Closing the Loopholes (No.2) – Casual Employment and Independent Contractors

This is the third article in our Closing the Loopholes No 2 series. In this article we will discuss two more of the major changes to workplace legislation. The first being changes to Casual Employment and the second being changes to the definition of employee. Both of these changes will come into effect from 26 August 2024.

Casual Employment

The Closing the Loopholes No 2 legislation will impact casual employment in two ways. The first being a change in the definition of casual employment. An employee will be casual if:

  1. The employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work;
  2. The employee would be entitled to a casual loading or a specific rate of pay for casual employees under the terms of a fair work instrument if the employee were a casual employee, or the employee is entitled to such a loading or rate of pay under the contract of employment; and
  3. The real substance, practical reality and true nature of the employment.

This amendment will require employers to take into account a wider range of factors when classifying their employees as casual. The definition does not only consider the terms of the contract at the time of being hired, but rather the whole of the employment relationship.

The second change in relation to casual employees will alter the process of converting to permanent employment. The new legislation allows the employee to give their employer written notification that their employment no longer meets the definition of casual employment (after 6 months employment in a medium/large business and 12 months employment in a small business). The employer will have 21 days to provide a written response to the employee. The employer will need to consult with the employee in relation to the notification and then come to a decision as to whether the nature of the employment will change.

An employer will only be able to reject the notification if the employee still meets the definition of a casual employee, or if there are reasonable and fair operational grounds for rejecting the notification.

This is opposed to the previous requirement for the employer to offer the employee part time or full-time employment after 12 months of regular and systematic employment.

Independent Contractors (definition of employee)

Closing the Loopholes No. 2 introduces a new definition of employee and employer. These changes will impact the factors that need to be taken into consideration when engaging independent contractors.

These changes reverse the recent 2022 decisions (CFMMEU v Personnel Contracting [2022] HCA 1 and ZG Operations & Jamsek [2022] HCA 2) that held the main factor in determining the nature of the relationship was the written contract and the obligations and rights that formed that contract. There was little weight placed on the practical nature of the relationship.

The Act now requires that:

  1. the terms of the contract governing the relationship will not be the main factor in determining the nature of the relationship; and
  2. the whole relationship between the individual and the company must be considered, including but not limited to, how the contract is performed in practice, degree of control by the company, whether the individual workers under an ABN and whether the worker can refuse work. This is similar to the new Casual Employment Provisions.

This is similar to the new Casual Employment Provisions. This amendment takes us back to what was formally known as the multi-factorial approach.

Independent contractors will be able to opt out of these provisions though an opt out notice if they earn over the contractor high income threshold. However, they can unilaterally revoke an opt out notice at any time.

Lessons for Employers

  • Employers need to familiarise themselves with the changes to the definition of both Casual Employment and an Employee.
  • Prior to the introduction of these changes, employers should conduct an analysis of the nature of their relationships with both their casual employees and their independent contractors.
    • Despite employers no longer being required to offer casual employees’ permanent employment, they should still monitor the relationships that they have with their casual employees and be prepared for notifications.
  • Employers will need to be cautious when dealing with independent contractors that ‘opt out’ of the new definition of employee. These opt out notices can be easily revoked which may open employers to a claim by the independent contractor.

If you would like to discuss these or other workplace issues please contact Andrew Bland or call 02 9412 3077.

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Closing the Loopholes (No.2) – The Right to Disconnect
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