Loophole Closure Legislation: Anticipated Industrial Relations Reforms Set for 2024

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The Closing Loopholes Bill introduces the possibility of criminal sanctions for employers deliberately underpaying staff, including superannuation. HR professionals should be aware of additional key aspects of this legislation.

This time last year, HR professionals and employers were grappling with the implications of the Secure Jobs, Better Pay Bill. Now, attention has shifted to the Closing Loopholes Bill, requiring HR professionals to acquaint themselves with the latest legislative changes.

“These changes reflect the evolving nature of the business and industrial landscape. For example, though not part of this set of changes, the regulation of gig workers is a response to the changing economy and society. It’s about ensuring that workplace relations laws stay current,” explains Michael Byrnes, Partner at the law firm Swaab.

Part one of the Bill secured Senate approval on December 7, 2023, with more contentious aspects slated for further discussion in 2024. Let’s delve into some of the key features of the Closing Loopholes Bill.

Criminalising wage theft

Within just over a year, starting from January 1, 2025, employers may be subject to fines of up to $7.8 million and face a maximum of 10 years in jail for intentionally underpaying their staff. The new legislation will encompass provisions for underpayment of superannuation, following an agreement with the Greens party to support the Bill.

Senator Barbara Pocock from the Greens emphasized that superannuation theft should not be considered an “optional extra,” citing estimates from Industry Super that Australian employees are losing $1,700 due to intentional non-payment of their superannuation.

The criminalization of deliberate employee underpayment, also known as wage theft, will extend to the entire country, following Queensland and Victoria, which implemented such measures in September 2020 and July 2021, respectively.

Michael Byrnes anticipates that this aspect of the industrial relations changes will be the most significant, noting that the introduction of criminal penalties, including imprisonment, will likely encourage employers to prioritize compliance with 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.

The upcoming laws on deliberate underpayment will specifically target employers engaging in intentional underpayment practices. The evaluation by the court will focus on the knowledge, conduct, and intentions of executives within the business. It’s crucial to address any underpayment issues promptly, even if they were unintentional, as persistent non-compliance by the time the legislation is enforced in 2025 might be deemed deliberate.

HR and employers are advised to intensify compliance efforts around payroll and consider the following measures:

  1. Establishing robust compliance measures to identify the applicable industrial instrument for each employee.
  2. Verifying the accuracy of employee classifications.
  3. Implementing sound record-keeping processes.
  4. Rectifying any existing underpayment issues before the legislation takes effect.

Small businesses (with fewer than 15 employees) will receive protection before the legislation is implemented. As a condition of support, crossbench Senator Jacqui Lambie has advocated for additional support and assistance for small businesses, including the development of a small business Code of Conduct and extra funding for the Fair Work Ombudsman to communicate the new obligations effectively.

Labour hire: same job, same pay

The forthcoming legislation will impact employers engaging in labour hire, requiring them to pay these workers at the same rate as full-time employees. Although the law is expected to receive Royal Assent and be implemented in late 2023 or early 2024, the Fair Work Commission won’t be able to issue ‘Regulated Labour Hire Arrangement Orders’ until November 2024. However, anti-avoidance provisions will take effect immediately upon implementation, allowing scrutiny of conduct aimed at circumventing these provisions.

Key points to note:

  1. Effective Date and Orders: Regulated Labour Hire Arrangement Orders can’t be issued until November 2024, providing time for preparation.
  2. Anti-Avoidance Provisions: Conduct to evade the provisions can be investigated, including misrepresenting the nature of work by labour hire workers.
  3. Estimates: Around 66,000 labour hire workers could receive pay increases based on this legislation, primarily affecting industries like construction and mining.
  4. Exemptions: Certain business groups, like the Australian Hotels Association and the Australian Resources and Energy Employer Association, secured exemptions for service contractors. This avoids applying the legislation to genuine contractors providing specific services.
  5. Guidance for Determination: To distinguish between a “de facto employee” and a genuine contractor, consider factors such as whether it’s a provision of service, the level of control over work, use of the employer’s systems, and the nature of the work.

Employers relying on labour hire workers are advised to review their enterprise agreements and assess potential economic impacts on the supply of labour. A mapping exercise can help identify any overlap between the work of labour hire workers and the coverage of enterprise agreements.

Criminalising industrial manslaughter at a Commonwealth level

The new Commonwealth industrial relations changes are expected to have limited impact, particularly as workplace health and safety legislation is predominantly governed at the state level. Many Australian states and territories already have industrial manslaughter legislation or are in the process of enacting it. The new law at the Commonwealth level specifically applies to government employers under the Commonwealth system. Similar to state-based legislation, it targets officers and persons conducting a business or undertaking (PCBUs) who display a “high degree of recklessness” or negligence regarding safety leading to an employee’s death. Potential consequences include fines of up to $18 million for body corporates or the Commonwealth and a maximum imprisonment of 25 years for individuals.

PTSD supporters for first responders

The Bill proposes a significant change for first responders, such as emergency service workers and paramedics, by reversing the onus of proof in workers’ compensation claims related to post-traumatic stress disorder (PTSD). Currently, these workers face challenges in proving that the nature of their work contributed to their declining mental health, particularly while still in recovery. The reversal of the onus of proof is a positive development aimed at easing the process for affected individuals, enabling them to access the necessary compensation and support.

“It essentially establishes a rebuttable presumption that if a first responder suffers from PTSD, their work significantly contributed to the condition.”

These changes will apply to first responders employed by the Commonwealth and ACT government, encompassing Australian Federal Police personnel, ambulance officers, paramedics, firefighters, emergency services communication operators, State Emergency Services operators, and all other positions covered by the Emergencies Act 2004 (ACT).

The second act: controversial aspects of the Bill

While there may be differing opinions on the details discussed above, the most contentious aspects of the proposed legislation have yet to be approved.

In September of this year, when the Government initially introduced the Closing Loopholes Bill, it met with significant opposition from both business entities and members of the crossbench, particularly Jacqui Lambie and David Pocock. They advocated for splitting the bill, arguing that it was unwieldy and that certain components required further deliberation.

Following an agreement to postpone sections of the bill pertaining to reforms in the gig economy, road transport industry, and casual workforces, the government managed to push through other amendments during the final session week of 2023.

Byrnes observes that although the government expedited the passage of less contentious aspects of the bill, it does not mean the remainder will be disregarded.

“The most contentious and far-reaching change will likely be the alterations to casual employment, if implemented. This could potentially affect a large portion of employers.”

He also highlights the significance of the gig economy changes, which will introduce regulations into a previously unregulated domain.

“This will expand the scope of employment and workplace relations law by encompassing ’employee-like’ workers.”

He anticipates that the second phase of the bill will be a priority in 2024, but further changes may not occur until the completion of the Senate Committee’s inquiry in February.

Navigating through all these changes might seem overwhelming and time-consuming, which is why Byrnes advises HR professionals to adopt a broad perspective.

“While it may appear daunting initially, it’s a matter of simplifying and focusing on the amendments that directly affect your business.

“There’s a multitude of changes, but not all of them are applicable to every business. It’s crucial to have a general understanding of these changes without delving into every detail.

“Unlike the changes from a year ago, which largely applied universally, this round of amendments targets more specific scenarios.”

He emphasizes that wage theft is a significant change employers should be aware of, though most would already have suitable safeguards in place.

“This is something businesses should have already addressed, so it’s about ensuring strict compliance. The possibility of criminal prosecution also underscores to HR the importance of having resources and support for implementing compliance processes.”

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