Criminalising wage theft and industrial manslaughter, and stronger protections for gig economy workers. Here are the big-ticket items in the government’s Closing Loopholes Bill.

Editor’s note: The Senate committee report on the Closing Loopholes Bill has now been delayed until February 2024.

The government is determined to ‘close loopholes’ around pay and working conditions with its latest tranche of industrial relations reforms. Stronger sanctions will be put in place for deliberate acts of underpayment – including jail time – and gig workers could see a boost in the protections and rights afforded to them, should the legislation get passed.

The Closing Loopholes Bill, which was introduced on Monday 4 September, also includes a federal approach to criminalising industrial manslaughter and new obligations around converting casual staff members.

None of these announcements are particularly surprising. We knew these things were in the pipeline. But they have still been met with concern from some parties.

Employer Groups say the new rules could create “uncertainty and complexity” for millions of casuals, contractors and labour hire workers, and claim that the first round of IR changes (Secure Jobs, Better Pay Bill) “resulted in deeply flawed change to the system that industry is still struggling with”.

To this, Tony Burke, Minister for Employment and Workplace Relations, and Minister for the Arts, told the Canberra Press Gallery, “When Secure Jobs, Better Pay legislation was introduced to the Parliament last year, we were told it would lead to unemployment. We were told it would lead to strikes. We were told it would fail in getting wages moving.”

He goes on to list the positive results to come out of the bill so far: less industrial action, 85 per cent of newly created jobs are full-time and more women are in full-time employment.

“This legislation is making a difference,” he said. And he’s confident this next suite of changes will be no different.

Here are the big-ticket items in this new Bill that HR should be across.

Jail time for wage theft

Employers who deliberately underpay their staff could face a maximum of 10 years in jail or million-dollar fines (capping out at $7.8 million, or three times the amount that was underpaid if that exceeds the maximum fine).

“It is and should be a criminal offence for the worker to be taking money from the till,” said Burke. “But it is not a criminal offence, in most of Australia, for the employer to be taking money from the wages.”

Penalties won’t apply to employers who make “honest mistakes”, Burke has clarified. Support will be afforded to employers who self-report accidental underpayments and the

Fair Work Ombudsman will be able to use its discretion in instances where it doesn’t pursue criminal proceedings, such as if the employer elects into a ‘cooperation agreement’ to right their wrongs.

The government has also announced an increase to the maximum penalties available for civil breaches of underpayment-related provisions (as advised by recommendation 5 of the Migrant Workers’ Taskforce report) which will come into effect on 1 January 2024, if the Bill is passed.

“It’s unlikely that a person will be jailed if they can prove that they have taken all reasonable steps to ensure that workers are being paid correctly.” Aaron Goonrey, Partner, Pinset Masons

Aaron Goonrey, Partner at Pinset Masons, says that the legislation could target anyone who was involved with purposefully withholding payments. Without seeing details of the Bill in full, he speculates this could include the company director, a CEO, payroll officer, legal advisor, accountant or an HR manager.

In determining what constitutes a deliberate underpayment, he says “consciousness and intent” will need to be proved. 

“Under the Victoria Wage Theft Act, the test to prove ‘dishonesty’ of a person in underpayments is “according to the standards of a reasonable person”.

“It may be a similar test to the existing accessorial liability provisions under the Fair Work Act. Accessorial liability occurs when a person is involved in the contravention of a workplace law.”

A contravention occurs when someone:

• Assisted, recommended or caused the contravention
• Influenced the contravention
• Was knowingly concerned in or a party to the contravention
• Conspired with others, which resulted in the contravention

Jonathon Woolfrey FCPHR, Chair of AHRI’s Industrial and Employer Relations Advisory Panel says, “Most employers will have little to fear in regard to ‘deliberate acts of underpayment’, but they will want to ensure they aren’t “reckless”, which may bring them within the parameters of the proposed bill.”

A detailed understanding of the National Employment Standards and Modern Award obligations is critical, he adds.

“It’s a common misconception to assume that paying at, or above, Modern Award rates automatically meets an employer’s obligations. A more thorough assessment is needed,” says Woolfrey, who is the Managing Partner at Talenting and an AHRI Board member and State President.

To prepare for these potential changes, Goonrey says regular payroll audits and due diligence around time and record-keeping should be a key priority for employers.

“It’s unlikely that a person will be jailed if they can prove that they have taken all reasonable steps to ensure that workers are being paid correctly.”

Woolfrey adds that employers could also implement or revise a remuneration framework that outlines an organisation’s salary, superannuation and other compensation strategies.

“[HR could also implement] ongoing monitoring mechanisms, such as regular reports to management or the board, to adapt to the dynamic IR environment, or [perform] scenario tests to assess how the organisation handles complex employment situations and whether it meets or exceeds legal requirements.”

Woolfrey says “no HR professional would argue against the broad intent of wage theft legislation”, but feels it misses broader issues.

“[The legislation] essentially serves as a distraction from the fundamental issue – the complexity of the industrial relations system. Ironically, given the rapid pace of IR reform over the past year, this new legislation contributes to that complexity. While Minister Burke has assured that the “objective is not to send people to jail,” the legislation’s big-stick approach seems to sidestep the real concerns of businesses.”

Small businesses (those with fewer than 15 employees) will be exempt from this new law.

“Ideally, you want the same rights for people in every workplace, but we have to take into account the fact small businesses don’t have an HR department,” said Burke.

The Government is pledging $32.4 million over four years to act on its plans to criminalise wage theft, which could include a “strong and visible” regulator. If passed, these changes are said to come into effect no later than 1 January 2025.

Closing loopholes for gig workers and labour hire

The Fair Work Act currently doesn’t define what an “employee” is. Instead, the courts have been referring to the ZG Operations v Jamsek case as precedent, which determined that what’s stated on an employment contract is what determines employment status.

The new Bill will include an official definition of an employee, which will also make it clearer who constitutes as “employee-like” (i.e. gig workers). Burke says the FWC will assess if someone is “employee-like” by asking:

• Do they have low bargaining power? 
• Do they have low levels of control over the work they do? 
• Are they being paid less than they would get if they were being employed as an employee? 

If the answer is ‘yes’ to these questions, then they may be entitled to further workplace rights.

For example, these “employee-like workers” (rideshare drivers/delivery riders) currently don’t have access to things such as sick leave, annual leave and minimum rates of pay.

Under the proposed laws, which would come into effect in November 2024, the Fair Work Commission will be given new powers to set minimum standards, via applications from relevant parties, including pay, penalty rates, superannuation, payment terms, record keeping and insurance.

“It’s likely that unions will take a leading role in this exercise,” says Goonrey.

“Gig economy workers will keep their status as independent contractors and the FWC will not be able to set standards on terms such as overtime rates, rostering arrangements or to change how a worker is engaged,” he adds. 

This would go against the very nature of gig work, which attracts some people due to its flexible nature.

Gig workers will also have access to a new jurisdiction within the FWC where they can claim “unfair deactivation” (an iteration of unfair dismissal) if they believe they were banned from a particular platform (e.g. UberEats app) without a fair reason.

These new rules are designed to make conditions safer for gig workers and to afford them with minimum standards for employment.

“It’s got to be possible to have 21st-century technology without having 19th-century working conditions,” said Burke.

As well as protections for gig workers, certain employers (excluding small businesses) will also no longer be able to introduce labour-hire workers to undercut the wages of those working under an enterprise agreement. 

Employees, unions and host employers will be able to apply to the FWC for an order that labour hire employees be paid at least the wages outlined in the host employer’s enterprise agreement, says Goonrey.

“Employers will be banned from taking action to avoid their obligations or prevent an order being made,” says Goonrey.

Head of the Minerals Council of Australia, Tania Constable, told the SMH that she believes these proposed changes – originally captured under the Same Pay, Same Job Bill – have the potential to “damage the economy”, stating it could “potentially smothers the entire economy, capturing every business that provides workers, services or skills to another company”.

But Burke says the legislation is likely to only impact 67,000 workers and that he’s not trying to turn every worker into an official employee. The changes are aimed at larger organisations, with the government citing the mining and aviation industries as key focus areas.

“If you are an employee, you have a whole series of rights. If you’re not an employee, all of those rights – all of them – fall off a cliff,” said Burke.

“What we want to do is turn that cliff into a ramp. So, for people in the gig economy, [we would] have a situation where you don’t get all the rights you would have as an employee, but you do have some minimum standards.”

Burke stated that there will still be a place for labour hire and gig workers to manage short-term fluctuations in demand and/or when a situation calls for a specialist skill set, so has included a three-month exemption period for these circumstances.

“A set-and-forget approach was a risky approach before, but now it’s not a viable approach for any employer.” – Jonathan Woolfrey FCPHR

Greater legal protection will also be created for independent contractors. Burke said since the Independent Contractors Act was introduced 17 years ago, it has only been used 68 times and the court has only made a ruling in three of those cases. 

He believes this is because it requires independent contractors to engage in expensive legal battles, which was unrealistic for the average contractor.

He plans to introduce a threshold for ‘no-cost’ jurisdiction within the FWC, which would make it more affordable for some contractors to enforce their rights.

Goonrey says “now is the time for both labour hire and host employers to assess their current arrangements and consider how these may need to adapt going forward to ensure contractual compliance while also seeking flexibility.”

Permanent pathways for casuals

The legislation proposes that casual workers who engage in regular and systematic hours should have access to leave entitlements and guaranteed hours by changing their employment status to permanent should they wish to.

“There would be no back pay of wages or entitlements prior to the period of conversion,” says Goonrey. “In essence, it would be another pathway for casual employees to convert to more permanent employment.”

Currently, an employee may request casual conversion any time after their 12 month anniversary of engagement, he says. 

Woolfrey says the new law would see employers required to offer a pathway to permanent work within the first six months.

“It’s estimated that this may allow up to 850,000 current casual employees the opportunity to request permanent work, which could have significant impacts on many employers. 

“This, combined with proposed changes around the use and payment of gig and labour hire workers, mean that HR practitioners need to have a thorough understanding across the various modes of employment their employer uses and ensure they’re fully aware of the employment situation and contract of each and every worker they directly or indirectly engage. 

“A set-and-forget approach was a risky approach before, but now it’s not a viable approach for any employer.”

Small business owners will be given a 12-month service period window before their casual employees can access new voluntary conversion pathways.

Read more on casual conversion here.

Criminalising Industrial manslaughter

Ninety-one workers have been killed on a worksite in 2023 so far and the government wants to introduce laws to bring that number down to zero in future years.

Industrial manslaughter legislation is already enshrined in most states and territories – or is in its proposal stages. The new Bill will introduce a federal approach.

Industrial manslaughter will become a criminal offence under Commonwealth work health and safety laws and  individuals could face 25 years in jail and body corporates could face up to $18 million in fines if “gross negligence or recklessness” is found to have contributed to the death of a worker. These changes could come into effect from 1 July 2024.

The contents of the Closing Loopholes Bill are likely to be debated over the coming weeks. If the proposals are passed, it’s likely we won’t see the majority of changes come into place until mid to late 2024.

What do you think about the proposed changes? Let us know in the comment section.