What does 2021 have in store? Significant change to IR Laws?
In this Employment Update we consider recent significant decisions affecting casual employment, the impact of COVID-19, and the named focus areas for IR Reform in Australia.
Risks Associated with Casual Employment
Last year the Full Federal Court decision of WorkPac Pty Ltd v Rossato (“Rossato decision”) caused panic amongst employers of casual employees, with the decision reiterating the risk of classifying an employment relationship as “casual” when the relationship practically functions as permanent employment. The outcome of the decision was that the Court determined that Rossato was not a casual for the purposes of the Fair Work Act as the parties had agreed on employment of “indefinite duration which was stable, regular and predictable”, and indicative of “firm advance commitment”. Consequently, Rossato was entitled to paid annual leave, personal leave and compassionate leave, although receiving a higher rate of pay on the basis that he was engaged as a casual employee.
Interestingly, in the Rossato decision, WorkPac (the employer) was not entitled to restitution (repayment) of the casual loading paid to the employee, because there was no relevant mistake, or failure of consideration. That is, that casual loading is not paid to a casual employee in satisfaction of leave entitlements owed to permanent employees. Rather, casual loading is paid to a casual employee because the employee is not entitled to leave entitlements.
The Rossato decision followed on from a 2018 decision that had already put employers on notice regarding the risks associated with casual employment, being the decision of WorkPac Pty Ltd v Skene (“Skene decision”). In the Skene decision, the full Federal Court held a casual employee was a permanent employee and entitled to annual leave in accordance with the National Employment Standards (“NES”). The Skene decision confirmed that when a casual employee’s hours are “regular and predictable”, without significant fluctuation, and there is an expectation of ongoing employment, the employment relationship is permanent.
After the Skene decision the Federal Government introduced Fair Work Regulation 2.03A to prevent “double dipping”, namely a circumstance where. an employee receiving the 25% casual loading might also then claim accrued leave entitlements. However, the Court confirmed in the Rossato decision that Regulation 2.03A could not prevent an employee paid a casual loading from claiming leave entitlements.
Round Table Discussions – IR Reforms
On 3 June 2020 the Attorney-General and Minister for Industrial Relations, Christian Porter (“Porter”) announced that key stakeholders from employer, industry and employee groups were commencing round table discussions to talk about industrial relations reforms. Porter said that the aim was to “gain consensus around policy proposals that the Government can then put into action, either by way of legislation, regulation, or via the budgetary process in October”.
The Federal Government established five working groups to consult on five key priority areas. Due to COVID-19, there was a real need for the groups to come up with agreed ways to “regrow jobs and charge a path to economic recovery”.
Casual employment was one of those key priority areas. Porter stated that “with so many Australians still out of work or doing fewer hours because of the pandemic, we cannot do nothing when we have a situation where employers are delaying making hiring decisions because of ongoing confusion about the legal status of casual employment”.
Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020
The highly anticipated Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (“the Bill”) was introduced into Federal Parliament on 9 December 2020. The Bill seeks to amend the Fair Work Act 2009 (Cth) (“FW Act”) and other legislation in what has been described as an “overhaul” of the industrial relations system.
Some of the proposed changes to key priority areas include:
- Introduce a statutory definition for “casual employee” into the FW Act. It is noted that the current proposed provision reads as follows:
15A Meaning of casual employee
(1) A person is a casual employee of an employer if:
a) an offer of employment made by the employer to the person is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and
b) the person accepts the offer on that basis; and
c) the person is an employee as a result of that acceptance.
- Prevent “double-dipping” scenarios by allowing an employer, where they have misclassified employee as casual, to offset the casual loading paid to the employee against claims for leave entitlements;
- Introduce a statutory obligation that an employer must offer a casual employee full-time or part-time employment (reflective of the pattern of hours worked) after 12 months employment, where the employee has during the previous 6 months worked a “regular pattern of hours on an ongoing basis”. An employer may however not be required to make an offer where there are “reasonable grounds” for not doing so;
- Introduce a statutory right for an employee to request casual conversion in similar circumstances;
- Introducing retrospective operation of some of the proposed casual employment amendments;
- Confirming that casual employees are to receive a Casual Employment Information Statement published by the Fair Work Ombudsman (“FWO”).
Flexible work directions and additional hours for part-time employees where an “identified modern award” applies to the employer and employee are anticipated. Identified modern awards have been established based on industries the Federal Government considers have been significantly impacted by the COVID-19 pandemic and include the following modern awards:
- Business Equipment Award;
- Commercial Sales Award;
- Fast Food Industry Award;
- General Retail Industry Award;
- Hospitality Industry (General) Award;
- Meat Industry Award;
- Nursery Award;
- Pharmacy Industry Award;
- Restaurant Industry Award;
- Registered and Licensed Clubs Award;
- Seafood Processing Award;
- Vehicle Repair, Services and Retail Award;
- a modern award prescribed by the regulations for the purposes of this paragraph
Flexible Work Directions
Identified modern awards are to include terms providing for “flexible work directions” concerning duties and location of work (with such directions to be limited to a 2-year duration).
Additional Hours for Part-time Employees
- An employer and employee may enter into a simplified additional hours agreement where the part-time employee is employed under an identified modern award and the employee’s hours are at least 16 hours per week;
- Additional hours agreed are to be paid without attracting overtime rates for hours worked within the span or spread of ordinary hours of the modern award;
- Additional hours are to be treated as ordinary hours of work for annual leave/paid personal/carer’s leave accrual, penalty rates and superannuation.
- Streamlining enterprise agreement making and approval processes;
- Providing more flexibility around the methods employees may be provided with a fair and reasonable opportunity to decide whether to approve a proposed agreement;
- Requiring the Fair Work Commission (“FWC”) to approve agreement (as far as practicable) within 21 working days;
Permitting the FWC (in limited circumstances such as the impact of COVID-19 on the enterprise) to approve an agreement that may not pass the Better Off Overall Test (BOOT) – but with the Agreement to be limited to a 2-year duration;
- Agreements to contain a model National Employment Standards (“NES”) interaction term – explaining the interactions between the NES and enterprise agreement;
- Enable franchisees to ‘opt in’ to a current single-enterprise agreement that covers a larger group of employers that operate under the franchise.
- Enabling the FWC to approve longer-term greenfields agreements made in relation to the construction of a major project (e.g. $500 million), to specify a nominal expiry date of up to eight years;
- For Greenfield agreements, where the nominal expiry is more than 4 years, the FWC must be satisfied that the agreement provides for at least annual increases for each employee covered by the agreement.
Compliance and Enforcement
- Strengthen the FWO compliance and enforcement framework – targeting wage underpayments;
- Introduce a new criminal offence if an employer dishonestly engages in a systematic pattern of underpaying one or more employees;
- Increase the value and scope of civil penalties for some offences, e.g. sham contracting penalties to increase by 50%;
- Criminal underpayment offence – scope for an individual to be imprisoned for up to 4 years;
- Introduce a new small claims procedure;
- Small claims cap to be increased from $20,000 to $50,000;
- Federal Circuit Court and magistrates’ courts will be able to refer small claims to the FWC for conciliation and where the parties agree, arbitration;
- Prohibit employers publishing job advertisements with pay rates below the national minimum wage;
- The FWO and Australian Building and Construction Commission (ABCC) to publish information clarifying when they will institute or defer instituting proceedings.
a) Fair Work Commission
- Enable the FWC to dismiss an application not made in accordance with the FW Act;
- Enable the FWC to dismiss an application at any stage if satisfied the application lacks merit or is an abuse of process;
While the proposed changes are unlikely to go through without alteration, Aitken Legal recommend that employers keep abreast of the proposed changes, particularly as some of the proposed casual employment amendments may operate retrospectively.
Disclaimer: The information contained this article is general and intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this update, Aitken Legal does not accept liability for any errors it may contain. Liability limited by a scheme approved under professional standards legislation.