Proposals to expand the Federal System to employee-like arrangements and alter casual employee definition - Employee Rights/ Labour Relations

Much of the Australian Labor Party (ALP or Labor) policy being taken to this election concerns what the party describes as 'insecure work'. Debate during the campaign has made clear that for the ALP, that description encompasses a wide class of worker - including casual employees, labour hire employees and independent contractors. We have reported on numerous ALP policies which impact this group, for example the same job/same pay and portable leave proposals.

This article looks at two more of those policies - firstly, the promise to amend the Fair Work Act 2009 (FW Act) to introduce an 'objective test' for determining whether an employee is a casual and secondly, the proposal to expand the scope of the federal regulatory scheme to 'employee-like' arrangements. It's clear that means the system will enable regulation of workers who are not employees.

The casual employee issue has a long history, having been the subject of both substantial legislative reform by the Coalition Government, and case law developments, during the past three years. The Coalition and ALP positions are polar opposites.

The 'employee-like' proposal is new, but does bear some resemblance to the Road Safety Remuneration Tribunal jurisdiction - which was established by the previous ALP Government (under Julia Gillard), and immediately repealed by the Coalition in 2013. Again, the parties positions are completely at odds.

This ongoing debate is occurring against a backdrop of rising interest rates, historically low unemployment and increases to the cost of living. However, describing it as a 'debate' is perhaps overly generous to both sides. The detail of these proposals has largely been ignored in the campaign, but one expects it won't be ignored after the election. Hence the importance of understanding the likely impacts of these proposals.

What is being proposed?

From early last year, the ALP clearly signposted its intentions to make legislative changes to address regulation of 'employee-like' arrangements, insecure work and casual employment.

In its 2021 National Platform (Platform), the ALP stated:

'Labor will ensure the Fair Work Act provides appropriate coverage and protection for all forms of work and that gig economy platforms and other working arrangements are not used to circumvent industrial standards.'¹

In its subsequent Secure Australian Jobs Plan (Jobs Plan), it hinted at the form such protections would take, stating they would:

'Extend the powers of the Fair Work Commission to include 'employee-like' forms of work, allowing it to better protect people in new forms of work, like app-based gig work, from exploitation and dangerous working conditions.'²

Casual definition

Many will recall the many judicial decisions over the last decade or more, up to the WorkPac cases, where courts and tribunals formed the view that an employee's status could change from casual to permanent, without the parties agreeing the change, or seemingly without any notification to either. The broad basis for that view was a courts assessment of whether the employee worked on a 'regular and systematic' basis.

The Coalition put an end to that, essentially saying that the parties could agree at the outset they were in a casual employment relationship, and provided there was no firm advance commitment to set working hours, then the employee was a casual.

In the WorkPac Pty Ltd v Rossato³ (Rossato) case, the High Court overruled the previous judicial decisions, finding that the common law was precisely the same as the governments legislation - and that is the point of departure between the parties on this issue. Labor proposes to introduce an objective legislative test for determining when a worker is a casual employee,⁴ with the intention that those employees have 'a clearer pathway to permanent work'.⁵

The notion of an objective test means that an employee who has been engaged initially as a casual may become a permanent, without any agreement, when they work in a way that is captured by the definition. It's difficult to be more precise at present, because the definition is not outlined in the ALP policy.

On the other hand, the Coalition remains committed to the reforms it made in 2021, continuing to support the existing definition of casual employment.⁶

As the above extracts from the Platform and Jobs Plan make clear, this proposal will bring into the system of workplace regulation workers who are not employees. That's a big change. It means that awards and enterprise agreements may cover independent contractors.

The scope of the change is not explained. The reference to the 'gig economy' is merely an example. The change might apply far more widely than just that sector.

The Coalition will take no steps to regulate beyond the employment relationship. The Business Council of Australia has been vocal in its opposition to the ALP proposal, describing it as the 'death of the truckie and the tradie' and a broader implementation of the former Road Safety Remuneration Tribunal.

How do the ALP proposals change the current state of play?

The ALP's proposed changes represent a departure from the traditional regulation of the employer-employee relationship in Australia.

For more than a century, the federal legislative scheme of regulation was based on the conciliation and arbitration power in the Commonwealth Constitution, which was concerned only with the regulation of employment relationships. With the advent of the WorkChoices legislation in 2006, and the FW Act in 2009, the corporations power became the constitutional basis for the federal scheme.

Hence the scope of the federal system was broadened and largely displaced the operation of state systems.

But interestingly, with the exception of the Road Safety Remuneration provisions, neither side sought to utilise that additional scope to extend the scheme beyond employer and employee. Indeed, the potential to do so was not seriously canvassed by either side in any of the elections since that time.

The change in approach now proposed by the ALP is said to stem from the rise in 'gig' work and other forms of 'on demand' work. While the size of the gig economy is difficult to measure, work of this nature is no longer simply the domain of food delivery platforms and ride share drivers, with research suggesting that technologies facilitating gig work are being deployed into more 'mainstream' workplaces.

For example, Dr Fiona Macdonald's recent research into paid care work in Australia, particularly under the National Disability Insurance Scheme, showed a trend toward the 'individualisation and commodification' of care through gig economies and technology platforms.⁷ The trend will undoubtedly continue in any number of different sectors.

The increase in these 'employee-like' arrangements, including in sectors that have historically utilised more traditional workforces, continues to raise questions about the appropriate way to engage such workers, and whether, and the extent to which, regulation is necessary or appropriate. It highlights the tension between protecting apparently vulnerable workers from possible exploitation, while ensuring flexibility and access to the labour market.

While the ALP proposals go further than ever before in expanding protections to non-employees, including expanding the powers of the Fair Work Commission, the practical impact of the proposed changes depends in part on the form they ultimately take.

As to casual employees, the current legislative definition requires that to be a casual, the employer must make an offer of employment on the basis that there is no firm advance commitment to continuing and indefinite work with an agreed pattern of work and the employee must accept the offer on that basis. The legislative definition reflects the historical understanding of casual employment and the way the concept is commonly understood in the workplace. The High Court in Rossato confirmed this legislative definition as being consistent with the common law approach, with the High Court focusing clearly on the terms of the contract at the time at which the employee was engaged.

The ALP has not yet articulated the substance of its proposed change to the definition of a casual employee. That makes it impossible to outline the practical impact of its proposal. It's interesting that even at this late stage of the campaign, the ALP's proposed definition has not been released, and hence subject to any scrutiny.

All that one can conclude is that consistent references to an 'objective' test suggests a legislative test that goes beyond what has been agreed between the employee and employer and imposes an independent standard considered by the ALP to be fair.

What is the policy objective driving the proposals?

As to 'employee-like' arrangements, it's clear that the ALP's primary rationale is job security (which is also reflected in the ALP's express intention to make job security an objective of the FW Act). However, the policy objectives go further than this to include broader notions of compliance and fairness. A closer examination of the 2021 National Platform reveals a wider concern with workers' terms and conditions being undermined and employers avoiding obligations through 'evasive practices'.⁸ Reading between the lines, it's apparent that the proposals are intended to extend regulation of the substance (and not simply the form) of such work relationships.

The proposed changes to the definition of a casual employee have a long and storied history. We have published a number of Corrs Insights on the suite of case law dealing with this issue⁹. In short, the ALP says the Coalition Government's definition of a casual employee gives a 'green light' to casualisation and 'makes the problem of insecure work worse'.¹⁰

The Coalition points to its reform efforts during 2021, which were driven by a policy objective of creating certainty. It holds up its casual conversion scheme in support of job security, which mandates an opportunity for employees to convert from casual to permanent employment after 12 months in certain circumstances.

Our predictions about the likely outcomes and consequences

As to employee-like arrangements and insecure work, the ALP has not yet articulated the powers that might be conferred on the Fair Work Commission to deal with non-employees. However, an examination of recent changes to the law in Victoria under the Andrews government, as well as key recommendations from the Inquiry into the Victorian On-Demand Workforce (Inquiry), provide useful examples of the types of changes that might be introduced under a federal Labor government.

The Inquiry, chaired by former Fair Work Ombudsman Natalie James, made several key recommendations which are instructive as to the approach that might be taken to changes to the FW Act in relation to the status of workers. Having regard to matters set out in recommendation 6 of the report of the Inquiry¹¹, the FW Act could be amended to:

adopt a definition of 'entrepreneurial worker', so that a person working as part of another party's business or enterprise would be regarded as an employee, while autonomous and self-employed workers would remain covered by commercial laws;
include a reverse onus of proof, whereby the party claiming that an individual is not an employee bears the onus of proving that to be the case; and
require express consideration of the relative bargaining power of each party when determining work status.

These changes would be similar to those proposed in the United Kingdom's Status of Workers Bill, which similarly proposes a definition of 'worker' that applies to everyone but the genuinely self-employed, as well as a reverse onus of proof.

Such changes would not only impact businesses operating in the gig economy, but also those that regularly engage independent contractors on a legitimate basis to work within their businesses for a range of reasons.

It is also possible an ALP government would seek to introduce a paid leave scheme for casual and insecure workers, similar to the recently announced Victorian Sick Pay Guarantee (Guarantee). The Guarantee provides certain workers with five days of paid personal/carer's leave at the national minimum wage. While the first part of the scheme is tax-payer funded, any continuation of the Guarantee after a two year trial period would be subject to an industry levy. There are real questions about whether a scheme of this nature is constitutionally valid, although an equivalent scheme at the federal level would be far less fraught.

As to the test of casual employment, the ALP said that it was committed to giving statutory effect to the common law test, before the High Court's decision in Rossato and is not as yet clear whether it's position on this will change.

However, as outlined earlier, it has also referred to a 'fair' and 'objective' standard, which suggests something beyond the common law test. It is unclear whether the ALP would add to the current test in section 15A of the FW Act or replace it entirely.

Regardless, any legislative changes which pursue a broad definition of casual employment and introduce subjective notions such as 'fairness' are likely to lead to greater uncertainty, including decisions being challenged in the courts.

While some of these proposals have the capacity to generate a measure of confusion and administrative complexity, it is also important to keep the issue in perspective. Some of what is being proposed could potentially be a fine tuning of existing provisions rather than representing a radical new direction.

Footnotes

¹ ALP National Platform 2021 at [28].

² Labor's Secure Australian Jobs Plan.

³ [2021] HCA 23.

⁴ ALP National Platform 2021 at [24].

⁵ Labor's Secure Australian Jobs Plan.

⁶ see section 15A(1) of the FW Act

⁷ Fiona Macdonald, 'Individualising Risk: Paid Care Work in the New Gig Economy', Palgrave Macmillan, 2021.

⁸ 2021 National Platform at [34].

⁹ https://www.corrs.com.au/insights/rossato-high-court-clears-the-air.

¹⁰ Labor's Secure Australian Jobs Plan.

¹¹ Report of the Inquiry into the Victorian On Demand Workforce, Industrial Relations Victoria, June 2020.

This article is part of our Australian Federal Election 2022 Insight collection. Read more here.

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