Closing Loopholes: your complete guide to part 2 of the reforms

Two workers sitting in an office discussing a document.

The second part of the Federal Government's "Closing Loopholes" reforms passed Parliament on 12 February 2024. The Bill received Royal Assent on 26 February 2024.

Part 2 of the Closing Loopholes reforms usher in a range of further workplace changes including in relation to casual employee conversion rights, protections for gig economy and road transport workers, intractable bargaining determinations, union rights of entry, defining "employees" and "independent contractors", and introducing a new "right to disconnect".

Part 1 of the Closing Loopholes reforms brought changes to payments for certain labour hire engagements, the introduction of workplace delegates' rights, specific protections for persons subjected to family and domestic violence, the criminalisation of "wage theft", and the establishment of an industrial manslaughter offence under federal work health and safety laws. These changes are discussed in further detail in our previous article.

In this guide

Further changes introduced by Closing Loopholes Part 2




Definition of casual employment

New pathway for eligible casuals to convert to permanent employment

New definition inserted into the Fair Work Act. The focus of the test is the practical reality of the employment relationship.

Eligible casual employees can notify their employer that they wish to convert to permanency, which the employer must consider and respond to.

26 August 2024

Right to disconnect

Employees can refuse to respond to after-hours contact from their employer and clients, unless that is unreasonable.

A standard term to the same effect will also be in all modern awards.

26 August 2024

(26 August 2025 for small businesses)

Definition of employment (independent contractor vs employee)

Overturns the effect of the High Court decisions in Jamsek and Personnel Contracting to revert to the multi-factorial test.

Assessment of the real substance, practical reality and true nature of the relationship.

26 August 2024 (unless proclaimed earlier)

Delegates' rights and union right of entry exemptions for underpayments

A new general protection for workplace delegates and rights to paid leave for delegate training, provision of reasonable facilities and time to communicate with and represent members (also extended to relevant "regulated workers" in road transport/gig economy).


Unions will be able to get an exemption certificate from the Fair Work Commission (FWC) to waive the 24 hours' notice for entry to investigate suspected underpayments where advance notice would interfere with the investigation.

26 August 2024, or an earlier date fixed by the government (for "regulated workers"). Already in force for other employees



1 July 2024

Intractable bargaining workplace determinations

Terms of an intractable bargaining workplace determination included to deal with a matter at issue cannot be less favourable to employees/union(s) than a corresponding term in an applicable existing enterprise agreement (excluding wage increases).

27 February 2024 (in force)

"Regulated workers" (road transport and digital labour/gig economy)

Minimum standards and collective agreements.

Unfair deactivation and unfair termination frameworks for regulated workers.

Road Transport Expert Panel and Road Transport Advisory Group established as an advisory body to the FWC; expert panel for road transport industry and powers for the FWC to make road transport contractual chain orders or guidelines.

26 August 2024, or an earlier date fixed by the government

Timeline of effective dates

Click image below to expand Closing Loopholes timeline

Road transport and gig economy changes

Commencement: 26 August 2024, or an earlier date fixed by the government

The changes to the Fair Work Act 2009 (Cth) following the passing of Closing Loopholes Part 2 include significant workplace reforms covering the road transport industry and the gig economy, with these changes flagged to commence on 1 July 2024.

Specifically, these reforms:

1. Provide a new detailed framework of "employment-like" rights and protections to particular workers who would otherwise be classed as contractors (newly defined as "regulated workers"). These regulated workers include "regulated road transport contractors" (e.g. in the road transport industry) and "employee-like workers" (e.g. in the gig economy).

2. Establish the making of minimum standards orders and guidelines covering regulated workers, digital labour platform operators, and road transport businesses.

Terms that may be included in minimum standards orders and guidelines can deal with: (a) payment terms; (b) deductions; (c) record-keeping; (d) insurance; (e) consultation; (f) representation; (g) delegates' rights; and (h) cost recovery.

However, terms that cannot be included are those dealing with: (a) overtime rates; (b) rostering arrangements; (c) terms primarily of a commercial nature; (d) terms that would change the nature of the relationship e.g. from regulated worker to employee; and (e) work health and safety already dealt with by law.

Further, there are additional restrictions for minimum standards orders covering "employee-like workers" that also generally cannot include: (a) penalty rates, loadings and shift allowances; (b) payments for time prior to or between engagements; or (c) minimum engagement/payment periods. However, the FWC may include such matters if it considers it appropriate to do so.

Parties who may apply to the FWC for such orders and guidelines include relevant union(s). In making a minimum standards order, the FWC must have regard to a newly prescribed "minimum standards objective", as well as consult in advance with affected parties on the proposed order.

Minimum standards guidelines may also be made by the FWC, as an alternative to making an order (with a key difference being that guidelines, unlike orders, will not attract a civil penalty if breached).

3. Allow for the making of collective agreements between digital labour platform operators, road transport businesses, and relevant union(s), which include provisions that are more beneficial for relevant regulated workers than would otherwise apply under a minimum standards order.

4. Establish new "unfair deactivation" and "unfair termination" remedies for eligible regulated workers (noting a "contractor high income threshold" will apply to eligibility). Under these changes:

  • eligible employee-like workers can seek reactivation/lost pay (but not compensation) where they have been unfairly "deactivated" from a digital labour platform; and
  • eligible "regulated road transport contractors" can seek reinstatement (or up to 26 weeks' compensation) where their services contract has been unfairly terminated (similar to the current Fair Work Act unfair dismissal regime for employees).

5. Establish a new "unfair contracts" jurisdiction that allows the FWC to set aside, amend, or vary, all or part(s) of a services contract on unfairness grounds (where it relates to a workplace relations matter, e.g. remuneration and hours of work). As with the new unfair deactivation and unfair termination remedies referred to above, the application of this unfair contracts jurisdiction is subject to a contractor high income threshold. Also, as this new "unfair contracts" jurisdiction applies broadly to services contracts, its application could extend beyond the road transport industry and gig economy.

6. Extend new workplace delegates' rights and protections (as passed in Closing Loopholes Part 1) to regulated workers - including rights to reasonable access to workplace facilities, and paid time during normal working hours for training.

Also, under these changes, reforms for the road transport industry include:

  • a new "road transport objective" for an appropriate safety net of minimum standards for regulated road transport workers and employees in this industry
  • the establishment of a Road Transport Advisory Group, which will advise the FWC on industrial arrangements in the industry
  • the introduction of new broader minimum standards covering persons in a "road transport contractual chain". This includes new powers for the FWC to make road transport contractual chain orders and guidelines which may cover matters such as: (a) payment times; (b) fuel levies; (c) rate reviews; (d) termination; and (e) cost recovery. However, these cannot include matters regarding, for example, overtime rates and rostering arrangements.

Intractable bargaining workplace determinations

Commencement: 27 February 2024 (in force)

Intractable bargaining declarations and workplace determinations were introduced into the FW Act under an earlier tranche of the current Federal Government's workplace relations reforms, the Secure Jobs, Better Pay Bill. Our previous guide on these can be found here.

In summary, intractable bargaining declarations can be made by the FWC where it is satisfied that there are no reasonable prospects of bargaining parties to a new enterprise agreement reaching an agreement (providing prescribed minimum timeframes have been met – generally after at least nine months of bargaining). Following the issuing of such a declaration, the FWC may then move to arbitrating an outcome on the parties via an intractable bargaining workplace determination (IBWD).

Under further changes to IBWDs in the Closing Loopholes Part 2 reforms, where there are terms not agreed between bargaining parties for arbitration by the FWC, such terms cannot be arbitrated by the FWC to result in them being less favourable to employees / unions than provisions in an existing applicable enterprise agreement that deal with the same matter (with the exception that this does not apply to wage increase terms).

That is, employees and unions cannot "go backwards" on contested terms and conditions in this FWC arbitration process, as against corresponding provisions in an existing applicable enterprise agreement. Time will tell as to whether this will be a disincentive for employees (and their representatives) to make concessions in bargaining - knowing that, if negotiations were to proceed to an IBWD, contested terms can generally be no less favourable than current enterprise agreement conditions.

Casual employment and conversion

Commencement: 26 August 2024

Closing Loopholes Part 2 brings in several major changes relating to casual employment.

Defining casual employment

A new definition of "casual employee" will be included in the Fair Work Act. The new definition has two elements:

  1. The employment relationship is characterised by no firm advanced commitment to continuing and indefinite work.

  2. The employee is entitled to a casual loading, or specific casual rate of pay, under a fair work instrument or contract.

Whether the first element under section 15A(1) exists depends on a range of factors, including the "basis of the real substance, practical reality and true nature of the employment." (section 15A(2)(a).

This differs from the current section 15A of the Fair Work Act which, following the High Court decision in WorkPac v Rossato [2021] HCA 23, gives primacy to the terms upon which the employee accepted the offer of employment.

The amendments also expressly acknowledge that a firm advance commitment can take different forms, including an employment contract, or a combination of the employment contract and a mutual understanding or expectation.

Other indicia that will be relevant to the assessment include:

  • whether an employer can choose to offer or not offer work, or whether an employee can choose to accept or reject work (and, importantly, if this is the case in practice);
  • whether it is reasonably likely there will be future availability of continuing work of the same kind available in the business;
  • whether there are full-time or part-time employees performing the same kind of work in the business that is normally performed by the subject casual employee; and
  • whether there is a regular pattern of work for the employee.

A note to the listed indicia states that a regular pattern of work does not, of itself, indicate a firm advance commitment to continuing and indefinite work, and that an employee who has a regular pattern of work may still be a casual employee even in its absence.

There are some exceptions to the new definition of casual employee, including fixed-term contracts and certain academic staff.

Employees who start work as a casual employee remain as such until a "specified event" occurs to change the nature of their employment to full-time or part-time.

Casual conversion changes

Closing Loopholes Part 2 also creates a new regime for casual conversion to permanent employment, which focuses on "employee choice". This will replace the existing regime where the predominant onus is on the employer to offer conversion to permanent employment to qualifying employees.

Under the new section 66AAB, a casual employee can give their employer written notification of choice to convert to permanent employment if:

  • they believe they no longer meet the (new) requirements to be classified as a casual employee; and
  • they do not have a dispute with their employer over their employment status; and
  • if the employer:
    • is a small business at the time, the employee has been employed for at least 12 months; or
    • otherwise, if the employee has been employed at least six months; and
  • in the previous six months, there has not been any resolution of a casual employment status dispute or any response from an employer not accepting a previous written notification from the employee about their employment status.

An employer must respond in writing to employee notifications within 21 days (section 66AAC), either accepting or rejecting the notification, but they must have consulted with the employee before responding.

If the notification is accepted, the employer must include in their response whether the employee will now be a part- or full-time employee, how their working hours will change and when the change will take effect (section 66AAC(2)).

An employer may reject the notification if:

  • the employee is still, in fact, a casual employee as defined (i.e., meets the requirements of the new section 15A(1)-(4)); or
  • "fair and reasonable operational grounds" exist, such as:
    • that substantial changes would be required to the organisation of the employer's business;
    • that there would be significant impacts on the operation of the employer's business; or that
    • the employer would have to substantially change the employee's terms and conditions of employment in order not to breach a term of a fair work instrument applying to the employee as a permanent employee; and
  • accepting the notification would result in the employer's failure to follow legally-required recruitment or selection processes.

Casual conversion disputes

Disputes relating to the casual conversion provisions are dealt with under a new section 66M. Parties must attempt to resolve disputes at a workplace level first, before any referral to the FWC. The FWC must first attempt to resolve the dispute other than via arbitration (section 66M).

Small claims

Casual employees will be able to commence a small claims dispute about whether or not they were a casual employee when they commenced employment.

Casual Employment Information Statement

The Casual Employment Information Statement must be provided on commencement already, but must now also be provided every six months from when employment commenced (or every 12 months for small businesses).

New anti-avoidance provisions

Commencement: 26 August 2024

Two new anti-avoidance offences regarding casual employment have been introduced. Under these provisions, employers must not:

  • dismiss, or threaten to dismiss, an employee in order to engage them as a casual employee to do the same or substantially similar work (section 359B); or
  • make knowingly false statements in order to influence an employee to enter into a casual employment contract, to perform the same or substantially similar work (section 359C).

Contravening either of these provisions may attract a maximum penalty of 300 penalty units.

Defining employment

Commencement: 26 August 2024 (unless proclaimed earlier)

By and large, the Fair Work Act governs employment relationships, conferring rights and imposing obligations on an employer and an employee. Under the Fair Work Act, "employee" and "employer" are defined to have their ordinary meanings, i.e. their common law meanings as developed by the courts.

A new section 15AA introduces a definition of employment whereby the ordinary meaning (i.e. the common law meaning) of "employee" and "employer" is to be determined by reference to the "real substance, practical reality and true nature of the relationship between parties".

Under the new section 15AA(2), ascertaining this will require:

  • consideration of the totality of the relationship between the worker and the principal. According to the Explanatory Memorandum this phrase, drawn from the High Court decisions in Stevens v Brodribb Sawmillling Co Pty Ltd [1986] HCA 1 and the majority in Hollis v Vabu [2001] FCA 44, is intended to indicate that all relevant indicia to the relationship are to be considered, and not one indicia will be determinative;
  • reference not only to the terms of the contract governing the relationship, but also other factors, including how the contract is performed in practice. According to the Explanatory Memorandum, this is intended to facilitate the use of a multi-factorial approach when characterising a relationship.

Contract no longer king: return of the multi-factorial test

As explicitly stated in a note to this amendment, it is a direct response to the High Court decisions of CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (Jamsek), which placed focus solely on the written terms of the contract in determining if a worker was an employee or a contractor, to the exclusion of post-contractual conduct (except in limited circumstances). The High Court's decisions marked a significant departure from the well-established multi-factorial test, holding that, where a written contract exists, primacy must be accorded to legal rights, duties and terms of the written contract, rather than the substance of the relationship and subsequent conduct of the parties when performing the contract.

Personnel and Jamsek established that except in limited circumstances, where a written contract exists, evidence of post-contractual conduct of the parties is not relevant in establishing the existence of an employment or principal/contractor relationship. The Personnel and Jamsek decisions increased certainty for businesses by enabling them to engage workers as contractors without risk of a claim for misclassification and entitlement to employment benefits (so long as the contract of engagement was appropriately drafted). However, the decisions were criticised for making it easier for businesses to achieve cost savings by sourcing labour from contractors, outside of the Fair Work Act and minimum terms and conditions, despite the social reality of the working relationship and inequality of bargaining power for workers entering contracts.

The new definitions mark a reversion to the multi-factorial test. This means the post-contractual conduct of parties will regain significance in determining disputes about whether a worker is an employee or a contractor, and therefore what benefits they are due. This change may lead to an uptick in underpayment claims where workers engaged as contractors are eventually found to be employees and have not had access to employee benefits, such as annual leave.

Factors to consider

In anticipation of these changes commencing, businesses will need to ensure that they review their contractor agreements and their practices to ensure that contractors are not in danger of being deemed to be employees. While there is no exhaustive list of indicia prescribed by the provisions, the multi-factorial approach has generally included considering:

  • the extent of control of, or the right to control, the worker;
  • whether the worker is provided with tools and equipment;
  • the provision and/or requirement by the principal to wear uniforms;
  • whether the worker is permitted to delegate or subcontract work;
  • whether the worker receives a periodic wage or salary, or is paid by reference to the completion of a task or project; and
  • the express terms of the contract between the parties.

While the lack of prescriptive considerations is intentional (according to the Explanatory Memorandum, to ensure a flexible approach that will enable the ordinary meanings of "employee" and "employer" to continue to adapt to changing social conditions, market structures and work arrangements), it does create uncertainty for businesses (subject to reliance on the "opt out" regime, where applicable).

Exclusions and opting out of the new definition

The amendments will apply to most businesses covered by the Fair Work Act, but will not apply to businesses that are only "national system employers" due to a state's referral of industrial relations powers to the Commonwealth. The common law test for employment established by the Personnel and Jamsek decisions will continue to apply to such businesses.

Similarly, the amendments will not affect the meaning of "employee" and "employer" under other workplace legislation to the extent that those laws adopt the ordinary meaning of "employee" and "employer" (e.g. superannuation, income tax, workers’ compensation).

The Act provides the opportunity to avoid the operation of section 15AA via the individual contractor/potential employee issuing an opt out notice (section 15AB).

If there is a perceived risk that a relationship may be classified as an employment relationship then, as long as the individual worker's earnings are above the contractor high income threshold:

  • a person (i.e. a principal/potential employer) may give an individual worker (i.e. the contractor/potential employee) written notice that the individual worker may submit an opt out notice; and
  • with or without written notice from the principal, an individual worker may submit an opt out notice to the principal, stating they consider their earnings will exceed the contractor high income threshold on the date the notice is given and elect for section 15AA not to apply to the relationship.

Assuming a contractor earns over the contractor high income threshold (which is yet to be set), they will have the ability to make clear the status of their engagement as an independent contractor by electing that the new employee definition does not apply to them, even if in practice many factors would point to them being an employee. However, they can also revoke the opt out notice at any time, meaning that businesses will need to remain vigilant to the true status of the relationship. Once a revocation notice is given, the new definition of "employee" will take effect on and after that date.

Written notice about opt out notices, and opt out notices themselves, can be issued from 27 February 2024 onwards before section 15AA comes into effect, or any time thereafter.

Union rights of entry: suspected underpayments

Commencement date: 1 July 2024

Union officials already have the right to exercise a right of entry to workplaces in order to investigate potential FW Act breaches, as long as they:

  • hold a valid and current entry permit issued by FWC; and
  • provide notice to the affected employer at least 24 hours before the proposed entry.

The FW Act has also always enabled a union to apply for an exemption certificate waiving the minimum 24 hours' notice requirement, and allowing the union official to enter the employer's premises without advance notice, if the FWC reasonably believes the advance notice might result in the destruction, concealment or alternation of relevant evidence. In such circumstances, the FWC could issue an exemption certificate if it reasonably believes that evidence will be concealed or destroyed if such notice is given to the employer prior to the delegate's entry.

Closing Loopholes Part 2 expands the grounds for obtaining an exemption certificate to include where the FWC is satisfied that a union official suspects a contravention(s) involving underpayment of wages or other monetary entitlements of a member of the union who works on the premises. The FWC does not itself need to be satisfied that there may be an underpayment contravention, or that there is a reasonable basis for the union official's suspicion. An amendment negotiated by Independent Senator David Pocock makes it a condition of granting an exemption certificate that the FWC must reasonably believe that advance notice of entry would hinder the effective investigation into the suspected underpayment contravention(s).

Critically, an exemption certificate cannot be relied upon to enter without notice to investigate underpayments relating to non-members. The Explanatory Memorandum (issued before the Pocock amendment) states that given the intention is to allow entry without notice, applications for exemption certificates are expected to be dealt with by the FWC on an ex parte basis; that is, without hearing from the employer. Whether this will be the case in light of the Pocock amendment remains to be seen, given employers may be able to provide evidence to satisfy the FWC there would be no risk to the effective investigation of the suspected underpayment contraventions.

It will be critical for employers to review their existing right of entry. Union officials entering pursuant to an exemption certificate have the same obligations not to misrepresent their authority as permit holders or hinder or obstruct another person, act improperly or disclose information obtained for an unrelated purpose.

Right to disconnect

Commencement: 26 August 2024 (26 August 2025 for small businesses)

Closing Loopholes Part 2 introduces a controversial new right to disconnect for employees, which is covered in further detail here.

In summary:

  • The new Division 6 of Part 2-9 provides for a workplace right for an employee to refuse to monitor, read or respond to contact, or attempted contact, from their employer outside of the employee's working hours, unless the refusal is unreasonable. This also applies to contact from a third party, related to the employee's work.
  • Employers who take adverse action against employees exercising the right to disconnect will leave themselves open to potential adverse action claims.
  • Parties can seek orders from the FWC to resolved disputes about the right to disconnect.
  • All modern awards will be amended to include a right to disconnect term.

Civil penalties and serious contraventions

Commencement: 27 February 2024 (in force)

Civil penalties

There will be a significant increase (five-fold from 60 to 300 penalty units) in the maximum civil penalties that can be imposed by a court for certain contraventions of the Fair Work Act, including contraventions of a term of a modern award or enterprise agreement.

On top of this, there will also be an increase in the maximum civil penalty that can be applied for failure to comply with a compliance notice.

Serious contraventions

The criteria for "serious contraventions of civil remedy provisions" under section 557A have also changed.

The first criterion remains that (a) "the person knowingly contravened the provision", with 557B clarifying that for bodies corporate, this occurs when the body corporate "expressly, tacitly or impliedly" authorises the contravention.

However, as of 27 February 2024, the second criterion (b) has changed from "the person's conduct constituting the contravention was part of a systematic pattern of conduct relating to one or more other persons" to "the person was reckless as to whether the contravention would occur".

Additionally, only one of (a) or (b) must now be satisfied to meet the threshold.

The threshold for "systematic pattern of conduct" has been repealed, replaced with a threshold for recklessness under s 557A(2), being where (a) the person is aware of a substantial risk that the contravention would occur; and (b) having regard to the circumstances known to the person, it is unjustifiable to take the risk.

These changes are significant as they will alter the likelihood of liability for the higher maximum penalties for serious contraventions.

Civil remedy provisions for regulated workers

Commencement: 26 August 2024 or an earlier date fixed by the government

Several of the new provisions relating to regulated workers are civil remedy provisions, including:

  • contravening a road transport contractual chain order (section 536NP);
  • discriminating against a regulated business (new subsection 354(3));
  • contravening a minimum standards order (section 536JB); and
  • contravening a collective agreement (section 536JJ).

Sham contracting

Commencement: 27 February 2024 (in force)

An employer is prohibited from representing a contract for employment as a contract for services.

The defence that previously existed was where the employer could show that they did not know and were not reckless as to whether the contract was in fact a contract for employment.

The defence can now be relied on where an employer reasonably believes that the contract is one for services.

In determining whether this belief is reasonable, regard must be had to the size and nature of the enterprise, and may be had to any other relevant matters.

This new defence means employers no longer have to prove a lack of knowledge, while also providing a wide scope to interrogate the reasonableness of their belief as to the nature of the contract. This may mean that sophisticated employers will face a high bar for reasonableness.

Increased FWO compliance

Commencement: 27 February 2024

A technical amendment has also been made to section 545 of the Fair Work Act to confirm that the Federal Court and Federal Circuit and Family Court of Australia have power to make orders compelling compliance with compliance notices issued by the Fair Work Ombudsman.

If you would like assistance in relation to the Closing Loopholes reforms, please contact our experienced Workplace Relations & Safety team.

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.

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