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Questioning the impending changes to “casual” employment

The casual employee landscape is about to change. In response to the phenomenon of “casualisation”, the Federal Government has introduced legislation with the aim of better protecting casual employees.

This article takes a critical look at the ongoing perception that casual employees need additional legislative protection. It argues that the “protection”, however well intended, could result in greater uncertainty and more disputes.

What is meant by a “casual employee”?

It is generally accepted that a “casual employee” is someone who works on an informal, irregular and an uncertain basis. A clear characteristic is the absence of certainty for further and ongoing work.

Why is the meaning of casual employee so important?

The meaning of casual employment is essential as it ensures both employer and employee fully understand the type of relationship they enter into, by example: a casual employees is not entitled to any annual leave, compared to the 4 weeks a permanent employee is entitled to receive. To compensate the casual employee most awards however stipulate that a casual employee must receive a higher hourly rate (which is generally an increase of 25%).

When all goes well, the meaning of “casual employee” is seldom a point of contention. The employer offers and the employee accepts work, and as long as the employer comply with its duties i.e. pay the increased hourly rate, everything is hunky-dory.

But if the employer pays the employee as a casual, whilst in fact the employee is a full-time employee, the employee would not have received certain entitlements, such as annual leave. If this continues for several years it would mean that the employee would have been underpaid, often to the value of thousands of dollars.

However, there is also a flipside to this example. Take, for instance, an employer who has engaged a casual employee. The casual employment contract is signed; the employer adheres to all the requirements of the contract and applicable awards. The casual can decide when they want to work and also receives the required increased hourly rate. This arrangement continues without any difficulty for 4 years; but then suddenly the employer receives a letter of demand that claims the casual employee was indeed a full-time employee and seeks immediate payment of 4-years’ outstanding leave entitlements—money for which the employer had never budgeted or planned .

This last-mentioned scenario has played itself out, all the way to the highest court in Australia, in the matter of Workpac Pty Ltd v Rossato (2021) 271 CLR 456.

Mr Rossato had worked as a casual employee for 4 years. After his retirement he disputed his status as a casual employee and demanded payment of 4 years’ worth of leave entitlements. The parties litigated for several years and ultimately the High Court rejected Mr Rossato’s claim. In coming to its decision, the Court confirmed that the employment status of someone should be determined based on the agreed terms of the employment contract, and not the conduct of the parties.

What does the Fair Work Act 2009 (Cth) (FWA) currently say?

The current legislation aligns with the views expressed by the High Court. The Act also confirms the importance of the wording of the contract, as opposed to the conduct of the parties.

There are views that consider the current approach as a blunt instrument that ignores the power imbalance between employers and employees; an approach that closes its eye to reality.

Irrespective, the High Court decision and the current definition of “casual employee” in the FWA provides a clear test that does not require the courts to interpret employment contracts beyond the language used. As the High Court in Rossato noted:

It is no part of the judicial function in relation to the construction of contracts to strain language and legal concepts in order to moderate a perceived unfairness resulting from a disparity in bargaining power between the parties so as to adjust their bargain…

Things are about to change

Under the Fair Work Legislation Amendment (Closing Loopholes No. 2) Bill 2023 (Cth) (CL2) the new definition of a “casual employee” will require one to look at the “practical reality” and “true nature of the employment relationship” to determine whether an employee is a casual employee.

The reason for the change is explained in the CL2 Explanatory Memorandum as one to “improve job security for casual workers”, but one needs to ask at what cost?

“Practical reality” and “true nature” are nebulous terms that ensures that parties will once again find themselves arguing whether an employee was indeed a casual employee.

The focus on improving job security for casual workers also seems overly one-sided. The central theme seems to be the protection of employees at the expense of employers who “hire and fire” casuals at will. Although the use of a casual employment can certainly lead to unfair outcomes where employees are left to the whims of their employers, it should also be recognised that the arrangement is not entirely one-sided. The casual employee has the power to decide when, where and for who they want to work. Just as the employer can decide not to use a casual so too can a casual employee simply decide not to work on the day proposed by the employer.

The level of uncertainty caused by casual employment is shared. This shared level of uncertainty is often overlooked.

Based on the Fair Work Commission Annual Report 2022-23, it seems that casual employment might be unfairly singled out as the cause of job insecurity. The report confirms that in the financial year 2022-2023 there had been 11,012 unfair dismissal remedy applications (s394) and 4,964 unfair dismissal application (s364). These disputes concern mostly permanent employees whose employment was terminated, which just demonstrates that no employment is truly permanent.

Critical question

Although the changes to be introduced by CL2 might be well-intended, they will inevitably lead to greater uncertainty: they invite arguments that an employment relationship that started as one kind has morphed into another.

Might it not have been better to move the focus away from the unilateral uncertainty of employees to the binary flexibility and benefits casual employment has to offer for both employer and employee? Such an approach would recognise that the 2.7 million casual employees, and the employers who employ them, are capable to enter into agreements that suits their individual needs.

Bernard Lock

Senior Associate

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

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