Don’t get caught in a loophole! – what to look out for: THREE changes resulting from the closing the loopholes bill

Employment Law: 07 February 2024

Author: Bianca Mazzarella - Our People

There have been significant changes to the Fair Work Act 2009 (Cth) (FWA) as part of the new ‘Closing Loopholes’ legislation. These changes will come into effect at various times until 2025 and it is important for employers to keep on top of the changes to avoid being caught out.

We have provided a high-level snapshot of THREE important changes that employers need to be aware of.

Rules for labour hire workers – ‘same job, same pay’

Effective 15 December 2023

New types of orders for labour hire employees can now be requested to ensure a labour hire employer pays employees supplied to a host employer, at a minimum, the same rate they would receive under the host employer's enterprise agreement or equivalent.

This reform targets gaps in the laws which have historically allowed large corporations to use labour hire to engage workers on rates that are under those agreed to in enterprise bargaining agreements.

Pursuant to the changes, if a labour hire employer is subject to an Order, they are obliged to ensure that the placed employees are paid the same as the employees the host directly employs.

Small business redundancy exemptions

Effective 15 December 2023

Under the new laws, large business employers that downsize and become a small business (less than 15 employees) due to insolvency will still be required to pay their employees redundancy pay.

This change ensures administrators and insolvency practitioners wind up the company quickly, to prevent them from relying on the loophole that previously existed.

Criminalising intentional wage underpayments

From 1 January 2025, the intentional underpayment of wages by employers will become a criminal offence. The offence will be committed if the employer is required to pay an amount under the FWA or pursuant to an industrial instrument, and fails to do so.

There are hefty penalties for such offences which includes up to 10 years imprisonment, a maximum penalty of three times the underpayment amount (if it can be determined) or $7.825 million dollars for a company and a penalty of three times the underpayment amount (if it can be determined) or a fine of $1.565 million dollars for an individual.

Intent is a pre-requisite, and there are exceptions to the application of the provisions. The Fair Work Ombudsman will be responsible for investigating suspected underpayment offences.

Key takeaways for employers

• Employers who engage labour hire workers may find their costs increase if their labour hire provider becomes subject to an order to ensure ‘same job same pay’;
• Small businesses will have access to a small business wage compliance code (yet to be published) which may protect them from wage theft criminal charges (won’t be protected from civil penalties).
• Delay of winding up of a company with 15 employees or more will not prevent an employees’ right to payment of redundancy.

Please contact our employment law team if you have any queries about how this affects your circumstances. Bianca Mazzarella, Special Counsel (bmazzarella@aitken.com.au) has many years of experience and would be pleased to assist on 03 8600 6000.