In our accompanying publication titled A casual or permanent employee? we considered two Full Federal Court decisions that provide the most recent assistance on this hot topic issue for employers.
Australian law recognises two types of employment: casual or permanent. Permanent employment can be full-time or part-time, and it can be for a fixed term or on a permanent ongoing basis. Full-time employment assumes at least 38 working hours per week, while both casual and part-time employment generally assume something less than this.
Broadly, permanent employment brings with it greater job security and entitlements. These include entitlements to paid sick, carer, compassionate and annual leave, and, in the event of termination, entitlements to notice and redundancy pay (where relevant).
Casual employees do not have those same entitlements. Instead, being paid by the hour, they are entitled to a 25% loading on their hourly rate. This is expressly prescribed in Awards and, by implication, in the annual National Minimum Wage Order, to compensate casual employees for the absence of paid entitlements enjoyed by permanent employees.
Casual workers comprise around 20% of Australia’s workforce, mostly in hospitality, retail, agriculture, arts and recreation industries. For many years until recently, a casual employee was thought to be an employee ‘engaged and paid as such’. That is, if the parties expressly agreed that the employment would be ‘casual’, and the hourly rate of pay was sufficient to include any legally prescribed minimum rate of pay plus the 25% loading, there was an assumption that the employment was truly casual.
Modern Awards make this assumption. That is, while the Fair Work Act 2009 (Cth) (FW Act) does not define casual employment, most Awards have provided for a right in casual employees to request conversion from casual to permanent employment. The right is subject to certain qualifying criteria and is not absolute. To start with it is a right to request conversion, not to demand it. Employers can refuse a request on reasonable grounds. And the right only arises after 12 months of casual employment and then only if the employment has become ‘regular’.
Recent developments
The absence of any definition in the FW Act (including previous versions of it) of permanent and casual employment has created problems, not helped by the more prescriptive treatment of the subject in Awards.
For many years there have been occasional disputes about whether a particular worker or group of workers have legitimately been employed on a casual basis, or not. The distinction can be important, for example, in determining whether an employee is or is not protected by the FW Act from unfair dismissal.
The decisions of the Full Court of the Federal Court in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato) and WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene) laid to rest the previous understanding that a casual employee was an employee ‘engaged and paid as such’. You can read our recap of the court decisionshere.
In both Rossato and Skene, the Court reinforced that “employment is not just the contract”, stating the Court was entitled to assess the true intent of the parties, despite the terms of the written contract, noting that “one of the key features of employment contracts is that they tend to be fluid and evolving.”
What now for employers after Rossato and Skene?
ASIC requirement
Recently, the Australian Securities and Investment Commission (ASIC) released new guidance requiring companies to make provision in their accounts for contingent liabilities by way of unpaid entitlements to casual employees in the wake of the WorkPac/Skene/Rossato litigation, including for annual leave, personal leave, compassionate leave, public holiday and redundancy pay.
Special leave sought to appeal and prospect for legislative reform
WorkPac has sought special leave to appeal the Rossato decision to the High Court. Even if the High Court grants special leave, the facts do not lend themselves well to WorkPac’s arguments. In any event, if that application is successful it could take many months before an appeal is heard and decided.
Media reports suggest that the Federal Minister intends to intervene in the appeal if special leave is granted. The other possibilities are the Minister may decide to amend regulation 2.03A to overcome the practical difficulties identified by the Full Court. Alternatively, the Government could amend the FW Act itself to allow casual loading to be set off against National Employment Standards (NES) entitlements.
Recommendations
The decisions in Rossato and Skene were dependent on the facts, and in Rossato were limited to those facts contained in an agreed statement of facts. All is not lost.
Employment contracts require regular review. The background law and regulation is changing all the time. Workforce arrangements are also liable to change over time. An arrangement can begin as casual but can shift over time into permanent ongoing full-time or part-time employment.
There is no magic formula that can be applied to eliminate risk to employers from claims by casual employees seeking relevant NES entitlements on the basis they are not true casuals. The HopgoodGanim team recommends in the current climate that employers take positive steps to mitigate risk, including:
- Consideration of staffing arrangements. Start with casual employees. Review their engagement (including contracts) and their systems of work. How far in advance is there a stated commitment to work agreed days or hours? If they are rostered, are the rosters fixed well beyond the following week or fortnight, or are they variable? Consider whether key factors of casual employment are present e.g. irregular work patterns, intermittency, unpredictability.
- Consideration of offering permanency at the outset, otherwise converting, where applicable, casuals to full-time or part-time permanent roles. If that’s not possible, then consider altering their work arrangements to reflect key factors of true casual employment. Of course, one needs to be careful of this if the employee is a ‘long-term casual employee’ – defined as a casual employed on a regular and systematic basis for a minimum 12-month period – as other factors and entitlements come into play.
- Review of casual contracts:
- to ensure casual loadings are attributed a clearly identifiable amount (preferably that demonstrates a close relationship between the purpose of the loading and the relevant NES entitlements);
- to allow off-set with an identifiable value for annual and personal leave that would accrue; and
- to require in an appropriate case that an employee claiming permanent entitlements repay the employer casual loading previously paid in compensation for those same entitlements.
If you wish to discuss your employment needs, please contact a member of our Workplace and Employment team.