Back to the Future, re-defining employment

The recent enactment of the Closing Loopholes No. 2 Bill means that there is now a new definition of employment in the Fair Work Act.

The Fair Work Act will provide a new “ordinary meaning” definition of employee and employer which clarifies that whether a person is an employee is determined by the “real substance, the practical reality and the true nature of the relationship.”

This marks a return to the multi-factorial test, which requires consideration of the totality of the working relationship. This unwinds recent High Court authority, which prioritised the terms of the written contract when determining whether an individual was an independent contractor or employee.

But there’s more…

High earning independent contractors have the option to opt out of this new definition to preserve their contractor characterisation. Opt out notices may be revoked at any time.

What does this all mean?

The provision will commence on the 26 August 2024, or earlier by proclamation.

It is now more important than ever for employers and principals to intentionally structure work as it is intended to continue.  Employers should have job design front of mind and regularly monitor their relationship with their workers.

Please contact our Employment, Discrimination and Equality team if you have any questions.