The Casuals Conundrum Resolved?

Articles Written by Ruveni Kelleher (Partner), Erin Wilson (Special Counsel), Katelyn Iacono (Associate)

Sweeping proposed industrial relations reforms introduced by the Federal Government on 9 December 2020 could change the nature of work for Australia’s estimated 2.6 million casual workers. It may significantly reduce the potential for future class actions and other claims in relation to casual employees.

Skene, Rossato and the rise of casual employment class actions

Earlier this year it was held by the Full Federal Court in Workpac v Skene (Skene)[1] and Workpac v Rossato (Rossato),[2]  that casual employees may be found to be permanent employees who are owed entitlements such as annual leave and redundancy pay, if they perform work according to a regular predictable pattern and have working arrangements indicative of a firm advance commitment of work. This is the case even though they receive a 25% casual loading intended to compensate them for these entitlements.

Skene and Rossato represent a significant risk of class actions and other claims in connection with the mischaracterisation of casual employment. This includes backpay claims estimated by the Federal Government to be worth between $18 and $39 billion.[3] Rossato is currently on appeal to the High Court.

Some welcome relief for employers?

To attempt to relieve the risk of such claims and the potential burden on employers, on 9 December 2020 the Government introduced the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Bill). The Government hopes to pass the Bill by March 2021.The main features of the Bill, as they relate to casuals and the potential for class actions, are summarised below.

Statutory definition of casual employment

A new definition of casual employment will be inserted into the Fair Work Act 2009 and will apply to casual employment offers made before, on or after the commencement of the new laws.

A person will be a casual employee if the employee accepts an offer of employment that “makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person.”

A number of factors must be considered when determining if the employer makes no firm advance commitment to continuing and indefinite work.  These include the ability to accept or reject work, whether the job is described by the employer as being casual and whether the employee is paid a casual loading.

Critically, whether a person is a casual employee will be assessed at the time the engagement is entered into and not on the basis of how the engagement works in practice.  This should provide employers with more certainty. It should also alleviate the need for employers to continually assess the likelihood of casuals being considered permanent employees through the application of uncertain and changing case law.

A regular pattern of hours, in itself, will also not be enough to make a casual a permanent employee, thereby dealing with one of the key reasons for the decisions in Skene and Rossato.

Double dipping

The second major change is designed to address concerns by business in relation to “double dipping,” where employees incorrectly characterised as casuals received both the 25% loading and paid entitlements only available to permanent employees. 

A new mechanism will allow employers to set off any claim for entitlements (e.g. annual leave, personal/carer’s leave, compassionate leave, redundancy pay) against the casual loading.

These provisions will have retrospective application so they will apply to all current employees from the commencement of their employment.  This is likely to have a significant impact on current claims, including class actions relating to casual employment entitlements, although there may be constitutional issues with this approach.

Casual conversion

In addition, the Bill introduces a revised minimum standard for casual workers to convert to a permanent role. Where an employee has worked for the employer for a period of 12 months and has worked a regular pattern of hours on an on-going basis for the last six months, an employer is obliged to make an offer to the employee for conversion to permanent employment. Where such offer is refused by the employee, the employee reserves the right to request conversion every six months, where they remain eligible. Employers will retain the ability to refuse such a request on reasonable grounds.

New casual employees are required to be given a Casual Employment Information Statement published by the Fair Work Ombudsman before or as soon as practicable after the employee starts employment as a casual employee.

Penalty increases

These reforms are aimed at providing increased certainty for employers about casual employment and confidence to employ them. While this may be good news for employees facing large scale claims by casual employees, employers should also be aware that the Bill enhances the Fair Work Act compliance and enforcement framework to more effectively deter non-compliance with workplace laws and make it easier to recover wages when underpayment does occur.

The Bill introduces a new criminal offence for dishonest and systematic wage underpayments. It also increases the value and scope of civil penalties and orders that can be imposed for non‑compliance. This includes a fifty per cent uplift to the ordinary penalty rates for breaching the sham contracting provisions for contractors who are actually employees and remuneration related contraventions. It also introduces a new penalty calculation method for remuneration related breaches by companies based on the benefit they obtained from the contravention.

These changes are likely to significantly increase the stakes for employers in large scale underpayment claims and class actions. The ACTU has indicated it will oppose at least some of these changes and we are yet to see the Labor Party’s position on the above changes. Although the ultimate terms of the legislation if passed are uncertain, employers should seek advice about the steps they can take to mitigate the risks arising in relation to casual employees in the meantime.

[1] [2018] FCAFC 131.

[2] [2020] FCAFC 84.

[3] Regulatory Impact Statement: Casual Employment Reforms, Attorney-General’s Department, December 2020.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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