What’s in an employment classification?

Most Australians have a streak of cynicism that gets stronger around an election. The policy differences between the two major parties can seem so superficial that voting feels less like an aspirational act and more like an exercise in punishing unnecessary leadership turmoil. But one area where there has always been daylight between the Coalition and Labor is workplace policy. And that’s certainly true for this election.

With a few weeks left before we go to the polls, it makes sense for HR to look at some of those differences and how they might impact their organisations. This first HRM article dedicated to the Federal election will address casual work.

Where we were

Last year the Federal Court Decision Workpac vs Skene threw the legal status of casual workers into confusion (well, further confusion). In it, the court found that a worker classified as a casual worker was in fact an employee. The decision centered around the attempt to determine the ‘essence of casualness’  – which is essentially employment that consists of irregular work patterns; uncertainty; discontinuity; and intermittency of work and unpredictability. (There is no firm legal test for casual work, it’s a ‘know it when you see it’ thing.) For our full breakdown of the case, read this.

What struck many employers as alarming is that Skene was not only found to be a permanent employee, and so entitled to be paid his accrued annual leave entitlements. But also that he received casual pay (the 25 per cent loading over what permanent employees receive) and that fact did not reduce Workpac’s payout.

Some employers have argued the decision risks a situation where many more of Australia’s 2.5 million ‘regular’ casual employees could “double dip”. They could, regardless of the fact that they were paid as casuals, make a successful claim and also receive the value of full-time and part-time entitlements. The Australian Industry Group has estimated the cost of granting paid annual leave entitlements to all ‘regular’ casual employees could be as high as $8 billion.

One of the more interesting attempts to remedy this situation has come from the NSW Business Chamber, which filed an application with the Fair Work Commission (FWC) to create a new employment category, called ‘perma-flexi’.

It’s currently a test case for the community services industry award, but if it was successful a similar position would be inserted into other awards.

Someone in a perma-flexi role would have a loading of 10 per cent rather than casual’s 25 per cent, but in recompense would be given access to leave entitlements (both annual and personal, based on hours accrued). The Chamber argues that the benefit to workers would be a level of security they can’t get with casual work, which would help them with things such as mortgage applications, but union representatives have pushed back against this.

“I just see this as a ruse to reduce permanent hours and to create an environment where effectively part-time workers become casual workers with a lower casual rate,” Health Services Union secretary Lloyd William told the Sydney Morning Herald. The union counter-argument is that without guaranteed hours, worker security is an illusion.

The FWC is not due to hear the case for a perma-flexi category until June, so after the election.

Where we are

In reaction to fears of double dipping the Coalition government introduced a regulation that would help prevent it from happening. The Casual Loading Offset amendment to the Fair Work Act (which came into effect from December last year) made it so that, if certain criteria is met, a casual worker  found to be an employee by a court would have their casual loading taken into account when determining the amount payable by the employer.

But as online resource for professional advice Mondaq points out this “protection is limited to having the casual loading taken into account by the courts. The assessment of the employment status (casual versus permanent) of an employee, and whether the casual loading should be applied to offset any NES entitlements, remains a decision of the courts.”

In other words, the amendment didn’t really clarify what a casual is, and didn’t remove the risk of double dipping, because in any case the court could decide that the casual loading offset doesn’t apply.

So if uncertainty is still the lay of the land, the objective of both major parties in this election is trying to create a version of certainty that appeals to the most voters.

Right to request

Late last month opposition leader Bill Shorten announced that his party would support an easier pathway for casual workers who wanted to become permanent staff. The key difference between Labor’s policy and the legislation that the Coalition government proposed earlier this year is an appeals process with the FWC.

Both parties want to allow casuals under relevant awards and enterprise bargaining agreements to request full-time work if they have worked full-time hours over the previous 12 months, or part-time work if they have worked a regular pattern of work (over the previous 12 months) consistent with that classification. Employers can deny the written request so long as they explain their reasonable grounds for doing so (for example, they could argue that the work will not continue into the future).

What Labor proposes is that a worker who was dissatisfied with this denial will be able to make a formal appeal to the FWC. How exactly this will look doesn’t seem to have been finalised, but the party has said it will consult stakeholders and put a firm definition of “casual worker” into legislation.

One of the arguments against this proposal, as outlined by the NSW Business Chamber, is that it creates “a mountain of red tape” that would hurt SMEs in particular.

The Coalition’s legislation on the other hand is a formalisation or expansion of a previous FWC decision, with a potentially game changing difference. Like Labor’s policy, it too allows casuals under relevant awards and enterprise bargaining agreements to request permanent work, but it doesn’t give them as much scope to appeal an employer’s refusal. Added to this, there is a clause in the legislation that says a casual worker is covered by the amended section if “the employee is designated as a casual employee by the employer”.

Some have argued this could have huge ramifications. “The reference to an employer delegating an employee as a casual in their contract of employment could have very significant implications if it was subsequently interpreted as giving employers the ability to designate workers as casual under contract,” University of Sydney labour law professor Shae McCrystal told the Sydney Morning Herald.

The theory is that because it would be one of the few clear cut tests for casual employment established in legislation, the courts would use it more widely. The definition could end up being used in cases that have nothing to do with permanent work requests.

It should be noted that there are legal experts who consider this eventuality highly unlikely. But the Australian Council of Trade Unions has taken it to heart and released a submission insisting that this part of the legislation be removed.

So to recap. Labor’s promises around casuals ahead of the election are:

• A formal, legal definition of a casual worker
• Eligible casuals can request permanent work
• Employers can refuse that request (stakeholders will be consulted on the form this will take)
• Casuals can appeal denied requests (stakeholders will be consulted on the form this will take)

The Coalition hasn’t made election promises on this, but they have proposed legislation that formalises eligible casuals the right to request permanent work. And, depending on your interpretation, they may be trying to give employers more power over the definition of what constitutes ‘casual’.