19/03/2024
In February 2024, the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (the Act) re-introduced the “multifactorial” test for whether a worker is legally considered to be an independent contractor or an employee. That is, the Act requires an assessment of all of the circumstances of each work arrangement to be made in order to correctly categorise a worker either way.
This had been the relevant common law test until it was supplanted in 2022 by the High Court decisions in the Personnel Contracting and Jamsek cases. These decisions established that a worker’s categorisation was primarily determined by the terms of the contract in question.
Now, the Act stipulates that when determining whether a worker is an employee or an independent contractor, consideration must be given to the real substance, practical reality and true nature of the work relationship. This requires an assessment of the whole relationship between the parties in question, including the terms of the contract and how the contract is performed in practice.
There are some exceptions to the application of the new provisions: for example, certain workers will be able to “opt out” of being employees through a notification process if they earn more than the contractor high-income threshold. The contractor high-income threshold has not yet been set.
The changes come into effect on 26 August 2024.
In coming months, employers will once again have to consider how work-related contracts operate in practice, in order to correctly identify whether a worker is an employee or contractor and so comply with the Fair Work Act.
If you wish to further understand or discuss these changes and how you can ensure your organisation complies with the new Fair Work regime, please contact us at enquiries@griffinlegal.com.au.