Changes to Definitions and Protections for Independent Contractors
The Fair Work Legislation Amendment (Closing Loopholes No. 2) Bill 2023 (Cth) has introduced several important changes for independent contractors. These changes include a new definition of employment, the expansion of the powers of the Fair Work Commission (FWC) to deal with unfair terms in services contracts and the introduction of new frameworks providing minimum standards to protect independent contractors.
- The definition of ‘employment’
A new definition will be introduced to the Fair Work Act 2009 (Cth) to assist in determining whether a worker is an employee or an independent contractor, and whether a party is a principal or an employer. In defining the relationship, the real substance, practical reality and true nature of the working relationship must be considered. This expands on the previous test to encompass all aspects of the working relationship, including the terms of the contract and how the contract is to be performed in practice.
- Unfair terms in contracts
Independent contractors will now be able to apply to the FWC where they believe their services contract contains an unfair contract term. This expands the powers of the FWC to determine if a term of the services contract is unfair, and make a subsequent order to set aside, amend or vary all or part of the contract. In determining whether a term is unfair, the FWC will consider the parties’ relative bargaining power, whether the term imposes harsh, unjust or unreasonable requirements, and what employees performing the same or similar work would receive. Contractors earning above the contractor high income threshold (yet to be determined) cannot apply for this remedy.
- Minimum standards of protection
A new minimum standards framework has been introduced to protect the interests of certain workers in the gig economy. The protections will apply to independent contractors considered ‘employee-like’ workers performing digital platform work and independent contractors in the road and transport industry, known as ‘regulated workers’. These new laws will introduce collective agreements for regulated workers, expanding access to collective bargaining. Regulated workers will also have the right to be represented by workplace delegates. Moreover, the FWC will have powers to deal with disputes involving the unfair deactivation or termination of a regulated worker.
Consequences
Applying these new definitions may see that existing working relationships will be characterised differently, resulting in different rights and obligations for both parties affected. This will be particularly important where there is a discrepancy between the terms of the contract and the practical performance of the contract. As such, employers and principals must be aware of the new rights and remedies available to independent contractors to ensure compliance.
If you have any questions about these changes, please do not hesitate to contact Nick Stevens, Josh Hoggett, Evelyn Rivera or Ayla Hutchison.
