Session 2 - Labour Hire and the Gig Economy

Maddocks Employment & Workplace Spotlight series training program resource.

View the recording of this session on Zoom.

Labour Hire Reforms in the Fair Work Act – What’s Next?

From 15 December 2023, an application to the FWC can be made for a regulated labour hire arrangement order. However, these orders will not come into effect until 1 November 2024.

What type of orders can the FWC make?

1. Regulated labour hire arrangement orders: An order for labour hire workers to be paid at least the same rate of pay as employees of the host business who are doing the same kind of work. This type of order requires labour hire workers to be paid the ‘full rate of pay’ that they would receive under a host employer’s enterprise agreement or equivalent determination. As such, this extends beyond just the base rate of pay and may include incentive-based payments, monetary allowances, overtime and penalty rates.

Employees, unions and host employers can apply for a regulated labour hire arrangement order. Labour hire employers (of the regulated employees) cannot apply for this order.

    2. Alternative protected rate of pay orders: An order where the protected rate of pay is based on a different employment instrument.

      (collectively referred to as a SJSP Order)

      (Note: Labour hire workers who are working for host businesses under a training arrangement are excluded a SJSP Order.)

      What will the FWC take into account in deciding whether to make a SJSP order?

      The FWC must be satisfied of all of the following:

      1. The work performed for the host employer is in relation to the supply of labour, and not for the provision of a service. When deciding whether the relevant work is for the provision of a service or the supply of labour, the FWC may consider factors such as the host employer’s control in managing the performance of the work, or the nature of the work itself (i.e., whether the work is specialised or requires expertise).

      2. The host employer’s employment instrument (i.e. enterprise agreement) would apply to the labour hire workers if they were directly employed to perform work of that kind.

      3. It is fair and reasonable in all the circumstances to make the SJSP order.

        Dispute mechanisms and anti-avoidance mechanisms

        The FWC is empowered to assist with disputes about SJSP orders, including through conciliation and arbitration.

        Legislative anti-avoidance provisions:

        • Prevent labour hire employers and host employers from entering into arrangements to specifically avoid the operation of these provisions; and
        • Prohibit labour hire entities from engaging other types of workers for the purpose of avoiding payment of the employees’ rate of pay.

        Regulated Gig Workers and Digital Labour Platforms

        The Closing Loopholes amendments introduce a minimum standards and guidelines regime to protect certain independent contractors called ‘regulated workers’, which will commence on 26 August 2024 or earlier by proclamation.

        In summary, regulated workers consist of independent contractors:

        1. Working in the road transport industry

        2. Performing work on digital labour platforms (e.g. online ride share or food delivery apps)

          The FWC will now have the power to make minimum standards orders and non-binding guidelines for regulated workers, which can include setting minimum payment terms, record-keeping requirements and insurance requirements.

          Unfair dismissal-like protections will also be extended to regulated workers, protecting them from unfair deactivation. Similar to unfair dismissal laws, the individual must have had at least 6 months of engagement and earn below a high income threshold in order to pursue an unfair deactivation claim.

          FWC jurisdiction for contractors to dispute unfair contract terms (UCTs)

          The Closing Loopholes amendments create a new pathway which allows contractors who earn below a, yet to be determined, ‘contractor high income threshold’ to apply to the FWC for dispute resolution in relation to UCTs about ‘workplace relations matters’ in their services contracts (Fair Work Pathway).

          The new Fair Work pathway is anticipated to commence on 26 August 2024.

          How will the FWC decide whether a term of a service contract is ‘unfair’, and what is the consequence of a term being unfair?

          In determining whether a disputed contract term is unfair, the FWC will take into account numerous factors such as:

          • The relative bargaining power of the parties to the contract;
          • Whether the contract as a whole displays a significant imbalance between the rights and obligations of the parties; and
          • Whether the contract term under consideration is reasonably necessary to protect the legitimate interests of a party to the contract.

          If the FWC finds that a contract term is unfair, the FWC has the power to:

          1. Change the terms of the agreement; or

          2. Set aside all or part of the agreement.

            Key takeaways:

            Labour Hire Reforms in the Fair Work Act
            • Same Job, Same Pay: The aim is to ensure labour hire workers are paid the same as directly hired employees doing the same job at the host company, where the host has an enterprise agreement or other covered employment instrument.
            • Waiting Period: An application for a SJSP order can be made, but there is a waiting period until 1 November 2024 until the order comes into effect.
            • Supply of Labour vs Provision of Services: SJSP orders are not available if the arrangement relates to the provision of services (rather than labour), and in considering this matter the FWC will consider factors like the control the host company has over the work, or whether the work is specialised or requires expertise.
            Regulated Gig Workers and Digital Labour Platforms
            • The FWC’s Power to Set Minimum Standards: The FWC will have the power to set minimum standards for independent contractors in the road transport industry and performing work for digital labour platforms.
            • Unfair Dismissal-Like Protections: Similar to unfair dismissal laws, regulated workers with at least 6 months of engagement and below a high-income threshold can challenge unfair deactivation.
            FWC jurisdiction for contractors to dispute unfair contract terms
            • New Option for Contractors: Contractors below a contractor high-income threshold will have an option to contest unfair contract terms related to workplace relations matters at the FWC. This is a new, less formal option compared to courts.
            • Start Date: The new Fair Work Pathway is expected to begin on 26 August 2024.
            • Disputed Contract Term: The FWC will consider factors like bargaining power and if the contract creates a significant imbalance in rights and obligations to decide if a term is unfair.
            • The FWC’s Power: If the FWC finds a contract term unfair, they can change the agreement terms or even set aside all or part of the agreement.


            The Maddocks Spotlight Series

            The Maddocks Employment, Safety & People team recently delivered its first Spotlight Series session for 2024 in which we discussed the changes to casual employment, the right to disconnect and a new definition of employment.

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