The Corrections
What massage therapists need to know about the recent “Closing the Loopholes” reforms
Historically, many massage therapists have found themselves classified as independent contractors, often under conditions that resemble employment. This misclassification can lead to missing out on essential employment benefits and protections.
New industrial relations provisions aim to rectify this by focusing on the real substance of the working relationship rather than just the written contract. The Australian government has legislated these changes through the Closing Loopholes Act 2023 and Closing Loopholes No. 2 Act 2024, which aim to address gaps in existing workplace legislation.
Part 1 of the Closing Loopholes reforms includes changes to payments for certain labour hire engagements and the criminalisation of “wage theft”. Part 2 includes changes to casual employee conversion rights and definitions of “employees” and “independent contractors”.
The amendments, specifically the introduction of section 15AA to the Fair Work Act 2009, are designed to address issues of sham contracting and provide clearer guidelines for determining genuine employment relationships.
The reforms are being implemented in a series of phases as shown below:
Source: Fair Work Commission: What’s changing
Section 15AA
Section 15AA employs a multi-factorial approach to assess whether a worker is an employee or an independent contractor. This means that factors such as the degree of control over work, the provision of tools, and the nature of payment and leave entitlements will all be considered. It (re)introduces a framework for determining the ordinary meanings of “employee” and “employer” based on the “real substance, practical reality, and true nature” of the employment relationship.
The goal is to ensure that workers who should be classified as employees are correctly recognised and afforded the appropriate rights and protections under the law.
This change is essentially a reversion to previous legislation that used the ‘multi-factorial test’ to assess employment status based on the totality of the relationship, including how a contract is performed in practice, rather than solely relying on the contractual terms of engagement.
These changes are a response to recent High Court decisions which emphasised contractual terms over the actual dynamics of the working relationship. By reverting to a more holistic assessment, the Fair Work Act now better protects workers from exploitative sham contracting practices.
For massage therapists, this should mean greater clarity and protection. If your contract does not accurately reflect your working conditions, you may now have stronger grounds to seek reclassification and secure the benefits you deserve!
Summary of key changes
| Change | Summary | Commencement |
| Definition of employment (independent contractor vs employee) | Counters the High Court’s rulings in the cases of CFMMEU v Personnel Contracting Pty Ltd and ZG Operations Australia Pty Ltd v Jamsek, which emphasised the primacy of contractual terms over the practical realities of the relationship. Assessment of the real substance, practical reality and true nature of the relationship. | 26 August 2024 |
| Right to challenge unfair contractual terms | Independent contractors have the right to challenge unfair terms in contracts | 26 August 2024 |
| Definition of casual employment New pathway for eligible casuals to convert to permanent employment (casual conversion) | New definition inserted into the Fair Work Act. The focus of the test is the practical reality of the employment relationship. Eligible casual employees can notify their employer that they wish to convert to permanency, which the employer must consider and respond to. | 26 August 2024 |
| Criminalising intentional wage underpayment | Intentional underpayment of wages by employers will become a criminal offence. | 1 January 2025 |
| Labour Hire | Labour hire employees can now apply to receive a protected rate of pay no less than what they would receive if they worked directly for a host employer. | 15 December 2023 |
Definition of employment
A new definition will be added to the Fair Work Act to help determine the meaning of ‘employee’ and ‘employer’. To determine if a worker is an employee or an independent contractor, the following must be considered:
- The real substance, practical reality and true nature of the working relationship.
- All parts of the working relationship between the parties. This includes the terms of the contract and how the contract is performed in practice. This is a change from the existing test, which focuses on the terms of a contract.
These changes come into effect on 26 August 2024.
Right to challenge unfair contractual terms
A new, low-cost, and flexible way for independent contractors to resolve disputes over unfair contract terms has been established in the Fair Work Commission. This service will be available to contractors who earn below a specified income threshold (yet to be determined at time of publication).
The Commission will look at several factors to decide if a contract term is unfair:
- The balance of power between the parties
- Whether the contract heavily favours one side
- The necessity of the contract term for protecting legitimate interests
- If the term is harsh, unjust, or unreasonable
- Whether the pay under the contract is less than what similar workers earn.
- Any other relevant factors.
If the Fair Work Commission finds a term to be unfair, it can change the terms of the contract or nullify (set aside) all or part of the contract.
These changes come into effect on 26 August 2024.
Definition of casual employment and casual conversion
Changes are aimed at making the definition of a casual employee fairer. Key questions to determined casual status are:
- Can the employer choose to offer work, and can the employee accept or reject it?
- Is ongoing work likely given the nature of the business?
- Do part-time or full-time employees do similar work?
- Does the employee have a regular work pattern? (A regular pattern alone doesn’t mean a firm commitment to ongoing work.)
After 12 months in a small business, casual employees can ask to change to permanent if their situation has changed and they believe they no longer fit the casual definition.
These changes come into effect on 26 August 2024.
Criminalising intentional wage underpayment
Employers who intentionally underpay their workers will face criminal charges. This applies to wages and entitlements under the Fair Work Act or related instruments (like the Health Professionals and Support Services Award). Intentional underpayment of superannuation contributions is also covered.
These changes will come into effect on 1 January 2025.
Labour hire
Labour hire employees can now be paid at least the same as the host’s employees under an enterprise agreement. This applies if the Fair Work Commission confirms that the host’s agreement would apply to the labour hire worker if they were directly employed.
These changes came into effect on 15 December 2023.
Conclusion
Stay informed and seek advice if you believe your employment status may be misclassified. These amendments to the Fair Work Act are hopefully a step towards fairer and more equitable treatment of massage therapists in the workplace. For specific guidance on these changes, contact the Fair Work Commission.
