A less casual approach

Despite suggestions that the rate of casualisation of Australian workplaces is on the rise, it has held steady at around the 20% – 25% mark for the past 20 years. Nevertheless, this represents a significant amount of Australian workers (around 2.6 million), the vast majority of whom are Award-covered.

Over the past couple of years, there have been various developments which mean that employers need to assess their use of casual employment and, where necessary, take steps to safeguard themselves against possible claims and breaches of their obligations under relevant Awards.

Entitlements for casuals?

When thinking of casual employees, most people tend to understand a casual role to be one where there is no entitlement to paid annual leave, paid personal leave or notice of termination but where the employee is paid a higher rate of pay (usually a casual loading of 25%) by way of compensation.

As a result of the decision in WorkPac Pty Ltd v Skene ^[1] (Skene) in 2018, this situation changed in relation to some “casual” employees engaged on a regular and systematic basis. In that case, the Full Federal Court found that a casual labour hire worker was not a true casual and, therefore, was entitled to annual leave payments under the National Employment Standards (NES).  This was the case despite the fact that the employee had received a 25% casual loading for the entire period of his engagement as a casual (which he was also entitled to keep).

Although much this case turned on its facts, it has implications for all employers who engage casuals. The Court’s findings were based on various factors including that the employee’s hours were rostered up to 12 months in advance.  This indicated a firm advance commitment by the employer as to the duration of employment and the days and hours of work – something that is inconsistent with the ad-hoc and generally short-term nature of casual employment.  Another important factor was that the casual loading was not clearly identifiable as a component of the hourly rate.

This all resulted in the employee being entitled to back payment for unpaid annual leave.

Other cases have confirmed that a variation in hours and times of work ^[2] or breaks between periods of casual employment ^[3] do not necessarily disrupt the regular and systematic nature of casual employment. In light of the Skene decision, the casual employees referred to in these cases would now likely be able to access entitlements usually reserved for full and part-time employees.

This is no doubt confusing for many employers but the basic premise is that a casual employee will not be a true casual if they work regularly and consistently over an extended period, despite variations in their hours and times of work. If an employee is not a true casual, they can be considered full or part-time employees at law, hence the ability to access entitlements usually reserved for such employees.

But all is not lost.

In response to the Skene decision, a new provision was included in the Fair Work Regulations 2009 ^[4] which allows employers to offset a casual loading paid to an employee in response to a claim by that employee for unpaid entitlements normally reserved for full and part-time employees. However, for employers to have this ability, the loading must be clearly identifiable as an amount paid to compensate the employee for not having one or more NES entitlements (such as annual leave, personal leave, notice of termination and redundancy pay).

Casual conversion

In late 2018, a model “casual conversion” clause was inserted into most Awards (including the Social, Community, Home Care and Disability Services Industry Award 2010 (SCHADS Award)). In the SCHADS Award, this is clause 10.5.

The effect of this model clause is that “regular casual employees” have a right to make a written request that their employment be converted to either full or part-time employment (as the case may be, depending upon the hours they work).

A “regular casual employee” is someone engaged as a casual who has, in the preceding 12 months, worked a pattern of hours which, without significant adjustment, the employee could continue to perform as a full-time or part-time employee.

Employers have 21 days to respond to a casual conversion request in writing. Although employers can refuse such a request, they may only do so on reasonable grounds following consultation with the employee.  Reasonable grounds in this regard include where it is known or reasonably foreseeable that the employee’s regular casual employment will cease to exist, or their hours will be significantly reduced, within the next 12 months.

Other reasonable grounds include where a significant adjustment would need to be made to the employee’s hours to accommodate the request or where it is known or reasonably foreseeable that a significant change in the days and/or times of work would not fit within the employee’s availability.

One obligation that we are seeing employers miss in relation to casual conversion is the obligation to provide all casual employees (not just “regular casuals”) with a copy of the Award provisions dealing with casual conversion either:

• if engaged on or before 1 October 2018 – by 1 January 2019; or
• if engaged after 1 October 2018 – within the first 12 months of employment.

If this obligation has not been incorporated into your organisation’s recruitment processes, we recommend that they be updated to ensure that newly employed casuals are provided with a copy of these provisions on commencement and that all existing casuals be provided with them immediately.

Do you really need all casuals to be casual?

There are a lot of reasons why employers hire staff on a casual basis. Typically, these include:

• the employer’s need for flexibility in workplaces where labour requirements fluctuate (e.g. seasonal work or the need to temporarily increase the workforce to meet a particular demand);
• the ability to terminate without notice; and
• an erroneous belief that casual employees cannot make an unfair dismissal claim meaning employers won’t be “stuck with” underperforming employees.

However, these issues can often be managed easily with appropriate planning. For example, an employer needing to boost their workforce temporarily could engage a person on a full or part-time basis for a fixed or, better still, maximum term.

In relation to termination without notice and being stuck with underperforming employees, employers can make better use of the minimum employment period ^[5] (MEP) under the Fair Work Act 2009. This allows employers to assess employees over that period and, where necessary, dismiss the employee without fear of an unfair dismissal claim.  Where employees have worked their MEP, adhering to a fair process in managing underperformance and, if necessary, dismissal can greatly reduce the likelihood of claim arising from dismissal (including general protections claims).

On that note, unfair dismissal claims can be made by casual employees who have worked on a regular and systematic basis for at least 12 months and who have a reasonable expectation of ongoing employment. In my experience, this accounts for the vast majority of casual employees in many industries.  Where that is the case, employers have the same exposure to the risk of unfair dismissal claims from casuals as they do from full or part-time employees.

The advantage of engaging an employee on a full or part-time basis is that, although the employee accrues, amongst other things, paid personal leave, it may be the case that the employee never takes personal leave. If the employer is paying that person as a casual with a 25% loading, that loading compensates the employee on the assumption that that personal leave (and other entitlements) will actually be taken.  Superannuation is also payable on the casual loading.  This means that by engaging staff as casuals, employers may well be paying for entitlements the employee may never use and be incurring additional superannuation payment costs.

What employers should do

• Immediately ensure all casual employees are or have been provided with a copy of the casual conversion provisions of the relevant Award.
• Undertake an audit of existing casual employees to assess:
  • whether they are engaged on a regular and systematic basis or would be considered a “regular casual employee”; and
  • where that is the case, consider whether they would be better engaged as a full or part-time employee.
• Review employment contracts to ensure that:
  • casual loadings are clearly identifiable as a component of the hourly rate; and
  • the NES entitlements for which the casual loading is paid in lieu of are specified.

[1] [2018] FCAFC 131.

[2] Kneen-McDaid v Jaycorp Pty Ltd [2017] FWC 1819; Bayley v Temples (WA) Pty Ltd T/A Temples WA [2016] FWC 2727

[3] Grey v Ardmona Foods – T0994 [2000] AIRC 338

[4] Regulation 2.03A.

[5][5] For employers with less than 15 employees, this is 12 months.  For all other employers, this is 6 months.