Government moves to bring fairness to the Fair Work Act

The Morrison Government has announced that it intends to amend the Fair Work Act to protect employers from casual employees ‘double-dipping’: where long-term casual employees are deemed to be ‘permanent employees’ for purposes of leave entitlements.

The current state of affairs

It follows a line of court decisions, most notably Williams v MacMahon Mining Services Pty Limited [2010] FCA 1321. Justice Barker of the Federal Court decided that Mr Williams, a miner engaged in the Western Australian mining industry on a contract that stated that he was a ‘casual’, was not a casual at all. The Court determined that at termination, Mr Williams was entitled to the monetary value of the annual leave that he should have accumulated during his employment period. In a further blow to the employer, the Court ruled that it could not offset the casual loading paid to Mr Williams, against its annual leave liability, and the annual leave liability was therefore to be calculated on the loaded rate.

What is casual loading?

Casual loading is an additional hourly pay that casual workers are paid on top of their usual hourly rates. Permanent employees are not entitled to casual loading payments. The hourly pay rate for casuals is the equivalent permanent hourly rate plus 15-25% of this hourly rate, depending on the award or agreement that covers the position.

Casual employees are entitled to only some of the benefits given to permanent employees. For example, casual employees don’t get paid holiday leave or sick leave. Casual loading was introduced to compensate casual employees for these ‘missed out’ entitlements – this at least was the intent.

The current position seems to be that even where an employee is engaged as a casual, and received the casual loading, the employee could upon termination, if the employee is found to be a permanent employee, be entitled to receive a payout of all leave entitlements at the loaded rate – in other words, the employee will be entitled to ‘double dipping’.

The Government’s response

This week Industrial Relations Minister Kelly O'Dwyer announced new regulations to remove the anomaly and clarify employers' legal rights to, in these circumstances, offset payment of casual leave loadings against the accrued leave entitlements.

No doubt the ACTU and unions will sturdily oppose the Government’s decision, but it is difficult to envision a strong cogent argument against the move. ‘Fairness is a two-edged sword – what is good for the goose must be good for the gander’. An employee who seeks to receive the protections of a permanent employee should expect to receive entitlements equivalent to that of a permanent employee – which means no casual loading on their pay rates.

Any arguments from the ACTU and unions that ‘double dipping’ should continue because ‘employers should pay a price for abusing loopholes’ are shallow and without substance. The reality is that many employers, and mostly small to medium size business owners, are law abiding citizens and any person, reading these decisions will realise that the law, when it comes to casual viz-a-viz a permanent employee, is not black-and-white and is largely dependent on the circumstances.

Businesses argue, and we agree, that the word ‘fair’ in the Fair Work Act should work both ways

Key take-aways

• Because of recent court decisions and changes in legislation casual employees may now enjoy significant more rights than previously envisaged
• Some of these rights include certain leave entitlements and the right to convert to permanent employment (see our article on the new Casual Conversion provision by clicking here).
• Know your rights - employers are encouraged to seek legal advice when engaging casual employees on a long-term basis
• Frank Law has developed a process where we review businesses’ employee arrangements which enables us to advice you if we believe the arrangements are posing a risk to the business.