Casual uncertainty a regulation nightmare

Most Australians understand the concept of casual employment.

Casual jobs are not necessarily permanent. The hours of work can vary from week to week or month to month, but some casual jobs provide regular shifts. And there is a premium attached to the wage paid, which is almost universally 25 per cent. This casual pay premium is in lieu of receiving entitlements such as paid leave and redundancy.

Casual jobs are common in some industries — retail, hospitality and higher education — and relatively rare in others.

About one-fifth of all jobs are casual, with this proportion remaining fairly steady during the past two decades or so.

Most awards contain provisions for casual employees. In the general retail industry award, for instance, a casual employee is simply defined as an employee engaged as such. It then states that a casual employee “will be paid both the hourly rate payable to a full-time employee and an additional 25 per cent of the ordinary hourly rate for a full-time employee”.

Many awards, including the general retail industry award, also contain a clause on the right to request casual conversion. The typical wording of these clauses provide for a person engaged by a particular employer “as a regular casual employee” to request that their employment be converted to full-time or part-time employment. A regular casual employee is defined in the general retail industry award as “a casual employee who has in the preceding period of 12 months worked a pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to perform as a full-time employee or part-time employee”. Note that on conversion, the employee no longer receives the casual pay premium but is entitled to paid leave.

Until the WorkPac v Skene decision, which was handed down by the Federal Court in August last year, the above arrangements in respect of casual employment were essentially settled.

Not only are many casual workers happy with their working arrangements, including the payment of the ­casual pay premium, casual employment can provide a stepping stone to better, more secure employment. Casual employment is also a flexible option for many ­employers.

The Skene case has blown up this settled position by awarding a casual driver (Paul Skene) employed by a labour hire company (WorkPac) back pay for unpaid annual leave even though the driver had been paid a premium on his hourly rate of pay.

This fact was clear in the enterprise agreement that governed his employment and the letter of offer sent to him before he took the job.

The basis of the Federal Court’s decision was that the regular and predictable hours of work ­undertaken by Skene meant he should be entitled to paid annual leave even though he was a casual worker. But herein lies the problem. It has been estimated that about 80 per cent of casual workers undertake regular shifts, which has never been viewed by the Fair Work Commission as being inconsistent with the status of casual employee.

If the Skene ruling is to hold, the question arises whether millions of casual employees could claim back pay for unpaid leave entitlements even though they have received the casual pay premium. In other words, will double dipping be legally sanctioned?

We just need to take a look at the figures. There are about 2.8 million casual employees. Working on the basis of 80 per cent being regular casuals, this works out at 2.24 million workers. Note here that workers who have held casual jobs in the past six years also could make claims. It’s also instructive to consider where these casual employees work. Most work for small businesses with fewer than 20 employees and a further 31 per cent work for businesses with between 20 and 99 employees

The Australian Industry Group has estimated the total cost of providing paid leave to all regular casual employees at between $5.7bn and $8bn. Many businesses would be sent to the wall. It is entirely possible that taxpayers would be on the hook in the instances of business failures through the Fair Entitlements Guarantee scheme.

Sensing the disaster that would befall many businesses were the Skene precedent to take hold, the government last year introduced the Fair Work Amendment (Casual Loading Offset) Regulations 2018 in an attempt to restore the pre-Skene state of affairs.

Notwithstanding the passing of these regulations, seven Skene-related class actions have been launched in the past 12 months, most being bankrolled by overseas-based litigation funders. Many of these class actions are ­directed at labour hire companies.

There also have been an unknown number of individual claims using the Skene precedent, though most of these cases have been settled. A claim by a sex shop sales assistant was heard recently by the Federal Court. The decision is still pending.

If you’re thinking this all sounds a mess, you wouldn’t be wrong. FWC vice-president Adam Hatcher has talked publicly about the “fundamental problem” that has arisen because of the conflict between the commission’s approach to casual employment, including in relation to casual conversion clauses, and the Skene decision. The issue “has to be resolved or in time it will snowball”, Hatcher says.

Labor tried to disallow the Fair Work Amendment (Casual Loading Offset) Regulations 2018 in the Senate this week. It’s hard to understand the motivation for this unsuccessful move — the motion was defeated 33 to 29 votes.

One supposition is that pressure was applied by some plaintiff law firms that have strong links to the Labor Party to see off the regulations. Unions also have a stake in this matter because casual workers are less likely to join unions than permanent workers and unions have a visceral dislike of ­labour hire companies.

Even so, the continuation of the regulations doesn’t solve the problem. The government needs to act with decisiveness to solve the matter through legislative amendments that clarify the definition of casual employees and to include the casual conversion right within the National Employment Standards.

While the government is consulting on a range of industrial relations issues, it needs to pull the issue of casual employment out of the list and deal with it expeditiously. The alternative is to have businesses continue to worry that they will be up for unaffordable amounts of back pay for their casual workers. It also may deter businesses from taking on any new casual employees given the uncertainty that prevails.