What Australia's new federal Labor government will mean for employers

Woman sitting by a counter and smiling into the distance.

On 21 May 2022, the Australian Labor Party (ALP) was elected in Australia's first change in government in nine years. The ALP's success will very likely lead to significant reform in employment and industrial relations. So, what exactly does a Labor government mean for employers?

Below, our employment law experts break down the key employment and industrial relations policies the ALP is proposing, and what employers can do now to start preparing for the anticipated changes to national employment and labour laws.

1. Creating secure jobs and stronger protections for workers

The ALP has committed to enshrining "secure work" as an objective of the Fair Work Act 2009 (Cth) (FW Act). This change would require the Fair Work Commission (FWC) to expressly consider "job security" in all its decision making. This commitment is bolstered by the following policy changes, which seek to prevent insecure employment and provide workers with greater security.

Casual employment: "Back to the future"?

The new government proposes to amend the existing definition of "casual employment" in s 15A of the FW Act to provide casual employees with a clearer pathway to permanent employment. The new definition would be an objective test based on the employee's ongoing employment relationship, as opposed to the terms and conditions agreed at the commencement of employment. This change would override the High Court's decision in WorkPac Pty Ltd v Rossato (2021) 392 ALR 39, where the Court held that a firm advance commitment to ongoing work is governed by the terms of the employee's contract rather than the subsequent conduct of the parties. See our related article.

Recommendations for employers

  • Start reviewing the working arrangements of any casual employees in your organisation, to determine whether any risk of misclassification exists (eg. where casual employees are working regular hours and shifts). The ALP's proposals to amend the definition of "casual employment" mean that such casual employees are more likely to be considered part-time or full-time employees. Accordingly, you should also consider whether any offers of casual conversion for employees should be made or are appropriate.

Limitations on fixed-term contracts

The ALP has also proposed to introduce limits on the number of consecutive fixed-term contracts an employer can offer for the same role. This change will mean that after 24 months on a fixed-term contract, an employer will be required to offer the employee permanent ongoing employment. There is no such obligation on employers in the FW Act or other related legislation. This is likely to have a major impact on employers in project-based sectors, who are most likely to engage employees on these types of arrangements.

Recommendations for employers

  • Employers who regularly engage workers through consecutive fixed-term contracts (eg. employers in project-focussed industries) should consider how the proposal to limit the use of fixed-term contracts may impact their labour engagement model. Employers in these industries may need to re-evaluate how they engage such employees in the future.

Sham contracting

The ALP proposes to strengthen sham contracting laws, to prevent employers from misrepresenting a contract of employment as an independent contracting agreement. This measure is likely in response to the recent High Court decisions that recognised the primacy of the employment contract in determining whether someone was an independent contractor or employee. See our related article.

The ALP has also committed to ensuring that the FW Act protections cover independent contractors, including those in the gig economy, and other "employee-like" forms of work. This would extend the powers of the FWC to set minimum standards for such workers.

Recommendations for employers

  • Update your independent contractor agreements, as well as reviewing your engagement processes to ensure that the appropriate engagement (or employment if not a genuine contractor) model is chosen for particular roles. Start reviewing onboarding arrangements for contractors, and ensure that the day-to day-engagement of these workers is in fact consistent with their contractual terms and that only true "independent contractors" are engaged as such.       
  • Employers who engage gig economy workers, or other "employee-like" workers such as, potentially, independent contractors, should closely monitor the proposed legislative changes in the area of "insecure work" to provide the FWC with power to regulate these arrangements.  It is likely that any proposed changes relating to "employee-like" workers will provide workers with increased entitlements and impose more obligations and increased costs on employers.

Portable leave entitlement scheme

The ALP has suggested that it will consider introducing a portable leave entitlement scheme for Australians in insecure work. This scheme would permit workers from certain industries to transfer their leave entitlements when they move from project to project or job to job within a single industry. While the ALP has not specified which industries will be affected, given the policy rationale behind this proposal, it is likely that industries with high instances of "insecure work" will be targeted. This may include accommodation and food services, retail, arts and recreation, and healthcare and social assistance.

Minimum wage increase

The ALP supports an increase to the minimum wage to counter the rising cost of living. The Prime Minister, Anthony Albanese, has announced that he intends to make a submission to the FWC's minimum wage panel, that it should award an increase to the minimum wage that ensures workers do not experience a "real wage cut" as inflation hits 5.1%.

The ALP has also proposed a government-funded wage increase for aged care workers at federally subsidised aged care homes.

Recommendations for employers

  • Employers with employees on the national minimum wage should consider how an increase to the national minimum wage will impact their business. Sectors that are likely to be most affected include early childhood education, aged care, disability services, retail and hospitality.

Criminalising wage non-compliance

The ALP proposes to legislate to make wage theft a criminal offence. In its 2020/2021 Annual Report, the Ombudsman reported that it had recovered more than $148 million in unpaid wages. However, it is believed there has not been a single conviction for wage theft in Queensland or Victoria since wage non-compliance was criminalised in those states. Any federal wage theft laws introduced by the ALP will not override existing state and territory laws where these currently operate. See our related article.

Recommendations for employers

  • Review employee remuneration in order to identify, address and prevent the underpayment of employees, as a matter of priority. The ALP's proposal to criminalise wage theft would apply to all forms of remuneration, including loadings, penalty rates, overtime, leave, allowances and superannuation guarantee.

2. Labour hire reform

The ALP has indicated that it wishes to create better employment conditions for labour hire workers. It proposes to legislate to ensure that workers employed through labour hire businesses receive the same pay, conditions and entitlements as employees of the host.

It will also establish a national labour hire licensing scheme, under which all labour hire providers must obtain and maintain a licence in accordance with certain conditions. The national licensing scheme will likely model schemes already operating in Queensland, Victoria, South Australia and the Australian Capital Territory. See our related article.

Recommendations for employers

  • Evaluate the ALP's proposals for labour hire reform. The impact of these proposals will likely be extensive and you should, if relevant, consider the systems and processes you will need to establish to comply with proposed legislation.

3. Closing the gender pay gap

The ALP has committed to a number of measures that aim to limit gender-based pay disparity in the workplace.

It will introduce the remaining recommendations from the Respect@Work Report. This includes amending the Sex Discrimination Act 1984 (Cth) to introduce a positive duty on employers, and strengthening whistleblowing laws and rewards schemes.

In addition, the ALP proposes to legislate:

  1. that companies with more than 250 employees will have to publicly report their gender pay gap; and
  2. to prohibit pay secrecy clauses, which currently prevent employees from openly discussing their pay. See our related article.

Another proposed initiative is to strengthen the powers of the FWC so that it may order pay increases for workers in low-paid, female-dominated industries. Additionally, the ALP has indicated that it will address the gender pay gap in the Australian Public Service and introduce 10 days of paid family and domestic violence leave as a National Employment Standard (NES).

Recommendations for employers

  • Review now and update your workplace policies, including sexual harassment, grievance handling and whistleblower policies, to ensure that they are preventative (rather than reactive) in the areas of sex discrimination, sexual harassment and victimisation in the workplace.
  • Review and possibly update your employment agreements or policies in relation to the ALP's proposal to abolish pay secrecy.

4. Enterprise bargaining

The Australian Council of Trade Unions and the Council of Small Business Organisations Australia (COSBOA) have reportedly already had discussions about award simplification.

COSBOA has highlighted how the award system is a "nightmare" for small business operators, as evidenced by the recent number of underpayment cases.

The ALP has pledged to bring business, employer groups and trade unions together in an "employment summit" to collaborate on issues of secure work and ensure that enterprise bargaining is working effectively.

The ALP has indicated support for:

  • simplifying the award system for small business and removing the impediments that discourage the use of enterprise bargaining
  • giving the FWC broader powers to arbitrate disputes arising in the course of enterprise bargaining
  • preventing the unilateral termination of an enterprise agreement that has passed its nominal expiry date
  • improving access to collective bargaining, potentially through multi-employer bargaining

5. Superannuation and the aged care pension

While votes are still being counted, the ALP will likely retain 26 seats in the Senate, where 39 votes are needed in order to pass legislation. Accordingly, the Greens may have the balance of power in the Senate, and it seems likely that the ALP will face calls to:

  • pay superannuation on government-funded parental leave
  • increase the aged pension to $88 per day, and lower the pension age to 65

Both the Greens and the ALP are also committed to maintaining the legislated increases to the superannuation guarantee, which commenced in 2021.

The ALP has also proposed including a right to superannuation within the NES, giving workers the power to pursue their unpaid superannuation as a workplace entitlement.

Recommendations for employers

  • Employers should ensure they are prepared for the incremental superannuation guarantee increases, which commence on 1 July each year. From 1 July 2022 the superannuation guarantee rate will increase to 10.5%. Employers may consider reviewing whether their employment contracts have a remuneration clause that is inclusive or exclusive of superannuation.

6. Abolishing the construction watchdog

The ALP has proposed that it will abolish the Australian Building and Construction Commission in the apparent belief that this change will promote greater union representation for construction workers.

7. "Safe rates" trucking body revived

The ALP is committed to reviving a trucking industry body that would set minimum pay standards for owner truck drivers. The previous industry body was abolished in 2016 after protests from owner drivers who thought the minimum rates and standards would make them less competitive. However, this time around there have been wide and industry-based consultations to ensure that the rates adopted will be sustainable. The independent body will be responsible for setting pay standards and safe working conditions. It will be interesting to see how any new body interacts with existing state schemes, such as those in New South Wales and Victoria.

8. Teal independents, Greens and the climate

The Coalition lost a number of its traditionally "safe" seats in this election to independents who, by and large, stood for a return to small liberal values, action on climate change, integrity and women's issues.

In considering the support for independents and the Greens, climate action in Australia is a growing issue that employers may need to directly address. It is envisaged that in the future there may be increased employee activism on this issue.

Recommendations for employers

  • It may be prudent for employers to give further consideration to, or if necessary start working on, their own environmental initiatives. These types of initiatives may make an important difference in attracting and retaining talent.

Please keep in mind that these are all proposals that this stage. However, if enacted they are wide-reaching and will have significant repercussions for employers. They could also be the tip of the iceberg in relation to the ALP's labour reform agenda.

If you'd like to discuss any of the topics listed above, please contact a member of our team.

Photo by Brooke Cagle on Unsplash

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.

Key contacts

Annabelle Gray

Annabelle Gray