Fair Work amendments prevent casuals from having their cake and eating it too

The introduction of the Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) will effectively alleviate the opportunity for employees, who have been incorrectly classified as ‘casuals’, from double-dipping on their entitlements.

 

Background

In response to the Federal Court decision of WorkPac Pty Ltd v Skene [2018] FCAFC 131 (WorkPac), the Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) were introduced to amend the Fair Work Regulations 2009 (Regulations).

Relevantly, WorkPac  held that the ‘casual’ employee in question, Mr Skene, was actually a permanent employee entitled to annual leave notwithstanding his designation as a casual employee. In reaching this decision, the Court focused on the ‘substance’1 of the employment relationship over its ‘characterisation by the parties’.2 The Court found that Mr Skene’s employment lacked the ‘irregular work patterns’, unpredictability and uncertainty that are indicative of a casual employment relationship.3

The decision resulted in orders that WorkPac pay Mr Skene compensation with respect to his annual leave entitlements, despite the fact that Mr Skene had received what his employer argued was a casual loading during the relevant period.

The new amendments, which came into effect on 18 December 2018, stipulate that in the situation where a person has been misclassified as a casual employee during all or part of their employment, the employer has a right to make a claim for the casual loading amount to be considered in the determination of the employee’s leave entitlements under the National Employment Standards (NES). The amendment was introduced in order to prevent the potential to ‘double dip’, which could occur following the decision and reasoning in WorkPac, whereby a casual employee could potentially be in receipt of a casual loading in addition to annual leave entitlements under the NES. Notably a casual loading is, at least in part, paid in recognition that a casual employee does not have any entitlement to other forms of paid leave.

When the Regulation applies

For the relevant regulation to apply, the following criteria must be satisfied:
  1. the person is employed as a casual employee;
  2. the person receives a loading amount from the employer, with this amount being ‘clearly identifiable’ as compensation for the employee not receiving the relevant NES entitlements (in other words, a casual loading has been paid and is capable of being identified, usually as being separately listed on a pay slip and referred to in a contract of employment);
  3. the person is actually a permanent employee despite being classified as a casual employee; and
  4. the person makes a claim for payment with respect to one (or more) of the NES entitlements of a permanent employee that was not received.

Significance for employers

The amended Regulations enable employers to offset casual loading where an employee is found to have been incorrectly classed as a casual employee. In doing so, the Regulations resolve the uncertainty and criticism surrounding ‘double-dipping’ following the WorkPac  decision.

It is common for employers to fall into the habit of employing casual employees for extended periods of time without reviewing the arrangements. At a minimum, employers need to ensure that they have properly drafted casual employment contracts and that their payroll systems are set up to identify and specify casual loadings that apply. Many casual employees also now have the right to request to have their casual employment converted into permanent employment under most Modern Awards.

Employers were required to notify all affected casual employees of their right to request a conversion before 1 January 2019.  Employers must also provide all new casual employees covered by a Modern Award that includes the model conversion provision with a copy of the conversion clause within the first 12 months of their engagement.

The Employment team are well versed in these issues and are on hand to assist clients with any reviews of their casual workforces and the accompanying documentation.  Please feel free to get in touch if we can be of assistance with this or any other HR or employment law related issues.


1 WorkPac Pty Ltd v Skene [2018] FCAFC 131 [180].
2 WorkPac Pty Ltd v Skene [2018] FCAFC 13 [55].
3 WorkPac Pty Ltd v Skene [2018] FCAFC 13 [173].

Contributors

Erin Kidd Special Counsel
Emily Truong Law Graduate