#IRDisrupted: The storm around casual work

Flexibility is at the centre of the debate about workplaces. We all want it but can employees have the balance of flex and security they want….and how does that line up with employer’s needs to respond to demand? And can the Nirvana of mutually beneficial flexibility and agility happen while being compliant with the industrial relations rules which provide entitlements that vary based on patterns of work?

The most ‘flex’ type of work is casual work.?A type of employee who you can – in theory – engage and deploy as and when needed.

A storm brews… a casual might not be a casual……

But there’s been a storm brewing over the status casuals for some time now. The clouds began to gather in 2016, with legal action taken against a labour hire company, Workpac, relating to its arrangements for certain long term casual workers.

After five years, two separate proceedings and 7 Federal Court Judges’ scrutiny, the High Court has settled the question. It has taken us back to Contract Law 101, putting primacy on the written contract, genuinely entered into by the parties.

Applying these principles, it found that the employee before it, Mr Rossato, was what his contract said he was: a casual worker.?

So what IS a casual?

Casuals are a longstanding feature of the Australian labour market. They’re not unique to Australia – forms of temporary work arrangements exist in almost all OECD labour markets.

At the moment there’s around 2.3 million casual employees in Australia[1] and consistently representing about one fifth of the labour market over the last two decades.?Casuals are engaged on a shift to shift basis, meaning they have no entitlement to ongoing work. They have no ongoing obligations to accept work either.

There isn’t a definition of ‘casual’ in the law, but the courts have determined they are workers who do not have a firm and advance commitment to ongoing work. They don’t receive paid leave but generally are paid a higher hourly rate – a loading of 25% – as compensation.

It is for this reason that casuals are the first to lose work in a downturn – we’ve seen a stark demonstration of this with the pandemic-driven shut downs.

It’s this sort of ‘precariousness’ that’s given rise to calls to give casual employees more security.

We’ve seen casual conversion clauses become more common in awards, providing that after 12 months of regularised work, a casual is entitled to be offered ongoing work if it’s available.

But this mechanism retained employers control over the arrangement– the consequences of the court cases included that workers hired and paid as casuals, and not been provided any leave, were entitled to that leave in retrospect.

And to top it off, they were entitled to keep their casual loading….intended to compensate them for not getting leave…..

This ‘have cake, eat cake’ outcome created an estimated cost of between $18 and $39 million for businesses. Businesses were being advised by ASIC to estimate this liability for their entire workforce without any real certainty as to what a court might decide with respect to any particular employee.?

Class actions were brewing as a result.

But the cyclone has turned out to be a storm in a teacup, albeit one that brewed for 5 years….. Employers can breathe a collective sigh of relief because the High Court closed the case. Rossato was a casual.

A quick history of the WorkPac saga

The story starts back in 2016 when a casual WorkPac employee (Skene) successfully took a case to the Federal Court, claiming he was not casual but a permanent employee. A single judge and then a Full Federal court agreed. In response, Workpac went back to court over another employee (Rossato) to ask the court to determine (uphold) his casual status.

The Federal Court looked at the written arrangements the employees had entered into – which referred to the workers as casual workers. But their Honours also looked at what had happened since: how the relationship evolved, the fact that workers’ rosters were set up to a year in advance, and they were working regularised, full time hours. This gave rise to expectations of ongoing employment.

The bottom line of these decisions was an unknown but potentially significant cost to employers.

The High Court took us back to basics: you look at the contract. You don’t go outside the contract unless there’s something unclear about the contact.

While subsequent conduct as the employment evolves might give rise to a ‘hope or expectation’ of ongoing work, this falls short of a ‘commitment’ which is something that is a binding promise enforceable by courts. An expectation does not change the fundamental nature of the employment relationship.

The legislative response to storm

While storm was making its way through the judiciary, the Commonwealth Government responded to employer concerns. It introduced and secured passage of legislation that included a new definition of ‘casual’. We all remember the Omnibus Bill – the ‘Workpac fix’ was the only part to pass the Parliament – here’s a quick reminder ).

The definition reflected the longstanding understanding of casual employment, focusing, as the High Court has done, on the written contract made from the outset of the employment.

The framework also set out some reciprocal rights for employees – the right to be provided information about their status and the right to convert to permanent employment if their arrangement was ongoing and regularised (reflecting entitlements being inserted by the Fair Work Commission into many awards).

The Fair Work Act’s new definition of casual is being, more or less, inserted in all awards. The amendments to the awards are meant to be finalised by 27 September 2021.

The storm has passed, but you should check everything’s tied down and in order….

The High Court decision doesn’t automatically get business off the hook. You could encounter an isolated storm if you don’t take care….

If you hire casuals:

1.?????Be clear from the start

If you’re offering casual employment, make sure you’re certain it’s a genuine casual role, meeting the new definition, with clear written terms reflecting this E.g. that the contract contains no firm advance commitment to ongoing employment).

2.?????Put casual terms in your employment contracts and enterprise agreements

Express terms in contracts and agreements are key because they make your intentions clear. E.g. whether there is a firm, advance commitment.

3.?????Continue to watch this space – we’re not done yet

Rossato’s over but there’s more. High Court will have another chop at considering the role of contracts in an employment setting in CFMMEU & Anor v. Personnel Contracting Pty Ltd and ZG Operations Australia Pty Ltd & Anor v. Jamsek & Ors later this year. After this decision, it won’t be surprising if they follow this heavy “contract contract contract” approach.

A gentle reminder

New obligations take affect from 27 September. Get ready for these:

• Providing existing and new casuals their Casual Information Statement
• Setting up annual reviews of casual employees
• Offering the right to convert to permanent employment to ‘regularised’ longer term casual workers if the requirements of the Act are met.
• For detail on these, check out the Fair Work Ombudsman’s resources here.

[1] https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/characteristics-employment-australia/latest-release