Australia: Casual Conversion Under The Temporary Clerks Award NSW
Issues And Solutions For Recruitment Firms: August 2006

In this article, Daniel Sleeman of Swaab Attorneys, deals with some important employment law issues affecting recruitment firms in New South Wales. In particular, the article seeks to assist recruitment firms who provide on-hired labour to their clients under the Clerical & Administrative Employees in Temporary Employment Services (State) Award.

Most recruitment firms offer more than one service to clients. Some provide a mixture of recruitment services and on-hired employee services. Others may provide contracting services through sub contracting or managed project/contract services.

Certainly, most recruitment firms offer a level of employment consulting services to assist their clients identify solutions to their human resources needs.

This article deals with two key issues affecting recruitment firms in New South Wales;

1. Casual Conversion Clauses.
2. Workplace agreements under WorkChoices.

In late March 2006 the NSW Industrial Relations Commission varied the Clerical & Administrative Employees in Temporary Employment Services (State) Award (better known in the industry as the "Temporary Clerks Award" and now technically called a "Notional Agreement Preserving a State Award" under the WorkChoices Legislation) to include a "casual conversion clause". On-hired employee service providers who engage on-hired employees to provide outsourced employment services to clients, will be more familiar with the term "Hourly temporary employee" instead of "casual employee". Employers of on-hired employees cannot afford to be confused. The Award defines the two terms (Casual and Hourly Temporary) to mean the same thing!!

The objective of the casual conversion provisions is stated at Clause 5 (b) of the Temporary Clerks Award as follows:

Casual conversion clauses are difficult, if not impossible for many employers to comply with, but for recruitment companies, it presents even greater problems. The reasons are obvious. Clients, and not recruitment firms, determine the length of placements. If a client does not know the length of the proposed placement from the outset, how can a recruitment company employing that employee be expected to potentially provide permanent employment under the casual conversion provisions of the Temporary Clerks Award?

Some placements may last for months. Some placements may last for minutes. That is the nature of the recruitment sector.

Aside from the obvious reasons that casual conversion provisions are difficult to comply with, the award provisions themselves may present further problems to recruitment firms providing outsourced labour to their clients under the Temporary Clerks Award. The provisions, and some general observations, are set out below:

• The concept of "regular and systematic basis" has no certain meaning and has been interpreted widely by courts and authorities on a case-by-case basis. This clause and in particular clause 5(c)(ii) places an onus on the employer to determine when an employee has been engaged on a "regular and systematic basis".

• Some businesses prefer to budget their "outsourced employment spend" on a financial yearly basis, and not by calendar year.

• The award seeks to introduce changes to the contract of employment itself.

• The requirement for the employer to provide written notice of these specific award provision is additional to the general requirement for employers to display the applicable award or industrial instrument at the workplace.

• The phrase "unreasonably so refuse" is ambiguous and unqualified and provides little guidance to employers seeking to comply with these provisions;

• The employer’s reasons for refusing an election of an employee to convert to permanent employment are likely to be financial, operational or specific to the needs of particular clients. The requirement to "fully state and discuss" the reasons for the refusal with employees may potentially place an employer in an awkward position, where in order to comply with the award, an employer might have to disclose confidential or commercially sensitive information about their and their clients’ business affairs.

• Four weeks appears to be a long time to keep such an option open, especially considering many permanent employees can be terminated with less than four weeks notice, depending on their contract of employment and any applicable award or legislative provisions.

• These provisions will impose various paperwork and administrative requirements on the parties, which in practice are likely to fall on the employer.

• The provisions appear to overlook the fact that clients of recruitment firms, and not recruitment firms themselves, determine the number of hours worked.

• Dispute resolution is time consuming and may be costly;

• Disputes at the workplace force an employer to "take their eye off the business" which may impact on the quality of service they are able to provide to their clients.

• This clause is likely to be argued widely and creates uncertainty;

• This clause arguably reduces the effect of the changes to unfair dismissal laws under the WorkChoices Legislation, particularly for employers with less than 100 employees. It is possible that an employer covered by the Temporary Clerks Award, and who has dismissed an employee, may be exposed to claims for breach of this award provision, when that employer may have otherwise been protected from an unfair dismissal claim under the WorkChoices Legislation.

Under the WorkChoices Legislation, most employers have a choice. For employers in New South Wales who are "constitutional corporations" (which is likely to be the majority of recruitment firms) and therefore covered by the WorkChoices Legislation, the choices are as follows:

1. Attempt to comply with the award provisions.
2. Pretend the award provisions don’t exist and hope they don’t get caught.
3. Make workplace agreements under the WorkChoices Legislation that are tailor made to meet the specific operational requirements of the business.

For some recruitment firms covered by the Temporary Clerks Award, the first option, to attempt to comply with the award, including the casual conversion provisions may appear feasible. Most employers believe they already comply with relevant industrial instruments, including awards. Most employers do not intentionally breach the terms of awards. But as illustrated in this article, using the casual conversion clause as an example, certain award terms and conditions are by their very nature and wording, difficult to comply with and pose challenges to the operational requirements of the business.

For recruitment firms who would prefer to "stick their heads in the sand" and ignore the award provisions altogether, this is a risky strategy which employers should not adopt. After all, why be in breach of an award provision and expose the business to compliance audits, investigations by Government Departments, union involvement or legal action, when there is an effective and practical solution at hand under the WorkChoices Legislation?

This article invites employers to seriously consider adopting the third option. That is, to make workplace agreements under the WorkChoices Legislation as a solution to problems posed by the Temporary Clerks Award. This option, making workplace agreements with employees under the WorkChoices Legislation, is briefly discussed below.

Recruitment firms covered by the WorkChoices Legislation can minimize risks associated with compliance with onerous casual conversion clauses, by adopting workplace agreements under WorkChoices.

The relevant types of workplace agreement under WorkChoices that individual recruitment companies may have already considered are:

1. Australian Workplace Agreements (AWAs) made between the employer and individual employees;
2. Employee Collective Agreements made between the employer and a group of employees who will be covered by the agreement;
3. Union collective agreements made between an employer and a union, where the relevant union(s) negotiates on behalf of employees;
4. Employer Greenfields Agreements made in relation to a new project, business or undertaking an employer is proposing to establish for future employees;
5. Union Greenfields Agreements made between an employer and a union in relation to a new project, business or undertaking an employer is proposing to establish, negotiated between the employer and a union on behalf of future employees.

Under the WorkChoices Legislation, once a workplace agreement commences, it removes the effect of any award that would otherwise apply to the employee, except for a number of terms and conditions, which are called "protected award conditions".

In relation to "protected award conditions", such conditions continue to apply unless the workplace agreement expressly excludes or modifies them. These "protected award conditions" under the WorkChoices Legislation include:

1. rest breaks
2. incentive based payments and bonuses
3. annual leave loading
4. public holidays and payment for public holidays
5. days to be substituted for public holidays or a procedure for such substitution
6. monetary allowances (for employment expenses; skills; disabilities)
7. overtime or shift work loadings
8. penalty rates
9. outworker conditions.

Workplace agreements must provide the minimum entitlements of employees, set out in the WorkChoices Legislation. These minimum entitlements form what is called, the "Australian Fair Pay and Conditions Standard".

The Australian Fair Pay and Conditions Standard deals with key minimum entitlements for all employees covered by the WorkChoices Legislation, and includes:

1. Minimum rates of pay
2. Annual leave
3. Personal / carer’s leave (including sick leave)
4. Maximum ordinary hours of work
5. Parental leave

The terms of a workplace agreement should be flexible and meet the requirements of the employer and employee(s). "Casual conversion clauses" (which are neither part of the Australian Fair Pay and Conditions Standard nor a "protected award condition"), may be removed by a workplace agreement.

Many employers under WorkChoices are now adopting at their workplaces, a combination of workplace agreements and common law contracts of employment, to provide an innovative and effective response to their employment needs.

As Workplaceinfo have previously covered on the issue of workplace agreements and common law contracts (in their bulletin of 17 August 2006), many employers are now using a combination of workplace agreements and common law contracts under the WorkChoices Legislation to set out terms and conditions of employment in accordance with their legal and operational requirements.

Combining workplace agreements with common law contracts and policy manuals can enable an employer to better deal with various other issues such as incentive schemes, loyalty programs, internal processes and procedures.

In the case of recruitment firms utilizing the Temporary Clerks Award, this alternative strategy has enormous potential to meet their operational requirements and streamline internal processes.

Upcoming Topics Over the next few months, Daniel Sleeman will be preparing a number of articles which are specific to the Recruitment Industry, based on his experience with recruitment clients.

The next three topics are as follows:

1. Implementing workplace agreements – a 10-step guide. Things you need to know to seek employees’ approval of workplace agreements, and some other helpful tips.
2. Informal arrangements with other agencies? What are the risks of informal, verbal arrangements with other agencies, such as "lending temps".
3. Paying your on-hired employees correctly. What are your legal obligations to pay on-hired employees correctly, and what you need to explain to clients who insist you pay according to their Certified Agreement.

Swaab was recently named winner 'Best Law Firm in Australia (Revenue < $20m)' at the 2007 BRW-St George Client Choice Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.