What the employment law changes mean for small businesses and individuals

Casual employment, independent contractors and the right to disconnect: what the employment law changes mean for small businesses and individuals

The Federal Government has recently introduced a range of new employment law reforms to the Fair Work Act 2009 (Cth) (Fair Work Act), which will impact on both small and non-small businesses.

The reforms will implement a wide range of changes to the Fair Work Act but, in particular, focus on providing greater regulation and certainty in respect of casual employees and independent contractors. The reforms also include a new 'right to disconnect' for employees of small businesses.

Given the breadth of these reforms, both individuals and small-business owners should be on notice as to how these changes may impact on current employment arrangements. This article provides a high-level overview of the changes made, outlining the key changes for small business employers and individuals to be aware of.

The Federal Government has secured passage to a raft of significant changes to the Fair Work Act under amending legislation[1] which will impact both small businesses (i.e., businesses that employ less than 15 people) and non-small businesses.

These changes are intended to provide further protections for individuals, including both employees and independent contractors.

What changes are being introduced under the reforms?

The key amendments to the Fair Work Act include:

• Right to Disconnect: From 26 August 2025, small business employees will have a right to disconnect, meaning they may refuse to monitor, read or respond to employer or work-related contact (or attempted contact) outside of their normal working hours, unless the refusal is unreasonable. Any disputes in respect to the exercise of the right to disconnect must first be attempted to be resolved at the workplace level, before an escalation to the Fair Work Commission (if necessary).
• Casual Employment Reforms:
  • Definition of Casual Employees: Casual employees will now be defined by the following factors:
    • an absence of a 'firm advance commitment' to continuing and indefinite work (assessed based on the real substance, practical nature and true nature of the employment relationship, among other factors); and
    • entitlements to a casual loading or specific rate of pay for casual employees;
  • Transition from Casual Employment: Casual employees may now submit a written notice to their employer if, after working for 12 months in a small business, they believe they are working as a part- or full-time employee;
  • Casual Employment Information Statements: Small businesses will be required to provide all casual employees with a Casual Employment Information Statement (CEIS) both when the casual employee starts working and again after 12 months of employment. The CEIS contains information regarding casual employees;
  • Sham Contracting: The Fair Work Act continues to impose civil penalties on employers, including small businesses, which represent employee-employer relationships as that of an independent contractor, which is known as 'sham contracting'. The reforms are not intended to impose any further burden in compliance with sham contracting procedures, but have adjusted the defence to sham contracting to one of 'reasonableness'. This means an employer will have a valid defence if they reasonably believed the employment relationship was that of an independent contractor relationship at the time of the misrepresentation.
• Independent contractor reforms:
  • General Employment and Independent Contractors: General employment will now be defined based on its ordinary meaning, which similar to the definition of a casual employee, looks to the real substance, practical nature and true nature of the employment relationship. Independent contractors who are earning more than $175,000 (current as of 1 July 2024) who do not wish to be treated as an employee may seek to opt-out of this provision; and
  • Unfair Contract Terms: Independent contractors who earn less than $175,000 (current as of 1 July 2024), may now apply to the Fair Work Commission instead of Court to settle any unfair contract term disputes in respect to workplace relations matters, which include remuneration, leave entitlements, and hours of work.

When do these changes come into effect?

The majority of these changes are already in force, with the exception of the employee 'right to disconnect' which will come into effect in respect to small business employees on 26 August 2025.

What do the reforms mean for small businesses and individuals?

If operating a small business, it will be important to consider and be aware of the following issues in light of the reforms:

• that employees have the right to reasonably refuse work-related requests outside of normal working hours.
• It will be necessary to ensure appropriate processes are in place to:
  • understand the status of casual employees, and their eligibility in transitioning into a part- or full-time role;
  • ensure all casual employees are provided a CEIS upon starting and after 12 months; and
  • monitor existing independent contracting arrangements to ensure they are not ordinarily employee-employer arrangements.

As an employee of a small business, it will be necessary to be aware of:

• Whether one meets the new definition of casual employment, and, if so, the right to seek a transition to part- or full-time employment if eligible after 12 months; and
• That the reforms grant a right to reasonably refuse work-related requests outside of normal working hours.

As an independent contractor to a small business, one should consider and be aware of the following rights:

• If the contractor is earning over $175,000: The right to opt out of the general employment definition under the Fair Work Act arises in circumstances where the contractor is earning over $175,000 and intending to remain as an independent contractor; and
• If the contractor is earning less than $175,000: The right to resolve unfair contract term disputes in respect to workplace relations matters in the Fair Work Commission (which is typically a quicker and more cost-effective option than through Court proceedings).

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

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[1] Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth)