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Court ruling could cost employers ‘billions’

Adam Zuchetti
Adam Zuchetti
13 September 2018 3 minute readShare
Gavel, court, judge

Businesses could face “billions” in backpay bills following a controversial decision by the Federal Court, which ruled that a casual worker is entitled to be paid annual leave.

Conventional wisdom has been that casuals do not accrue annual leave entitlements, because the casual loading sees them effectively paid a higher hourly rate in lieu of such accrued entitlements.

But business groups lashed out at the court’s apparent decision to turn that wisdom on its head.

The situation had been flagged last month, after a verdict on an individual employment matter set a new precedent on casual worker entitlements.

An appeal was set to be launched, however News Corp Australia reported that the business in that particular case has abandoned plans to appeal the Federal Court’s decision.

‘Looks like double-dipping’

Business groups suggested it will be a massive hit to employers – particularly SMEs – and complained about the fairness of the decision.

Head of the Australian Chamber of Commerce and Industry, James Pearson, blasted the decision, saying it will ultimately cost jobs.

“The regulatory and legal implications of this decision are alarming,” he said.

“The Court’s decision to allow an employee hired and paid as a casual access to paid annual leave will not just place at risk the employment arrangements of Australia’s casual employees, it will cost the economy billions of dollars in compliance and liabilities.

“This decision is a king hit on the livelihoods of Australian employers and employees - in particular small businesses.”

Mr Pearson said the decision strikes at the heart of flexibility that is offered by casual work for both employers and workers.

“This decision has the potential to create billions of dollars in liabilities for Australian businesses, most of which are small businesses,” he said.

“How can it be fair that an employer can pay a higher casual rate in lieu of things like paid leave, follow the rules in their award or enterprise agreement – and then face penalties and have to pay again for leave? To a lot of people, it looks like double-dipping.”

He added: “People running small businesses have told me this could send them to the wall and that means thousands of people could lose their jobs.”

“Double-dipping” was also used by the AI Group to explain the situation of casuals being allowed to accrue leave entitlements in addition to the casual loading.

“The very widespread and longstanding practice across virtually all industries is that an employee engaged as a casual and paid as a casual is a casual. It is very common for casuals to work on a regular and systematic basis for extended periods,” its chief executive, Innes Willox, said.

“In the WorkPac v Skene case, the Federal Court held that the term ‘casual employee’ in the Fair Work Act has no precise meaning and whether any employee is a casual for the purposes of the Act depends upon the circumstances. According to the Court, irregular work patterns, uncertainty, intermittency of work and unpredictability are the usual features of a casual employment arrangement.

“The Federal Court’s decision is inconsistent with the whole notion of ‘casual conversion clauses’ which have been an important part of the award system for 20 years.

“Casual conversion clauses were inserted into awards because the evidence showed that a large proportion of casuals have no wish to be employed on a permanent basis. They either do not wish to lose their 25 per cent casual loading or they do not wish to lose the flexibility they enjoy, or both.”

Push for government to change the law

Both employer groups and unions are pushing for the federal government to amend the Fair Work Act to better define the rules and responsibilities around casual employment.

“Parliament needs to amend Part 4-1 of the Fair Work Act without delay to prevent an employer being ordered to pay compensation or a pecuniary penalty, in circumstances where the compensation would result in ‘double dipping’ by an employee who was engaged as a casual employee and paid as a casual employee at the time when the employment first commenced,” Mr Willox said.

“In addition, the Fair Work Act needs to be amended to define a ‘casual employee’ as, in effect, an employee engaged as a casual and paid as a casual, regardless of the pattern of work.”

He added: “This is the second time that Parliament has needed to act quickly to address problems caused by a Federal Court decision relating to casual employment. In 2001, the Workplace Relations Act 1996 needed to be, and was, amended urgently to address the adverse impacts of the Federal Court's decision in Hamzy v Tricon International Restaurants trading as KFC (2001) 115 FCR 78," said Mr Willox.

Meanwhile Australian Unions posted to Twitter that casual employment has been a farce in many workplaces.

“Entrenched practice of pushing workers into insecure casual employment when they are doing permanent jobs must,” it wrote, along with the hashtag #changetherules.

Attached to the tweet was a photo of ACTU president Michele O’Neil with the quote “for too long employers have tried to cut corners by hiring people on casual contracts so that they can deny them their proper leave entitlements”.

Small Business Minister Michaelia Cash has been contacted for comment.

Court ruling could cost employers ‘billions’
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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