IR Bill seeks clarity for casual employment dilemma

On 9 December, IR Minister, Christian Porter, introduced the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the Bill) to Parliament. Among other aspects, the Bill seeks to provide a definition of casual employment with the intent of reducing “ongoing confusion about the legal status of casual employment” which the Minister claims is currently stifling the hiring decisions of employers.

Most employers would recall the well-publicised decisions handed down against labour-hire firm, WorkPac, in recent years, wherein two long-term casual employees both successfully argued, in essence, that they were incorrectly engaged as casual workers. Having convinced a relevant court their employment more appropriately represented a permanent engagement each worker was awarded a payout for leave entitlements which should have accrued during their employment. Refresh with our related articles, WorkPac v Skene and WorkPac v Rossato. Although only two individuals were impacted by these decisions of 2018 and 2020 respectively (and WorkPac is set to challenge the latter before the High Court), both outcomes generated wide-spread angst amongst employers and large-scale misreporting of the decisions created significant confusion over the rights and entitlements of casual workers.

Largely in response to the uncertainty created by these decisions against WorkPac, the Morrison Government is seeking to amend the Fair Work Act to provide a definition of casual employment which will identify a person as a casual employee if employment is offered and accepted without any firm advance commitment that the work will continue indefinitely and follow an agreed pattern of work. Minister Porter indicated the meaning of “firm advance commitment” will be guided by specific factors, including whether the employee can elect to accept or reject work; the employment is described as casual employment; and the employee will be entitled to a casual loading or a specific rate of casual pay.

In addition, Minister Porter said the proposed legislation will provide “an enhancement of the existing award rights of conversion” by requiring employers to offer conversion to permanent employment to casual employees with at least 12 months’ service who have worked a regular pattern of hours on an on-going basis for the previous six months. This is a slight amendment to the current model casual conversion clause in existence in most Modern Awards which conveys the right to the employee to elect to convert after having performed regular hours over the previous period of 12 months. Minister Porter stressed that employers would retain the right to refuse conversion requests on reasonable business grounds, as is the case currently under the Modern Awards.

Whilst introducing a universal definition of casual employment and revising the process surrounding conversion to permanent employment may be welcomed by many, of primary interest to employers would be the proposed introduction of a mechanism to prevent what the Government has labelled “double dipping”. Minister Porter explained that the proposed legislation will enable employers to offset amounts already paid to a casual employee, through casual loadings, against any claims of backpay for benefits such as sick leave or annual leave. As part of the Bill, which, if passed, will apply to past and future employees, a court will be required to deduct any identifiable casual loading paid to compensate the employee for the absence of one or more entitlements under the National Employment Standards (NES), a Fair Work instrument or employment contract, from any amounts later found to be payable to the employee.

The Government argues the introduction of such a provision would eliminate the “massive potential liability” employers would face in essentially having to pay entitlements to an employee twice, as has effectively been evidenced in the recent decisions against WorkPac.

Unions have expressed displeasure with a number of aspects of the proposed legislation with ACTU President, Sally McManus, saying they will campaign strongly for the Senate to block “extreme parts” of the amendments pertaining to casual employment. Ms McManus described the Government’s proposals in relation to casual employment as “very disappointing” adding that the Bill merely reflects, “exactly what the employers wanted”. Elsewhere, Opposition IR Spokesperson, Tony Burke, labelled the Government’s desired IR reforms a “fail” and suggested the proposed changes were about “removing security of employment”.

The Bill seeks other legislative changes such as “simplification” of the Better Off Overall Test (BOOT) in relation to approval of enterprise agreements; imposing a 21-day deadline for the Fair Work Commission (FWC) to determine agreement applications and jail terms of up to four years for the worst instances of underpayment of workers.

In related news:

Also on 9 December, Minister Porter wrote to FWC President, Justice Iain Ross, requesting that the Commission utilise its powers under s.157(3)(a) of the Fair Work Act 2009 to “undertake a process to ensure several priority modern awards in sectors hardest hit by the pandemic be amended”.

In very brief summary, the Government has encouraged the FWC to consider the development and insertion of “loaded rates” and/or “exemption rates” to simplify the pay arrangements within the General Retail Industry Award 2020, the Hospitality Industry (General) Award 2020, the Restaurant Industry Award 2020 and the Registered & Licensed Clubs Award 2010 by rolling various penalties and loadings into the one rate of pay, which would be payable for all time worked. Minister Porter’s correspondence suggests the ‘loaded rates’ would “reduce the cost of administrative burden and address concerns about perceived risks arising from existing pay rate complexities and complexity risks that may lead to, particularly small business, mistakenly underpaying employees”. Whilst acknowledging the design of the ‘loaded rates’ would be a matter for the Commission, the Government’s proposal is that such rates be “optimally structured” to ensure workers are not financially worse off over time and that they are only available on an opt-in basis, by agreement between an employer and employee, with either party being able to opt-out with appropriate notice.

In addition, the Government has also encouraged the FWC to consider making the classification structures of the four Modern Awards identified, “clearer, easier to understand and simpler to apply”.

Minister Porter’s correspondence indicated the Government would support the proposed changes being made “as expeditiously as possible, preferably no later than 31 March 2021” adding that these “key changes… could potentially support Australia’s economic recovery”.

Despite the fact Minister Porter suggested it appeared to him there was “no massive objection from the union movement” towards the FWC designing ‘loaded rates’ for the identified Modern Awards, it would be surprising if unions support the move, with proceedings scheduled to commence before the Commission prior to Christmas.