Cross-Border Catch-Up: Key Changes to Australian Employment Law

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Diana Nehro: Welcome to the Cross-Border Catch-Up, the podcast for global employers who want to stay in the know about cutting-edge employment issues worldwide. I am Diana Nehro, and I’m here today with my colleague, Goli Rahimi. We are cross-border attorneys at Ogletree Deakins, and today we are going down under to see what new changes are coming to the Australian employment law horizon.

Goli, what a great topic. I love that we’re covering Australia, even though I really wish we could actually just go there and sit on Bondi Beach and not just talk about it, but I appreciate that we have our limitations. In any event, I understand that the next several months will be busy for Australian employers and HR professionals. Can you tell me more about that?

Goli Rahimi: Thanks, Diana. Yes, so yeah, let’s talk about it. So, business leaders in Australia are going to want to pay special attention to some of these big-ticket items that are scheduled to go into effect actually starting at the end of August and then well into 2025. So, today what we’re going to do is we’re going to cover some of the major changes here under Australia’s, quote, “Closing Loopholes Number 2 Act.”

Diana Nehro: Okay.

Goli Rahimi: Yeah, it’s a fun name.

Diana Nehro: I say Loopholes Number 2. It all sounds very specific. It is quite a fun name.

Goli Rahimi: Yeah, they closed the Loopholes Number 1 a while back, and now we’re on part two of closing loopholes. I always feel like it’s really fun when legislators recognize the gaps in existing laws, and then they try and close these loopholes.

Diana Nehro: I was just going to say, I’ve never heard of a legislature before actually openly acknowledging that their laws may not make sense as written. So, that’s pretty progressive. I’m impressed.

Goli Rahimi: Yeah. Okay, so we can get started on the very first loophole; this is everyone’s favorite topic, the right to disconnect, and hopefully, no one is going to exercise that right while they’re listening to us on this podcast. You’re going to need to know all about this new rule.

So, you’re going to want to remember this date, it’s August 26th, 2024, because actually almost all of our updates going to effect on this date. But the right to disconnect on August 26th will become a workplace right for employees of non-small business employers under Australia’s Fair Work Act. This is also going to be expressly included as a term in modern awards.

Now, who are non-small business employers? Those are companies with at least 15 employees, and that’s going to include employees of associated entities. So, sometimes you’re going to bring in employees from subsidiaries around the world to meet this threshold.

So, we’re looking at this having a really big impact on hundreds of companies in Australia, and that doesn’t mean that small business employers will be left out. They get an additional year to comply. So, August 26th of 2025 is when they will have to recognize that right.

So, our listeners who have employees in Europe and other countries or who are familiar with this right to disconnect law will really understand this concept. But essentially, well, what is it, right? The right to disconnect is an employee’s right to essentially refuse to monitor, read, or respond to contact from their employer outside their working hours unless it’s unreasonable to do so.

So, what does this mean? In practice, unless it’s considered, quote, “unreasonable.” If your boss emails you at 9:00 P.M., and this is outside your standard working hours, you can basically ignore the email.

Now, there’s a little bit of a caveat to this because in other jurisdictions with the right to disconnect law, the employer can’t reach out to you, period. But, in Australia, the boss or the supervisor or manager can still email you. You can just ignore it. It essentially just delays employee’s required response time.

Diana Nehro: I get it in theory, and it is an interesting distinction between how it’s been handled in other countries. But what if there’s a work emergency? What if there’s something that they really need to know about at nine o’clock at night on Friday?

Goli Rahimi: Right. And so this Closing the Loopholes Act is definitely taking that into consideration. It’s absolutely a factor to consider when a court or some other decision-makers determining if it’s, quote, “reasonable for that employee to refuse to respond.”

Other factors are probably going to include how the contact was made, right? Is your boss texting you, is your boss calling you, is your boss just sending an email? How much disruption it causes, and the employee’s role and responsibilities. However, we’ve been taught this over and over again in law school, the quote, “reasonable person” is not really defined, right? It’s a product of legal precedent. So the next several months, we’re probably going to see a lot of legal debates and case law over what constitutes a reasonable refusal.

Diana Nehro: Yeah, I can imagine there’s a whole world of things that employers might think is reasonable where employees may not. So, that definitely sounds like it’ll be the subject of many interesting legal discussions. It also sounds like it could really be a big shift for many employers, especially those who are accustomed to longer hours post-COVID. The constant connection to technology has made it much easier to work remotely off hours. I know I’m guilty of that myself. So, it just sounds like there’s a lot of change that’s going to be interesting to see how it actually gets implemented in practice.

Goli Rahimi: Exactly. And this is actually one of the underlying reasons why this law was even passed in the first place. This is not unique to just Australia. We’re seeing this across the world. There’s this increased recognition that unreasonable work demands are detrimental to worker health and safety. So, it’s actually prompting many lawmakers to pass similar laws across the world in addition to other rules that limit excessive work hours and other psychosocial hazards in the workplace.

Diana Nehro: Interesting. So, assuming that the employer chooses to disregard this law and insists that the employee respond in off hours, what happens from a consequential perspective in terms of penalties, anything like that for the employer?

Goli Rahimi: Right. So, as we talked about earlier, the employer can still reach out. The employee just has the right to refuse. But if the employer comes back and disciplines or terminates the employee for refusing to respond to an after-hours message, there’s a few things that could happen. So first, the Fair Work Commission in Australia can essentially issue an order to the employer to say, this dismissal was void, this discipline was void. Or conversely, if the employee’s refusal is unreasonable, the Fair Work Commission can force them to stop refusing.

Diana Nehro: You got to figure out what this meaning of reasonable is and then respond to the email, or not?

Goli Rahimi: We’re all very busy trying to figure out what’s reasonable and what’s not. But if one of these orders is issued and either the employer or the employee does violate it, then there’s some pretty hefty penalties. It’s going to be approximately 18,000 Australian dollars, which converts to 12,000 U.S. dollars for each violation.

Diana Nehro: Does that mean per email, is that [inaudible 00:07:26]?

Goli Rahimi: We’re going to have to wait and see what that means. The statute says each violation. So a violation could be each email, it could be each violation of the order. We’ll just have to see how it’s interpreted by the courts.

Diana Nehro: That could be very, very expensive.

Goli Rahimi: Yes.

Diana Nehro: Okay. This sounds great. What else can we look forward to under the Closing Loopholes Act?

Goli Rahimi: Okay, don’t get excited. This is one of our favorite topics, Diana.

Diana Nehro: Terrified and excited at the same time. Tell me, tell me, I can’t wait.

Goli Rahimi: Employee classification misclass. So, we’re going back to our favorite date, August 26th, 2024. The Closing Loopholes Act is going to change the current test for determining if a worker is an employee or an independent contractor. So, this new test is going to look like a lot of the tests that are applied all over the world, including in the U.S.

Currently, what is the test that we’re relying on? Well, currently, Australia focuses almost exclusively on the terms of the contract and doesn’t give much credence to how the relationship is operating in practice. But starting August 26th, courts will look to the, quote, “real substance, the practical reality, and the true nature of the working relationship.” These are very fancy words. What does it mean? Essentially, it means we’ll look at the totality of the circumstances; how is this contract performed in practice?

That doesn’t mean we’re totally doing away with the importance of the underlying agreement, but it is no longer the only or most important factor. Some other factors will include the extent to which the contractor is controlled by the company, whether they’re given tools and equipment to carry out their duties, if they get the same benefits as employees of the company, how they’re compensated, et cetera, et cetera. This is pretty in line with how many other countries are actually analyzing claims for misclassification.

Diana Nehro: Yeah, that’s an interesting point that up until now basically or up until August 26th, employers or courts will look only at the contract itself. I think we have time for one more update. So, tell us what else the Closing Loopholes Act will do.

Goli Rahimi: All right. So, our final change is a brand-new sparkling definition of, quote, “casual employee.” So, what’s a casual employee right now? So, currently, a worker is considered casual if their employer makes no firm advanced commitment to continuing work or a definite work according to an agreed pattern of work. There’s a lot of words here. Basically, you’re not committing to keeping this individual on forever.

To determine if someone is a casual employee, prior to this update on August 26th, what courts would do is they would look at several factors that exist at the time employment begins. So, they really wouldn’t look to see how the relationship has developed. But now, effective August 26th, there will be no fixed point in time requirement. And again, we’re going back to those fancy words we talked about when we were doing the independent contractor analysis, but whether someone’s a casual employee is going to be based on the real substance, the practical reality, and the true nature of the relationship. So in other words, we’re looking at the totality of the circumstances, regardless of how the employer and the casual employee really contemplated this relationship at the outset.

Diana Nehro: You’re right, that is a very sparkling new definition. What does it mean in practice?

Goli Rahimi: So, these changes have essentially created a new, quote, “employee choice process.” So, what does that mean? This means that a casual employer can actually notify… a casual employee, excuse me, can actually notify their employer if they think they no longer meet this revised definition of casual employee. So, they go ahead, and they notify the employer. And if the employer agrees, then the employee will convert to a permanent employee. The employer can only reject the notification on fair and reasonable grounds. There’s our favorite word again, reasonable.

Diana Nehro: It really does seem to put a lot of pressure on the employer to make sure that they’re watching every single day to see what the employee is doing that might be different from how they contracted them originally.

Goli Rahimi: You would think so, but what’s interesting is that earlier versions of this bill actually had a much higher burden on employers. So, earlier drafts of the Closing Loopholes bill required the employer to give a very detailed explanation to the employee if they were rejecting the request. And they only have very limited enumerated reasons upon which they could base that rejection.

So now, the employer still has to give the employee some sort of notification as to why they’re rejecting it. But the notification does not have to be detailed. The rejection can be on any grounds that are considered fair and reasonable. So, the employer still has the burden of considering these requests, but the burden itself is a little bit alleviated.

Diana Nehro: Wow, amazing. Goli, we’ve covered so much today, and I think that’s really, it sounds like just the tip of the iceberg when it comes to the Closing Loopholes Act. Wow. It just sounds like there’s so much about what’s going to be changing, what will change, the landscape of Australian employment law in general. A lot to keep abreast of. And thank you so much for providing us with this insight today. And thank you everyone for joining us on today’s Cross-Border Catch-Up. Follow us to stay in the know about cutting edge employment issues worldwide.

Announcer: Thank you for joining us on the Ogletree Deakins podcast. You can subscribe to our podcast on Apple Podcasts or through your favorite podcast service. Please consider rating and reviewing so that we may continue to provide the content that covers your needs. And remember, the information in this podcast is for informational purposes only and is not to be construed as legal advice.