opposed to merely the terms in the employment contract.”  

Akin to requests for flexible work arrangements, casuals can write to their employer to notify them that they’d like to change their employment status, and employers are required to respond within 21 days. 

An employer may refuse a notification on any one of the following grounds:

• They believe the employee has been correctly classified as a casual employee, e.g. they aren’t working on a systematic basis.
• There are fair and reasonable operational grounds for not accepting the notification, such as if substantial changes would be required to the way work in the business is organised to allow the employee to convert. 
• A change of employment status to full-time or part-time would not comply with a recruitment or selection process required by law, such as the Public Service Act 1999, which outlines that casuals cannot convert without a competitive selection process.

Avoidance penalties to be aware of

The changes will also introduce new anti-avoidance provisions to prevent employers from improperly engaging casual workers. This means employers must not: 

• Dismiss or threaten to dismiss an employee with the plan to then re-engage them as casual. 
• Make false statements to persuade an individual to enter a casual employment contract, such as telling them they will be financially better off.
• Misrepresent employment as casual.

Breaching these provisions can attract civil penalties. The maximum payable under the FW Act increased by 500 per cent for both standard civil contraventions and serious contraventions from 27 February 2024. Companies can now face fines of $469,500, or $4,695,000 for serious contraventions.

Implications for employers engaging casual workers

HR professionals should get across these changes and update their casual conversion processes and procedures to ensure a smooth transition and compliance with the new regime.  Factors to consider include: 

• While not having a firm advance commitment to continuing work is a consideration in determining whether an employee is casual, employers should still consider any conduct on their behalf which could suggest the employee is not a casual (e.g. while a contract says there will not be commitment, sending a text to the casual promising to give them a specific shift every week).
• Ensuring casuals are paid a casual rate or casual loading where they would otherwise be entitled to one under an industrial instrument.
• Being aware that casuals can now request conversion to permanency, and considering what grounds (if any) an employer has to reject such a request.

Fay Calderone is an Employment Partner at Hall and Wilcox. 

A version of this article was first published in the June 2024 edition of HRM Magazine.

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Reading this article might spark a sense of déjà vu for some people: another busy year drawing to a close with the promise of significant industrial relations changes awaiting them in the new year.

This time last year, many HR professionals and employers were wrapping their heads around the Secure Jobs, Better Pay Bill. Now, it’s the Closing Loopholes Bill that they need to familiarise themselves with.

“These changes are a reflection of the changing business and industrial landscape. For instance, while it’s not part of this tranche of changes, the regulation of gig workers is a product of an evolving economy and society. It’s about ensuring that workplace relations laws keep up,” says Michael Byrnes, Partner at law firm Swaab.

Part one of this Bill was passed by the Senate on 7 December 2023, with more controversial aspects tabled for further discussion in 2024. More on that in a moment.

First, here are some of the most significant aspects of the Closing Loopholes Bill.

Criminalising wage theft

In just over a year, by 1 January 2025, employers could face fines up to $7.8 million and 10 years in jail for deliberate acts of underpayment. 

The new legislation will also include provisions for the underpayment of superannuation, following a deal struck with the Greens party to support the Bill. 

Greens Senator Barbara Pocock said superannuation theft should not be treated as an “optional extra” and that Australian employees are currently losing $1,700 in “intentional non-payment of their superannuation”, according to estimates from Industry Super.

The rest of Australia will join Queensland and Victoria, which criminalised the deliberate underpayment of employees (wage theft) in September 2020 and July 2021 respectively. 

Byrnes believes this will be the most significant aspect of the first tranche of IR changes. 

“This has been an important issue for some years, particularly since the introduction of the serious contravention provisions of the Fair Work Act, which were significant enough, but this takes it to another level.

“Even though I suspect there won’t be many prosecutions, the fact that employers face the possibility of criminal penalties, including imprisonment, will certainly focus the minds of employers on ensuring they’re compliant in terms of their payment obligations.”

“While it might seem daunting at first blush, it’s a matter of stripping it down and looking at the amendments that actually impact your business.” – Michael Byrnes, Partner, Swaab.

As has been emphasised in both government communications and media reporting, these new laws will only pertain to employers who deliberately underpay their people.

“A court will look at the knowledge, conduct and intention of executives of the business. They will look at whether or not they knew this was happening,” he says.

Importantly, Byrnes says if your business is currently on notice for underpayment – even if, in this instance, it was an accidental underpayment – and doesn’t remedy this by the time the new legislation is effective in 2025, that could be deemed a deliberate act of underpayment.

“It could be said that they are continuing a practice of underpaying employees with knowledge of it.”

Byrnes says HR and employers should treat this as a warning to “double down” on compliance exercises around payroll.

He recommends:

• Ensuring you have compliance measures in place to identify which industrial instrument applies to an employee’s role.
• Checking that employee classifications are accurate.
• Implementing sound record-keeping processes.
• Ensuring you’ve remedied any existing, historical underpayment notices before the new legislation is enacted.

Small businesses (those with fewer than 15 employees) will also be protected before this legislation is enacted.

“As part of this process, the crossbench Senator Jacqui Lambie demanded, as a condition of support, that small businesses be provided with some additional support and assistance in order to ensure they weren’t inadvertently caught up in the web of these wage theft provisions.”

These resources include the development of a small business Code of Conduct, to be created prior to the wage theft laws coming into effect, and extra funding for the Fair Work Ombudsman to assist in communicating these new obligations to small businesses, according to a report from Smart Company.

Read about the Victorian restaurant that was the first Australian business to face criminal wage theft charges.

Labour hire: same job, same pay

Employers who engage labour hire workers, such as airlines, mining companies and warehouses, will soon have to pay them the same as full-time workers. 

While the law is expected to receive Royal Assent and be implemented either late in 2023 or early 2024, the Fair Work Commission won’t be empowered to make ‘Regulated Labour Hire Arrangement Orders’ until late 2024.

“Applications might be able to be made prior, but the applicable orders  can’t be made until November 2024,” says Byrnes.”This is to give the Fair Work Commission [and employers] time to prepare.”

However, he notes that the anti-avoidance provisions will take effect upon implementation.

“If an employer is engaging in conduct to avoid these provisions, that conduct could be looked into.”

This might look like purposefully misrepresenting the nature of the work the labour hire workers are doing to suggest an enterprise agreement at the host employer does not apply, for example.

The government has estimated that around 66,000 labour hire workers could receive a pay increase based on this new legislation, and Byrnes says the industries most likely to be impacted by this are construction and mining.

This has sparked pushback from many people in the business community, including Australian Industry Group. Its CEO Innes Willox said, “The sad result will be uncertainty for businesses across a raft of crucial sectors that will need to grapple with how they respond to this unworkable legislation.

“Employers will now inevitably need to decide between navigating costly litigation before the Fair Work Commission in order to argue why they shouldn’t be caught by the new laws or simply reassess their willingness to offer job opportunities.”

According to a report from The Guardian, Workplace Relations Minister Tony Burke was able to get two powerful business groups over the line – Australian Hotels Association and the Australian Resources and Energy Employer Association – by excluding service contractors from the changes.

“This draws on the distinction between employees and independent contractors, to some extent,” says Byrnes. “The rationale is that it should only apply to labour hire workers who are being used as de facto employees or a supplementary workforce. You don’t want it to apply to people who are genuine contractors providing a specific service.”

To determine if someone is a “de facto employee” or genuine contractor, he suggests considering the following as a general guide:

• Is it a provision of a service as opposed to a supply of labour? If yes, then they are likely a service provider.
• Does the employer direct, supervise or control the work? If not, then they are likely a service provider.
• The extent to which the worker uses the employer’s systems, plants or structures. If they’re not using them consistently, then they are likely a service provider.
• Is the work of a specialist or expert nature? If yes, then they are likely a service provider.

“In some ways, it draws on the principles that have traditionally applied in distinguishing an employee from an independent contractor.”

If your organisation is one that relies on labour hire workers, Byrnes says it would be advisable to look at your enterprise agreement and do a mapping exercise to determine if there is crossover between the work of your labour hire workers and the work that’s covered by the enterprise agreement.

“It’s also worth assessing the potential economic impact that [this new legislation] could have on your supply of labour.”

Criminalising industrial manslaughter at a Commonwealth level

New Commonwealth industrial relations changes are unlikely to have a wide-reaching impact, says Byrnes, as workplace health and safety legislation is largely governed at a state level.

Most Australian states and territories have existing industrial manslaughter legislation in place, or are in the process of passing it.

“[The new law] applies to government employers who are covered by the Commonwealth system.”

As with the state-based legislation, this will apply to officers and persons conducting a business or undertaking (PCBUs) that demonstrate “a high degree of recklessness” or negligence to safety that result in an employee’s death.

The consequences of this could involve fines of up to $18 million for body corporates or the Commonwealth and a maximum imprisonment of 25 years for individuals.

Read about an employer who was jailed for an employee’s death in Western Australia.

PTSD supporters for first responders

Under the Bill, the onus of proof for first responders (emergency service workers, paramedics, etc.) to prove they have experienced post-traumatic stress disorder will be reversed.

Under the current system, it can be challenging for these workers to navigate workers compensation claims, as it requires them to prove that the nature of their work was a contributing factor to their deteriorating mental health – which only becomes more challenging if they are still recovering.

“[This change] is incredibly significant and important for the people affected, and a positive development so they can get the compensation and support they need,” says Byrnes.

“It’s essentially a rebuttable presumption that if you’re a first responder and have PTSD, that your work was a significant contributor to that PTSD.”

These reforms will cover Commonwealth and ACT government first responders, including Australian Federal Police employees, ambulance officers, paramedics, firefighters, emergency services communication operators, State Emergency Services operators and all other roles covered under the Emergencies Act 2004 (ACT).

The second act: controversial aspects of the Bill

While some would argue that the details outlined above are controversial, the most divisive elements of the proposed Bill are yet to be passed.

In September this year, when the Government first introduced the Closing Loopholes Bill, it faced significant backlash from both business groups and members of the crossbench, namely Jacqui Lambie and David Pocock. 

Both wanted to see the Bill split, as they felt it was unwieldy and that certain aspects required further discussion.

After agreeing to hold off on provisions of the Bill related to reforms to the gig economy, road transport industry and casual workforces, the government was able to get its other changes over the line in the final sitting week of 2023.

Byrnes notes that while the government opted to take an expedited step in getting some of the less controversial aspects of the Bill passed quickly, that’s not to say the rest of the Bill will be forgotten about.

“The most controversial and broadest change of all will be the casual employment changes, if [they’re] implemented. It will potentially impact a significant majority of employers.”

He also notes that the gig economy changes are interesting, as they will introduce regulation to a previously unregulated space.

“It will broaden the conception of what employment and workplace relations law is about in some ways, by extending it to [include] ’employee-like’ workers.”

He suggests that the second tranche of the Bill will be a priority in 2024, but we’re probably unlikely to see further changes until the Senate Committee’s inquiry is complete in February.

Getting across the details of all these changes might feel like a daunting and time-consuming task, which is why Byrnes suggests HR professionals take a high-level view of these changes.

“While it might seem daunting at first blush, it’s a matter of stripping it down and looking at the amendments that actually impact your business. 

“There are a raft of changes, but not all of them apply to all businesses. It’s important to be across these changes at a high level, but you don’t need to dig into the minutiae of them all.

“Compared to the changes from a year ago, which did have, by and large, universal application, this tranche of changes applies to more specific situations.”

He says wage theft is the main change that employers should be across, but notes that most employers would already have many of the appropriate safeguards in place.

“This is something that businesses should have already turned their minds to, so it’s just a matter of making sure that compliance is strict. The prospect of criminal prosecution also gives HR a card to play with senior management about the importance of ensuring there are resources and support for HR to implement the processes necessary for compliance.”

Keep an eye out for AHRI’s new Advanced HR Law short course in the new year, which will focus on a range of HR law topics, including Industrial and Employment Relations. In the meantime, browse AHRI’s existing suite of short courses that are on offer.

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