The Closing Loopholes Act was introduced by the Australian government in September 2023 to enhance fairness in the workplace. The latest changes outlined in Closing Loopholes No. 2 came into effect on 26 August 2024 and address key areas such as casual employment, independent contracting and the right to disconnect while introducing new standards for some contractors.
Despite media attention focussing heavily on the right to disconnect, there are additional changes business owners need to prepare for. Failing to comply with these new rules could lead to penalties, so it’s crucial to understand the updates and adapt your workplace practices accordingly.
Casual Employment Changes
One of the most impactful changes involves casual employment. The new rules redefine what it means to be a casual employee, offering clearer pathways to permanent employment. Under these reforms, businesses must now reassess the status of casual employees regularly and provide an option for conversion to permanent work.
According to the Australian Bureau of Statistics, casual workers make up approximately 20% of the Australian workforce — and are especially common in industries like hospitality, retail, and healthcare, where short-term and flexible work arrangements are common. This change ensures that long-term casuals are no longer denied benefits like paid leave and job security.
These changes may increase overhead costs for businesses reliant on casual labour, as they’ll need to offer permanent employment to casual workers who’ve been in continuous service for 12 months. Employers should assess their workforce and prepare for the possibility of needing to convert casual staff to permanent roles.
What’s required?
Employers are required to offer permanent employment — or explain why they aren’t making a conversion offer — within 21 days after a casual’s 12-month work anniversary (and before 26 February 2025).
This requirement applies to casuals who were employed before 26 August 2024, have worked a regular pattern of hours for the previous 6 months and could continue working these hours without significant changes.
Small businesses with fewer than 15 employees are exempt from this obligation.
Independent Contractor Changes
The Closing Loopholes bill also reshapes the treatment of independent contractors. With a stricter definition of what constitutes an employee versus a contractor, many businesses may find that workers previously classified as independent contractors should now be treated as employees. This is particularly significant in industries such as construction, IT, and creative services, where the use of contractors is common.
Additionally, the Fair Work Commission can now cancel or amend unfair contract terms that would be covered by workplace relations standards if the contractor were an employee, offering further protection for contractors who may have been disadvantaged by one-sided agreements.
The changes aim to close the loophole where employers could sidestep employment obligations by classifying workers as contractors.
What’s required?
Businesses must now review their relationships with contractors to ensure they meet the new definitions or face the risk of legal action.
Whether someone should be classified as an employee depends on factors including the level of control the business has over the task performed by the contractor, where financial responsibility lies, who supplies tools/equipment and how work hours are set. Use the Fair Work Ombudsmun’s Relationship Tests to confirm if an independent contractor your business works with is correctly defined in your contract.
Minimum Standards and Protections for Some Contractors
The gig economy and road transport sectors are also experiencing significant changes with newly introduced minimum standards for contractors. This reform directly affects workers in sectors such as ridesharing, food delivery, and freight transport, where independent contractors often lack basic protections.
The new standards give gig workers access to entitlements traditionally reserved for employees, including minimum wages, safe working conditions, and fair treatment practices. Eligible employee-like workers can also seek reactivation or claim in the case of unfair deactivation from a digital labour platform.
These changes are expected to reduce exploitation and improve working conditions for some of the country’s most vulnerable workers.
What’s required?
Business owners should review their agreements with gig and road transport workers and ensure working conditions meet minimum standards to comply with the new rules.
Right to Disconnect
Perhaps the most widely discussed change is the introduction of the right to disconnect, which allows employees to refuse contact from their employer outside of working hours, except in unreasonable circumstances. This reform has sparked significant media attention, with many assuming it will lead to a blanket ban on after-hours communication. However, it’s important to note that these rules don’t extend to reasonable communication and won’t apply to small businesses until 26 August 2025.
The intent behind this change is to protect employees’ work-life balance, and it doesn’t prohibit all forms of after-hours contact. Employers can still contact employees in urgent situations, such as filling a shift due to illness, without facing penalties.
What’s required?
Businesses should put clear policies in place to define reasonable versus unreasonable contact and engage with their employees to set expectations regarding after-hours communication.
By making the expectations clear, employers can avoid potential disputes and intervention from the Fair Work Ombudsman.
Complying with the Latest Closing Loopholes Directions
In summary, the Closing Loopholes Act represents a significant shift in workplace regulations, aiming to close gaps that have historically disadvantaged workers.
Business owners and employers should be aware that:
- Casual employment changes require employers to reassess their workforce and offer pathways to permanency where applicable.
- Independent contractor rules tighten the definition of employment, potentially requiring some contractors to be treated as employees.
- Minimum standards for gig and transport workers offer protections that may increase business costs but improve fairness.
- The right to disconnect sets new expectations for after-hours communication, giving employees greater control over their work-life balance.
By understanding these changes and preparing accordingly, businesses can remain compliant and continue to operate smoothly. Conducting internal audits will ensure your business is ready for these evolving workplace laws.
To gain clarity on how these changes may impact your business and more advice on upcoming regulation changes, contact us for expert advice from our advisors and accountants.
