The latest developments impacting Australian Contractors

Have you heard about the significant updates that have taken place for Australian Contractors?

With the introduction of the Closing Loopholes legislation, featuring the Fair Work Amendment - Closing Loopholes Act 2023 and the Closing Loopholes No.2 Act 2024, the Government has implemented important reforms to the nation's workplace laws. Many of these updates took effect on August 26, 2024, so it's essential for employers and contractors to understand these changes and their implications for their agribusiness.

Adjustments were implemented to tackle concerns surrounding the classification and treatment of independent contractors, aiming to provide better working conditions and protections for these individuals.

Traditionally, independent contractors have been regarded as separate from employees. A true independent contractor operates their own business, which can offer more flexibility but also means they do not benefit from the essential protections provided to employees under the Fair Work Act. This situation has led to instances of misuse, where some employers label workers as independent contractors to evade obligations such as superannuation, minimum wage standards, worker’s compensation, leave rights, and safeguards against unfair dismissal.

So what’s changed for independent contractors

• A new test for determining if someone is an independent contractor or an employee

The Fair Work Act 2009 (Cth) will be updated with a new definition to help clarify the distinction between a worker being classified as an employee or an independent contractor, as well as to identify whether a party acts as a principal or an employer. This new section will require the parties to consider the “real substance, practical reality and true nature” of their relationship.

It’s essential to recognise that these factors are evaluated by considering the overall relationship between the individual and the other party. This means looking at all elements of their working relationship throughout its entire duration, not just at the time the contract is signed. This includes both the terms of the contract and how they are executed in real life. This approach represents a significant shift from the previous focus, which was mainly on the written contract's terms.

• Ability for contractors to challenge unfair contract terms

Contractors have the option to reach out to the Fair Work Commission if they believe that their service contract includes an unfair term. The Commission serves as the national tribunal for workplace relations and oversees registered organisations.

This empowers the Fair Work Commission to evaluate whether a term in the services contract is unfair and to issue orders to annul, amend, or modify any section of the contract. In making this determination, the Fair Work Commission will assess the bargaining power of each party, whether the term imposes unreasonable or harsh requirements, and the pay that employees performing similar tasks would receive.

If you have a dispute regarding unfair terms in a contract, the Fair Work Commission can help, but only if the following applies:

1. the services contract was entered into on or after 26 August 2024

2. the contractor's income is less than the high income threshold. This threshold will be $175,000 starting from 1 July 2024.

• Alterations to the defense from “sham contracting”

Occasionally, a company or individual might inform a worker that they are an independent contractor, even though they are actually an employee of the agribusiness. If an employee is mistakenly classified as a contractor, it may be considered sham contracting.

Claiming that a worker is a contractor when the business does not reasonably believe this is illegal. Additionally, it is unlawful to knowingly provide false information to convince an employee to become a contractor for the same or similar work. It is also illegal to terminate or threaten to terminate an employee to engage them as a contractor for the same or similar tasks.

• More protections for contractors in the road transport industry and on digital platforms

There are particular laws that apply to some independent contractors, who are referred to as regulated workers. A new minimum standards framework has been launched to safeguard the rights of specific workers in the gig economy. This framework will extend protections to independent contractors who are classified as ‘employee-like’ while working on digital platforms, as well as those in the road transport industry, now known as ‘regulated road transport contractors’.

The Fair Work Commission has the authority to establish standards for regulated road transport contractors through the creation of minimum standard orders (MSOs are legally binding) and minimum standards guidelines (MSGs aren’t legally binding). These are a collection of rules pertaining to wages and working conditions for contractors engaged in regulated road transport.

Road transport contractors that operate under regulation may also be impacted by the orders and guidelines of a contractual chain.

Topics: Contractor Directory

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