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Businesses exposed to billions in back-payment claims following ruling in casual worker case

Image of male barista in cafe
Photo by ZACHARY STAINES on Unsplash
Image of male barista in cafe
Photo by ZACHARY STAINES on Unsplash

Business owners employing casual workers should begin considering whether to offer part-time conversions or risk being on the hook for additional loadings and leave entitlements, workplace lawyers say.

In a landmark ruling on Wednesday, the Federal Court confirmed a casual mining worker employed by labour-hire firm WorkPac was entitled to paid leave – a decision that could drastically change payroll costs for many firms.

The court found casual worker Robert Rossato was entitled to annual, sick and carer’s leave because he worked regular and predictable shifts committed to in advance.

It affirms a prior 2018 ruling also concerning a WorkPac employee, reigniting a political standoff over what business lobbyists argue could be $8 billion in back payment claims by so-called ‘regular casual’ workers across the economy.

Businesses that employ casual workers on a regular basis – even if the days they work each week vary – are being advised to take immediate steps to reduce their potential liability.

Workplace Law managing director Athena Koelmeyer says firms should identify all of their casual workers and consider whether to offer them conversion to part-time roles.

“If your casuals are not true casuals, as in they’re not truly random, ad hoc and called in when you absolutely need them, then it’s no longer a risk – it’s almost certain you’re going to be on the hook,” Koelmeyer tells SmartCompany.

“Not only for entitlements that are paid to permanent employees, but also you’re going to get no relief by way of offset from casual loading rights, based on this decision.”

Class actions “tip of the iceberg” for employers

Australian Council of Trade Unions Secretary Sally McManus says the ruling is a win for workers suffering because of “systemic casualisation”.

“We need the stop the practice of some employers labelling jobs ‘casual’ when they are in fact permanent. This has stripped workers of rights and security,” McManus said in a statement circulated Wednesday.

While Wednesday’s ruling is a re-affirmation of the 2018 Skene decision which originally ignited fears about back payment claims, it clarifies WorkPac is not able to off-set Rossato’s leave entitlements with his 25 per cent casual loading.

This had been an area of contention, and several high-profile class-action cases against labour-hire firms have been waiting for yesterday’s decision to press ahead with their claims.

This is significant because the additional legal grounding has spurred concern businesses across the economy employing so-called “regular casuals” could find themselves on the other end of back payment claims, not just large labour-hire companies.

Koelmeyer says the class actions are just the “tip of the iceberg” and could hit vulnerable firms affected by the bushfire crisis and COVID-19 pandemic particularly hard.

Business lobbyists at the Australian Industry Group are now once again heaping pressure on the Morrison government to amend the Fair Work Act to clarify the nature of casual work.

The group, representing about 60,000 employers, has previously claimed between 1.2 and 2.2 million casuals could fall under the 2018 Skene ruling, totalling as much as $8 billion in back payments.

“Casuals make up around 20 per cent of the Australian workforce, providing vital flexibility to employers and employees. The Fair Work Act needs to be urgently amended to define a casual employee in a simple and clear manner,” AI Group chief executive Innes Willox said in a statement circulated Wednesday.

Workplace lawyer Peter Vitale says businesses can’t do anything about back payment liability up until this point, but could make changes to their current and future arrangements to limit their exposure.

However, he cautions that part-time conversions must be voluntarily accepted by workers, who may be remiss to give up their 25% loading during the COVID-19 pandemic.

“There’s a significant disadvantage for them [casuals] to convert to permanence,” Vitale tells SmartCompany.

“If an employee insists on continuing on that basis [as a regular casual] the risk of a WorkPac scenario continues to be significant.

“If the employer says, ‘well, we’re not going to give you any more shifts unless you convert to part-time’, there’s going to be all sorts of questions … about unfair dismissal claims or an adverse action claim,” he continues.

Pressure mounts for legislative change

Vitale predicts the federal government will be forced to step in and make changes to the Fair Work Act in lieu of Wednesday’s decision, a course it has been reluctant to take since the 2018 ruling.

Former Industrial Relations Minister Kelly O’Dwyer spearheaded the creation of Senate regulation in late-2018 to protect workers from “double-dipping” claims, after which Labor senators unsuccessfully moved to overturn the rules.

But this measure stopped short of amending the Fair Work Act to clarify the definition of casual work.

Current Industrial Relations Minister Christian Porter had intervened in Wednesday’s case, making arguments supportive of WorkPac specifically around their ability to off-set leave claims with casual loading.

Koelmeyer says the buck stops with the federal government after years of uncertainty about the nature of casual and contractor work in Australia.

“We’ve been playing in the grey area for a very long time now, we need the Fair Work Act to now be amended to say, ‘this is what a casual is’,” Koelmeyer says.

“Particularly for SMEs where they’re not necessarily armed with their own workplace lawyer or HR manager to really manage all this stuff.”

This story first appeared on Smart Company and has been republished with permission.

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