Will ‘Closing the Loopholes’ protect ‘gig economy’ workers?

One of the most important aspects of the government’s Fair Work Amendment (Closing Loopholes) Bill is the detailed provisions covering gig workers. Those provisions account for 100 pages of the 284-page bill.

The ‘Loopholes Bill’ fulfils promises Labor made before the election to regulate two types of workers: road transport owner-drivers (one of the original categories of ‘gig workers’); and ‘employee-like’ workers in the digital platform economy. These two groups are what the Bill calls ‘regulated workers’.

Most digital platform workers are not employees but contractors, so they are not covered by employees’ awards. They work in areas like ‘ride-share’, food delivery and, increasingly, community care. They lack bargaining power, are often paid below what the award would require (if they were employees), and are considered vulnerable. Their non-employee status costs platform workers in those three sectors around $450 million per year.

The Bill enables the Fair Work Commission to establish standards on matters like payment terms, deductions, working time, record-keeping, consultation, representation and union delegates’ rights for these ‘regulated workers’.

The Bill says such standards can only be established where the workers have low bargaining power, are being paid less than equivalent employees or have little authority over their work. It can establish standards in response to an application from a union, business or the Minister, or on its own initiative. The Bill details consultation processes the FWC must engage in for both types of regulated workers before finalising a decision. It can also issue non-binding ‘guidelines’ as an alternative to enforceable standards.

The Bill tells the FWC to tailor regulation to the circumstances of the workers and their industry, and not give preference to one business model over another. In other words, once costs are taken into account, it should mean regulated workers get similar pay to award-based employees performing similar work. This is a critical objective.

What the Bill does not do is redefine any regulated workers as employees. Indeed, it prevents the FWC from doing this of its own accord. This will disappoint many who have been lobbying for such workers to be redefined as employees — and for good reason, as by many tests they should be treated that way. Elsewhere, the Bill’s attempts to revert to an ‘old’ definition of employee — one that preceded the High Court’s ruling that it’s what the contract says, not what actually happens, that is important. This will not make much difference to platform workers, who tended to be treated as contractors anyway under the old definition.

Instead, practicality has won out over high ideals, and that too is for good reason. Big platform firms like Uber have shown that they can rewrite contracts adroitly to circumvent decisions by courts or legislatures to classify workers as employees. Then those workers are at least as badly off as they were before.

Politically, taking on this fight would be bad news for a government. More than anything else, employment status is the issue that motivates expensive oppositional campaigns by the affected firms. Those campaigns frequently co-opt the workers themselves, many of whom don’t want to be employees. This is because they like to imagine themselves as independent people who will make it good in life, even if in reality these aspirations are often unfulfilled and they end up at the beck and call of large corporations.

So the Loopholes Bill takes, as its inspiration, reforms to road transport regulation in New South Wales that have survived 45 years (yes, forty-five years) and several changes of government. What is now Chapter 6 of the NSW Industrial Relations Act enables that state’s Industrial Relations Commission to regulate numerous standards, including pay rates, union recognition and dispute settlement, for owner drivers. It has led to significant improvements in road safety for the affected workers. It does all this without threatening the contractor status of the workers involved. They are protected (that’s what they want), and they don’t become employees (which also keeps them happy — and encourages many to join the Transport Workers Union).

Owner-drivers are mostly ‘small business’ people, who are seen as a natural constituency of the Liberal Party. So this has been enough to prevent repeal of these provisions when government has changed in NSW (or even nationally). The potential sustainability of the gig workers provisions in the Loopholes Bill are its greatest asset for vulnerable workers.

Wary of potential overreach by the FWC, the Government’s Bill does not allow the new minimum standards to cover overtime pay, rostering, purely commercial issues, health and safety matters covered by other laws, or other topics prescribed by regulation. Likewise, it is instructed to avoid unreasonable adverse impacts upon industry participants, including on sustainable competition, business viability, innovation and productivity. This will no doubt lead to a lot of argument in proceedings. How the FWC balances this requirement against the objective of not favouring one business model over another will be critical in determining how beneficial the legislation is to these disadvantaged workers.

The regulation powers provide various opportunities for the Minister to widen, or narrow, the scope of activities in this jurisdiction.

There are some weaknesses in the approach. For example, the availability of non-binding guidelines could dilute regulation. Conversely, the exclusion of some matters reduces the flexibility of the FWC to find the best solution to the issues it encounters. The Bill could have been more explicit about aligning award and contractor pay rates. Contractors outside the platform economy (aside from those involved in road transport) are not covered.

Still, the Bill provides a sustainable model for regulating and protecting many ‘gig economy’ workers. Its success could provide future Parliaments with a model for legislation to protect other vulnerable contractors who are not part of the digital platform economy.

David Peetz is Laurie Carmichael Distinguished Research Fellow at the Centre for Future Work and Professor Emeritus, Griffith Business School, Griffith University.

This article was published on 8 September 2023 in Pearls & Irritations