Changes to the Fair Work Act: closing in on labour hire loopholes

In brief: On 7 December 2023, the Federal Government passed a partial package of its changes to the Fair Work Act 2009 (Cth)(Act), through the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill) inundating employers with yet more changes in an economically challenging period.

The recent amendments were:

1. Labour hire reforms;

2. Expanded union delegated rights; and

3. Wage theft offences.

In this article, we will explore the more controversial elements passed recently by the Government.

Labour Hire Reforms

We explored the details of these reforms in a previous article which can be revisited here. Since writing that article, the Government has introduced a significant change to their proposed regime. They have agreed to change the definition of labour hire to exclude circumstances where the contractor is providing labour and equipment.

These changes have commenced, but a Regulated Labour Hire Arrangement Order (RHLAO) cannot take effect before 1 November 2024.

A business will not ordinarily need to comply with an RHLAO where:

1. An employee is covered by a training arrangement.

2. An employee is performing work for less than 3 months.

Does a RHLAO affect services agreement employees? 

An employer can also argue that employees have not been engaged purely for services only to avoid the operation of an RHLAO, but in order to avoid the RHLAO, employers will need to show to the Fair Work Commission that:

1. The involvement of the employer involved in the matters of performance relating to the performance of the work by the contractors;

2. The degree of supervision by the employer over the individuals performing the contracted services;

3. The degree to which the employer will use the employer's systems and infrastructure; and

4. The degree to which the services provided are expert or specialist in nature.

What if there is no exemption to an RHLAO?

If there is no exemption to an RHLAO, then the Fair Work Commission will make, upon application, an alternative pay rate order (APRO). The APRO will allow the Fair Work Commission to make an order that requires an employer to pay its labour hire employees the rates which cover the host employer's entity (even if the labour hire employer is covered by an industrial instrument).

Anti-avoidance

Along with this significant change, employers may be penalised for seeking to avoid these measures, such as cutting a contract short to below the three month general requirement.

The anti-avoidance measures have been applied retrospectively to commence from 4 September 2023.

Key takeaways

Employers must be prepared to meet this significant change head on.

To do this, it is important employers begin to: 

1. Examine, what, if any, labour hire arrangements you have in place, and expect to continue these beyond November 2024.

2. Review your labour hire arrangements to understand whether you may or may not be caught under a potential RHLAO.

Our employment and safety team is always available to assist you in addressing these issues.