Australian industrial relations reform: Key takeaways for business from the Senate Inquiry into the Closing Loopholes No. 2 Bill

On 1 February 2023, the Senate Education and Employment Legislation Committee (Committee) released its report (Report) in relation to the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill).

Following a deal with independent Senators and the Greens, the Bill was split into two parts on 7 December 2023. The first tranche of amendments that passed that same day dealt with ‘same job, same pay’ for labour hire workers, workplace delegate rights (except those relating to regulated workers), criminalisation of intentional wage and superannuation theft, protections for certain employees with PTSD, enhanced discrimination protections, regulation of silica-related disease, changes to the small business redundancy exemption, amendments regarding conciliation conferences related to industrial action, a new federal criminal offence of industrial manslaughter and changes to right of entry rules for assisting health and safety representatives. 

The second tranche of proposed amendments, titled ‘Closing Loopholes Bill No. 2’, at the time of writing remain before the House of Representatives. These reforms propose changes to casual employment, the definition of employment, multi-enterprise bargaining rules, intractable bargaining processes, minimum standards for certain gig economy workers and road transport contractors who are not classified as employees, and workplace delegates’ rights for these ‘non-employee’ workers. 

As the first tranche of reforms have now passed both Houses, the Report focuses its recommendations on the second tranche of the reforms. The Report follows the Committee having conducted hearings across Australia, gathering inputs from various stakeholders including businesses, employee groups, unions, and workers.

Recommendations by the Committee

The Committee reports that the Bill received substantial support from employee groups, academics, civil societies, and religious organisations,¹  particularly in relation to the proposed amendments concerning road transport and digital platform workers.²  The Committee also reports that a minority, consisting of employers and employer groups, oppose the amendments proposed under the Bill,³  with others expressing reservations about the Bill's perceived complexity and potential negative impacts on productivity.⁴

In weighing these views, the Committee’s ultimate recommendation was that the Bill be passed, subject to a series of further proposed amendments,⁵  as summarised below. 

The Right to disconnect

The Committee recommends that an amendment be made to the Bill to legislate the 'Right to Disconnect'. Specifically, this would provide a right for employees to disengage from work outside regulated hours by limiting the extent to which employees can be expected or required to perform work outside of regulated hours. 

The Committee proposes that Modern Awards and enterprise agreements include a compliant ‘right to disconnect’ term, and the Fair Work Commission (FWC) be empowered to make ‘stop orders’ if a dispute about the right to disconnect cannot be resolved at the workplace level.

Regulating road transport

The Committee makes a number of recommendations concerning the Bill’s proposed amendments to the regulation of road transport and digital labour platform workers. 

First, the Committee recommends that the Bill be amended to restrict multiple legal actions being taken by employee-like and road transport workers for the same conduct or circumstances and to empower the FWC to make a new form of orders related to contractual chains in the road transport industry. 

The Committee also suggests amending the Bill’s existing provisions in relation to road transport minimum standards orders, a new form of orders proposed to set minimum standards for regulated road transport contractors. On the current drafting, the Bill provides that these orders can only come into effect 24 months after the relevant notice of intent for the order is published, however the Committee recommends reducing the 24 months’ notice period to 12 months. A new ‘failsafe’ mechanism is also recommended by the Committee whereby the Minister or the FWC, upon application, can defer or suspend a minimum standards order while a review is conducted to decide whether to vary or revoke its terms. 

A further recommendation is made by the Committee that owner drivers, or their representatives, be included on a road transport advisory group subcommittee when considering the making of minimum standards orders.

Casual employees

An amendment is recommended by the Committee to clarify that the rights granted to casual employees by this Bill are workplace rights for the purposes of the general protections provisions of the Fair Work Act 2009 (Cth) (FW Act).

Consequential changes and timing

The report suggests that gig platforms have raised concerns about the interaction of minimum standards orders with state laws, systems and standards.⁶  To resolve this issue, the Committee recommends that the Bill be amended to “ensure that parties are not subject to duplicative and overlapping regulation between the Commonwealth, and State and Territory jurisdictions”.

Further, the Committee recommends that the interactions between the Public Service Act 1999, which regulates the employment and administration of the Australian Public Service (APS), Australian Public Service Commissioner’s Directions 2022, which provides guidelines and directions for APS employees and agencies, and the FW Act, be examined to ensure that casual employees in the APS have access to the Bill’s casual conversion provisions while maintaining the APS merit principle (which refers to the principle that employment and promotion within the APS should be based on merit and capability). The Committee’s concern is that current drafting might allow public sector employers to avoid converting casual employees to permanent positions by using merit selection processes, which could be contrary to the Bill's intention to address insecure employment. The Committee agrees that the merit principle is vital but should not create barriers to casual conversion.
Finally, due to delays in the Bill's passage, the Committee recommends amending the Bill to change the commencement dates for those provisions of the Bill dealing with the definition of employment, road transport and independent contractors from 1 July 2024 to 6 months after Royal Assent.

The Dissenting Reports and additional comments from the Greens

The Coalition Senators’ dissenting report expresses strong opposition to the Bill, emphasizing its negative impact on casual employment, the gig economy, the road transport sector, and the overall economy due to flawed economic modelling. It also opposes the Labor-Green amendments to 'intractable bargaining', arguing that they remove incentives for unions to negotiate and could harm productivity.

The Jacqui Lambie Network (JLN) dissenting report expresses significant concerns about various parts of Schedule 1 of the Bill, including the new definition of casual employment, increased rights for workplace delegates, and changes to the framework for dealing with suspected underpayments and civil penalties. The report criticizes the lack of detail and clarity in the Bill, particularly in defining 'employee-like' statuses and union delegate rights, which could lead to confusion and increased disputes in workplaces. The JLN is also apprehensive about the proposed changes to right of entry for union representatives, seen as granting police-like powers without adequate safeguards The JLN concludes that while some changes to the employment landscape are necessary, the Bill requires further scrutiny and input from stakeholders to ensure the best interests of both employees and employers are protected.

The Australian Greens Senators express strong support for the Bill’s provisions, emphasizing the need for a fair and equitable industrial relations system in Australia. The Greens in particular stress the importance of implementing a 'right to disconnect' to address the issue of unpaid overtime, advocating for its inclusion in the FW Act. They view this right as essential for improving workers’ quality of life and reducing the financial, physical, mental, and social costs of unpaid work.

Senator David Pocock emphasizes the importance of not rushing legislative changes, especially in industrial relations, due to their far-reaching impact. Senator Pocock expresses support for parts of the Bill, particularly the regulation of gig work and safety in road transport. However, he raises concerns about several aspects of the Bill, including its potential impact on casual employment, the definition of employment, and the regulation of the gig economy. Pocock also discusses the right to disconnect, advocating for careful consideration and additional safeguards to prevent misuse. He proposes a thorough review of the FW Act amendments two years after commencement to identify and rectify any unintended consequences and improve the operation of the amendments.

Next steps

While at the time of writing it is not clear to what extent the Committee’s recommendations in relation to the Bill will be adopted by the Government, Australian businesses will need to stay abreast of these developments and factor these potential reforms into their future planning.

1. Paragraph 2.153 of the Report.
2. Paragraph 2.154 of the Report.
3. Paragraph 2.156 of the Report.
4. Paragraph 2.157 of the Report.
5. Paragraph 2.188 of the Report.
6. Paragraph 2.196 of the Report.