New Federal Court Ruling: Time to Review Your Casual Employment Arrangements
A decision by the Federal Court last week on casual employment in the WorkPac v Rossato case has significant implications for clients with long term or regular casual employees.
The main take-outs of the decision regarding casual employment arrangements are as follows:
- Under certain circumstances, employees who have been regarded as casuals (ie. where there is a “firm advance commitment”) may be mis-classified, as they should be treated as ongoing employees (full time or part time), rather than casuals.
- Where this occurs, an employee that has been mis-classified as a casual employee would be entitled to annual leave, personal/carers leave and public holidays for the period of their employment, in accordance with the Fair Work Act 2009.
- Furthermore, the Court ruled that even though a casual loading had been paid to the employee throughout the employment period (in lieu of annual leave and personal/carer’s leave entitlements), this could not be used to off-set the leave entitlements due.
The decision has sent shockwaves through businesses as it is likely to create even greater uncertainty around the employment of casual employees, and act as an additional disincentive to employment at a critical time for the Australian economy.
It has been estimated that there may be in excess of 1.5 million casual employees in Australia that work on a regular and ongoing basis and that the potential for backpay as a result of this decision could be up to $8 billion.
Although significant, employers should be careful not to overreact to this decision and the media commentary surrounding it.
The decision related to the specific circumstances of an employee who had a series of six contracts with a labour hire company in the mining industry, each of which was effectively full-time in nature. Whilst it does have broader application, it certainly does not apply to all, or even most casuals.
Nevertheless, we strongly advise clients with long term casual employees or casual employees engaged on a regular basis, to take immediate steps to understand their exposure and manage their risk.
Steps to Ensure the Nature of Your Casual Employment Arrangements
Clients with casual employment arrangements that are continuing, regular, certain or predictable, may be deemed to be ‘other than casual’, and claims for substantial backpay may result. We therefore encourage clients to consider the real nature of each of their casual work arrangements and to take appropriate steps to manage the situation and mitigate the risk.
This could include:
- ensuring that each of your casual employees has a well drafted employment contract and that the contract clearly describes the employment as casual
- ensuring that there is no firm advance commitment of continuing and indefinite work
- ensuring that the contract provides that the employer can elect whether to offer employment on a particular day and that the employee is able to decline the offer
- including in the contract of employment that termination is available at short or on no notice
- regularly reviewing casual employees’ actual hours of work, shift arrangements and rosters to ensure they continue to be casual and irregular in nature
It should be kept in mind that the subject of casual employment arrangements and the treatment of ongoing casual employees is by no means finalised.
It is likely that the WorkPac v Rossato decision will be appealed to the High Court, however of course, if this occurs, it will be quite some time before the matter is ultimately determined.
Industrial Relations Reform Process
In addition, on Tuesday of this week, the government announced a fast-tracked IR reform process to address a number of specific problem areas. This process includes five working groups involving employers, industry groups, employee representatives and government that will be tasked with discussing, negotiating and agreeing solutions to each of the identified problem areas by September this year. Importantly, one of the five working groups specifically covers casuals and fixed term employees.
How We Can Help
We are very aware that casual employment arrangements are vitally important to many of our clients and that many of you would have casual employees that have been with your business for long periods of time, sometimes many years.
If you have questions or concerns in relation to this decision and how it might apply to your particular situation, please don’t hesitate to contact us for assistance.
This is a complex area of employment law and we have a team of experienced specialists at Allan Hall HR dedicated to helping clients work through these sorts of issues.