Casual vs Permanent

Steven Hu, Kenneth Hong, Yukio Hayashi 24 Jun 2020

On 20 May 2020, the Full Court of the Federal Court of Australia handed down its decision in WorkPac Pty Ltd v Rossato.

The case centres around labour hire firm WorkPac, which employed Robert Rossato as a mine worker at two Queensland mines owned by Glencore. Mr Rossato was a casual employee, on rolling contracts, over a three-and-a-half-year period. As a casual, he was paid an extra 25 percent loading on top of his wage — which is the usual practice to make up for not being given benefits such as annual leave.

The Full Federal Court dismissed WorkPac’s application for a declaration that Mr Rossato was a casual employee, instead finding that Mr Rossato was a permanent employee. It was found that because Mr Rossato's employment was "regular, certain, continuing, constant and predictable", and he was given rostered shifts well in advance, he was eligible to entitlements that full time employees receive under the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) and the relevant Enterprise Agreement: being paid annual leave, paid personal/carer’s leave, paid compassionate leave, and payment for public holidays.

This is an important decision for employers who engage casuals, whether directly or as a host employer. Pending any intervention by the Federal Government or appeal to the High Court, employers should now carefully review their casual employment arrangements, update the terms of their casual contracts, and revisit their arrangements with labour hire companies and their workers. In particular:

• Employers should review their casual arrangements with a view to determining whether some other form of engagement is more appropriate – including part time and fixed term arrangements.

• Assuming casual engagement is still appropriate, specific attention should be given to the employee’s written contract to ensure that the casual loading is a separately identifiable amount that is stated to be paid as a result of the employee not being entitled to NES or other entitlements peculiar to permanent employment. We also suggest a statement to the effect that if the employment is subsequently determined not to be casual employment, the employer is entitled to repayment of the casual loading.

• Regular reviews of casual arrangements should be conducted – at least once every 12 months – to assess the likelihood of the employment being a “firm advance commitment” of employment.

We can assist you if you have any questions about how the Workpac v Rossato decision may impact the work arrangements in your own organisation or more generally in relation to how you are employing or engaging your workforce.

Key Contacts

Kenneth Hong

Partner

Yukio Hayashi

Partner

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Key changes to Australian employment law

On 6 December 2022, the Fair Work Legislation Amendment (Secure Jobs Better Pay) Act 2022 received Royal Assent, amending the Fair Work Act 2009 (Cth). The key amendments to the Fair Work Act are as follows: 1. Casual Conversion – currently in effect Casual conversion is allowing casual employees to become employed on a permanent basis. It is available for an eligible casual employee, being one who: Has been employed for at least 12 months; Has worked regular pattern of hours during the last six months of employment; and Is able to continue working the regular pattern of hours as a full time or part time employee without significant changes. Employers must offer casual conversion within 21 days of an eligible employee’s 12 month work anniversary. This is an ongoing obligation, and employers must consider an employee’s eligibility each year to make the offer. If a casual employee requests casual conversion, employers must respond in writing by accepting or rejecting within 21 days. An employer must have reasonable grounds for rejecting a request, or not making a casual conversion offer. Employers must also provide casual employees with the ‘Casual Employment Information Statement’ in addition to the Fair Work Information Statement, at the commencement of employment. 2. Pay Secrecy Terms – currently in effect The Fair Work Act now gives employees the right to disclose their salary information. It also prohibits employers from entering into a contract (or other written agreement) with an employee which includes a term which prohibits an employee from disclosing their salary or other terms and conditions reasonably necessary to determine an employee’s salary. Any existing employment agreements which do include a pay secrecy term have no effect, and can no longer be enforced. 3. Prohibiting Workplace Sexual Harassment – effective 6 March 2023 The Fair Work Act will prohibit sexual harassment in connection with work. Employers will potentially be made liable for sexual harassment committed by an employee or agent in connection with work, unless they can prove they took all reasonable steps to prevent the sexual harassment. 4. Flexible Working Arrangements – effective 6 June 2023 The amendments allow pregnant employees and employees experiencing domestic violence to request flexible working arrangements. In addition to existing obligations on employers to provide reasons for refusing an employee’s request for flexible working arrangements, employers may only refuse a request for flexible work arrangements if they have: (a) Discussed the request with the employee;(b) Genuinely tried to reach an agreement with the employee about making changes; (c) Had regard to the consequences of refusal for the employee; and (d) The refusal is on reasonable business grounds. Employers must also set out the particular business ground that it relies on for refusing the request, and explain how those grounds apply to the request. The Fair Work Commission will now be able to hear and make orders about disputes regarding flexible workplace arrangement requests. 5. Fixed Term arrangements – effective 6 December 2023 The term of a fixed term employment contract must not exceed 2 years (including extensions). Fixed term contracts may not be extended more than once. Some fixed term contracts are excluded from this rule, e.g. those relating to casual employees, seasonal labour, specialised skill employment and high-income employees. From 6 December 2023, employers will need to give ‘Fixed Term Contract Information Statement’ prepared by the Fair Work Ombudsman. This has not yet been made available. Disclaimer: The contents of this publication are general in nature and do not constitute legal advice. The information may have been obtained from external sources and we do not guarantee the accuracy or currency of the information at the date of publication or in the future. Please obtain legal advice specific to your circumstances before taking any action on matters discussed in this publication.

High Court Clarifies Definition of Casual Employee

As one of the most significant decisions by the High Court in 2021, the High Court has determined the meaning of a casual employee in Workpac Pty Ltd v Rossato [2021] HCA 23. Mr Rossato was employed as a production worker by Workpac’s labour-hire company under a series of six contracts, or assignments, to perform work for one of Workpac’s clients. While Mr Rossato was required to work regular and full-time hours according to a fixed pattern of work, Workpac treated Mr Rossato as a casual employee, such that Mr Rossato was not paid the leave or public holiday entitlements under the Fair Work Act 2009 (Cth) (the Act) and the enterprise agreement. The Court confirmed that the question of whether a person is a casual employee is to be determined by considering the express terms of a written employment contract, and not on the basis of any subsequent conduct of either party. To this extent, the court held any such commitment to further work must be contained in an enforceable agreement to be recognised. The High Court held that a casual employee is an employee who has no “firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work” and provides no reciprocal commitment to the employer. In considering the nature of the commitment, the court held that ‘the existence or otherwise of a “firm advanced commitment” must be for enforceable terms’, and should not be held to exist from expectations or understandings borne from the manner in which the parties have performed their agreement. The High Court held that a mere expectation of continuing employment on a regular and systematic basis is not sufficient for the purposes of the Act. Mr Rossato’s employment was expressly on an “assignment by assignment basis”. Mr Rossato was entitled to accept or reject any offer of an assignment, and at the completion of each assignment Workpac was under no obligation to offer further assignments. The High Court also held that it was not the role of the courts to “moderate a perceived unfairness resulting from a disparity in bargaining power between the parties”. In relation to the employment relationship, it should be noted that the High Court held in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 that: 1. while mutual undertakings may not always be express, where there are express terms of the contract between the parties, they must be given effect unless they are contrary to statute; 2. if the mutual undertakings are said to be implied in what has been agreed, they cannot be inconsistent with the express terms of the contract; and 3. if the mutual undertakings are to be inferred from the conduct, then they may take effect as contractual variations. This decision by the High Court in Workpac v Rossato is important for both employers and employees as it reinforces the importance of specifying the terms of the contract in writing, taking into account the key features of the High Court’s decision. It is also important that casual contract terms and employer’s policies are carefully reviewed to ensure that they do not create any unintentional implied mutual obligations or variations inferred from the conduct. It is also worth noting that a new provision of s 66B of the Act has been introduced which requires employers to offer casual employees to become permanent employees if they have been employed for 12 months and have worked regular and systematic patterns in the last six months. Disclaimer: The contents of this publication are general in nature and do not constitute legal advice. The information may have been obtained from external sources and we do not guarantee the accuracy or currency of the information at the date of publication or in the future. Please obtain legal advice specific to your circumstances before taking any action on matters discussed in this publication.

Modern Slavery Reporting Requirements

In Australia, the Modern Slavery Act 2018 commenced operation on 1 January 2019, creating reporting obligations for certain entities. The term modern slavery is used to describe situations where coercion, threats or deception are used to exploit victims and undermine or deprive them of their freedom. It describes serious exploitation and not substandard working conditions or the underpayment of workers. The Australian government, in support of UN Guiding Principles, aims to combat modern slavery in the Australian community and in the global supply chains of Australian goods and services. Who needs to report? Entities that have: Consolidated revenue of at least $100 million for the relevant reporting period (a financial year), and which Are Australian identities, or Undertake business in Australia in that financial year What do I need to report? The mandatory criterion are: The reporting entity’s structure, operations and supply chains; Modern slavery risks in the reporting entity’s operations and supply chains (including those of subsidiary entities); Actions taken (including by subsidiary entities) to assess and address those modern slavery risks, including due diligence and remediation processes; How the reporting entity assesses the effectiveness of actions taken; and The process of consultation with subsidiary entities in preparing the modern slavery statement. When do I need to report by? Affected entities must report in respect of the first full reporting period following commencement and must report within 6 months of that period ending. For example, the reporting period for entities with a 30 June year end will be 1 July 2021 to 30 June 2022, with reporting due by 31 December 2022. Further information Further information and links to the online registers can be found here: https://www.homeaffairs.gov.au/criminal-justice/Pages/modern-slavery.aspx Please contact H & H Lawyers for further legal advice for submitting a modern slavery report. [Disclaimer] The contents posted are general legal information, not legal advice, and the author and publisher have no legal responsibility for the contents. Each post is based on the law that was in force at the time of writing. Please consult a lawyer directly for accurate legal advice.

Are You At Risk of Sham Contracting?

Online food delivery competitor Foodora has been accused of sham contracting its own employees and now faces legal action launched by Australia’s Fair Work Ombudsman. As business opportunities increase in Australia more employers turn to flexible and intuitive ways to cut costs and maximise profits, which can sometimes lead to cutting corners and the underpayment of employees. It is important for an employer to enter into valid employment contracts with its employees, as it will assist them in avoiding the risk of being accused of sham contracting. What is Sham Contracting? Sham contracting is an illegal method of employment under section 357 of the Fair Work Act 2009 (Cth), where the employer misrepresents the employee as an independent contractor. Any employer that makes such misrepresentation of the employment relationship is liable for penalties under that Act. Penalties for sham contracting include sanctions made against the employer and financial penalties up to $54,000.00 for each contravention. Sham contracting is typically instituted by an employer for their own benefit as it allows an employer to avoid being responsible for an employee, or to avoid paying an employee their entitlements (such as superannuation, worker’s compensation and leave). More likely than not a sham contract is entered into by an employer either knowingly to avoid their employer obligations, or because of an employer’s recklessness in considering whether or not the individual was an employee. One recent example of potential sham contracting is by the online food delivery business, Foodora. Online food delivery businesses are expanding worldwide giving consumers a quick and efficient food experience. The concept of having all types of food delivered to you wherever you are is a great idea and will only keep developing but a non-traditional approach to staffing has left these types of businesses subject to legal action brought against them for sham contracting. If an employer is not careful they can be liable for serious penalties and so it is important that an employer abides by their employment obligations and responsibilities. The Differences between an Employee and Independent Contractor? Before entering into any employment contract it is critical for both the employer and employee to understand the difference between an employee and an independent contractor. The main factor that differentiates between the two is the control that the individual has over their work responsibilities and obligations. The characteristics of an employee are: Any employee working for an employer receives at least minimum entitlements – paid leave, long service leave, worker’s compensation, superannuation. An employee is not responsible for paying for their own tax, an employer will deduct the income tax from an employee’s wage/salary. An employee typically only works for one business. An employee has no control over what type of work to be completed as it is controlled by the employer. An employee works according to standard or set hours. The characteristics of an independent contractor are: A contractor is essentially their own employer. A contractor control how work is to be completed and how long the work will take to complete. Contractors are not restricted to one business but are able to work for multiple businesses/people. Contractors do not have set hours of work instead they agree on how many hours it takes to complete a job. Contractors have high responsibility and liability for their work or injury and need to have their own insurance cover. Contractors are responsible for filing their own tax and GST. A contractor has an Australian Business Number (ABN) and submits invoices. Unlike employees, contractors receive no entitlements and pay for their own superannuation. Actions to Take as an Employer to Minimise Risk As an employer, it would be prudent to review all existing contractual arrangements to ensure that you have not unknowingly misrepresented your employee as a contractor. It is important when hiring an employee that you confirm with them the details of the work and type of work that is required of them throughout their employment contract so that there is no confusion about the employment relationship. You will also need to be aware and up to date with any entitlements and payments that you owe to the employee. [Disclaimer] The contents posted are general legal information, not legal advice, and the author and publisher have no legal responsibility for the contents. Each post is based on the law that was in force at the time of writing. Please consult a lawyer directly for accurate legal advice.