In this newsletter, we take a look at two new major developments in the Employment and Industrial Relations (IR) space, which are likely to have an impact on the obligations of most employers in Australia.
Legislative reforms for 'casual employment'
The original Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2020 (Bill) was introduced into the House of Representatives on 9 December 2020. The Bill contained some of the most substantial reforms to Australia's IR system since the Fair Work Act 2009 (Cth) (Fair Work Act) was introduced.
The aim of the Bill was to "improve the operation and usability of the national industrial relations system. By providing greater certainty and flexibility to employers and employees the Bill aims to support productivity, employment and economic growth and ensure that employees also receive their share of benefits that flow from economic recovery."1
Initially, the Bill covered a range of proposed amendments to the Fair Work Act that included targeting key areas within the Australian IR system including, criminalising wage theft on a federal level, award simplification, Greenfields agreements enterprise bargaining, and compliance and enforcement. However, following the amendment to the Bill on 18 March 2021,2 almost all of these proposed amendments were "scrapped" by the Government, with the exception of provisions dealing with casual employment. After receiving Royal Assent on 26 March 2021, the Bill came into force as the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Amendment Act). The Amendment Act amends the Fair Work Act.
For the purposes of this newsletter, we will focus on some of the more significant amendments introduced into the Fair Work Act, by the Amendment Act (namely, the changes in relation to casual employment that came into effect on 27 March 2021).
- Definition of "casual employee"
The Amendment Act clarifies who is a "casual employee", by providing that a person will be a "casual employee" if:
- "an offer of employment made by the employer to the person is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and
- the person accepts the offer on that basis; and
- the person is an employee as a result of that acceptance."3
The defining feature of this new statutory definition of "casual employee" is the focus on an offer of employment where there is no "firm advance commitment" to continuing and indefinite work according to an agreed pattern of work.
In determining whether, at the time the offer of employment is made, there was no firm advance commitment to continuing indefinite ongoing work, regard must be had to the following considerations:
- "whether the employer can elect to offer work and whether the person can elect to accept or reject work;
- whether the person will work as required according to the needs of the employer;
- whether the employment is described as casual employment; and
- whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument." 4
The Amendment Act further clarifies that:
- a regular pattern of hours does not in and of itself indicate a firm advance commitment to continuing and indefinite work;5 and
- the question of whether a person is a casual employee or not is to be assessed on the basis and acceptance of the offer of employment (and not on the subsequent conduct of either party).6
- Casual conversion right
The Amendment Act introduces a new entitlement into the "National Employment Standards" (NES) (contained in the Fair Work Act) by giving casual employees a right to covert to permanent (full-time or part-time) employment, provided they meet the eligibility criteria. This is known as the 'casual conversion' right.
The Amendment Act requires employers to make an offer to a casual employee to convert to full-time/ part time employment if the employee:
- has been employed for twelve (12) months;
- has worked a regular pattern of hours for at least six (6) months of that period on an ongoing basis; and
- the employee could continue to work those hours as a full-time/part-time permanent employee without significant adjustment.7
The offer must be made in writing, be clear as to whether full-time/part-time employment is being offered, and be given to the employee within 21 days after the twelve (12) month period of employment has passed.8 The employee must respond to the offer within 21 days and a failure to do so will mean that they are taken to have declined the offer.9
There are some exceptions to this new rule. The Amendment Act provides a list of circumstances where an employer is not required to make an offer to a casual employee, including the following:
- the employer is a small business owner (as defined under section 23 of the Fair Work Act);10
- the employee's position will cease to exist in twelve (12) months after the time of deciding not to make the offer;
- the hours of work which the employee is required to perform will be significantly reduced in that period;
- there will be significant changes to either or both of the days and times on which the employee's hours of work are to be performed which cannot be accommodated within the days/times the employee is available to work in that period.11
Employees also have a residual right to request casual conversion later in their employment if they meet the certain eligibility criteria.12 The employer has an obligation to respond to this request within 21 days.13
- Casual loading
A significant decision last year in the IR and employment law field was the Full Federal Court's decision in WorkPac v Rossato  FCAFC 84 (Rossato).14The key issue in this case was whether Mr Rossato (a local worker) was employed as a casual worker or a permanent employee with the labour hire company, WorkPac, which in turn was impartial on whether he was owed leave entitlements (as a permanent employee), as alleged by him.
- The Full Federal Court ruled that Mr Rossato was not a casual employee, as he had a 'firm advance commitment from...his employer to continuing and indefinite work according to an agreed pattern of work.'15 Accordingly, it was held that Mr Rossato was entitled to leave entitlements as a permanent employee.
- This presented a "double dipping" scenario where Mr Rossato was able to retain all his casual loading payments but still retrospectively recover his accrued and untaken annual, personal and compassionate leave entitlements. While the decision was welcomed by union representatives and workers, the ruling left many employers exposed to potentially significant underpayment claims dating back some six (6) years.
- In a bid to reverse the decision, WorkPac sought special leave from the High Court to challenge the decision of the Full Federal Court. The outcome of the appeal to the High Court is not expected until mid 2021.
In an attempt to address the potential "double-dipping" scenario, the Amendment Act provides that, if a casual employee has been paid a loading amount to compensate them for not having one or more relevant entitlements, then this will be set off against any claim for entitlements the employee may later be found to be entitled to, in the event that they are classified as a permanent employee.16
Practically, this means that a court must reduce any amount owed to the employee concerned, in respect of certain entitlements by an amount that they have received by way of casual loading. This reduction however, will be guided by a number of considerations, including whether the contract of employment actually specifies the relevant entitlement that the loading amount is meant to compensate, and the specific proportion of the loading amount attributable to each such entitlement.17
Employers should carefully review their employment contract template and ensure that it contains an enforceable set-off clause.
- Casual Employment Information Statement
Another change introduced into the Fair Work Act by the Amendment Act, is the introduction of a new Casual Employment Information Statement (prepared by the Fair Work Ombudsman), which includes, amongst other things, the following information:
- the meaning of casual employment (referred to in clause 15A of the Amendment Act);
- when an employer's offer of casual conversion should be made and the circumstances when an employer is not required to make an offer of casual conversion to the employee;
- the right to request casual conversion;
- casual conversion entitlements of casual employees employed by small business employers; and
- how the Fair Work Commission may deal with disputes in relation to casual employment.18
An employer will be required to provide the Casual Employment Information Statement to each of the employer's casual employees before, or as soon as practicable after, that employee commences employment as a casual employee.19
The Casual Employment Information Statement can be found in the Fair Work Ombudsman website.
Wage Theft Act (Victoria)
On 16 June 2020, Victoria passed the Wage Theft Act 2020 (Vic) (Wage Theft Act), becoming the first jurisdiction in Australia to take this landmark step to criminalised wage theft. The Wage Theft Act is scheduled to come into force by no later than 1 July 2021.20
The Wage Theft Act, amongst other things:
- introduces three (3) new offences in respect of employers who falsify or fail to keep records for the purposes of concealing wage theft; and
- establishes the "Wage Inspectorate Victoria", a new statutory body, which will have enforcement and investigative powers in relation to offences established under the Act.
The three (3) offences are as follows:
a) Withholding of employee entitlements
Employers who dishonestly withhold entitlements from employees will be in breach of the Wage Theft Act. In determining whether such conduct is dishonest, it will be irrelevant whether the employee consented to this withholding of the wages.
b) Falsification of employee records
Employers who produce, make or copy employee records that are misleading, false or deceptive, including altering employee record will be in breach of the Wage Theft Act if the basis of the falsification was done "dishonestly" with the view of obtaining financial advantage. This offence is not intended to capture people who accidentally incorrectly record and/or later rectify pay roll records.
c) Failure to keep employee entitlement record
This offence is intended to capture employers who "dishonestly" fail to keep employment records with the intention of gaining a financial advantage.
Companies who are found guilty of the abovementioned offences may face fines up to $991,320 and individuals (such as directors) may face up to 10 years imprisonment.21
- Who will these offences apply to?
The purpose of the legislation is not to punish employers who make honest and genuine mistakes in regard to their employees' entitlements and leave records, but to capture those who deliberately take part in conduct that is "dishonest". These new offences require an establishment of intent to commit these offences, "beyond reasonable doubt".
This legislation will apply to all Victorian employers and employees, including body corporates, individuals and partnerships. In some circumstances, officers or other representatives of an employer may be liable for the offences committed by the employer.
- The role and powers of the Wage Inspectorate Victoria
The Wage Inspectorate Victoria is a statutory body, which will be established to educate and promote compliance with the legislation. The Wage Inspectorate Victoria will have broad powers such as, requiring employers to produce documents and records and applying to a magistrate for a search warrant.
- Criticism of the Wage Theft Act
On 9 December 2020, the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2020 was presented into the House of Representatives.22
The Victorian Chamber of Commerce and Industry, in March 2020, said as follows in relation to the Wage Theft Act (prior to the Bill being passed into new law): "Business and workers need a national approach. Unnecessary and confusing state by state approaches will damage the business environment and discourage employment."23
The Wage Theft Act (while it was still a Bill) had been described as 'ill-conceived' as the federal government had been considering developing its own laws to criminalise wage theft. However, following the third reading of a federal bill on 18 March 2021, the Morrison Government removed from the federal bill, its own provisions dealing with the criminalisation of wage theft.24 The effect of this is that, at this point, it does not appear that any federal legislation will be introduced criminalising wage theft on a federal level. Employers with employees in Victoria however, need to be mindful of the Wage Theft Act and the potential serious repercussions.
Other States and Territories, namely, Queensland, Western Australia and South Australia, are also in varying stages of the process of implementing similar laws in respect of wage theft.
- Employer obligations
Given the above upcoming changes, it is even more important for employers to understand their obligations in regard to workers' pay entitlements. We recommend a three-fold approach to understanding your obligations as an employer:
- Consider the source of each employee's entitlements (including reviewing/considering the NES, any applicable Modern Awards and/or Enterprise Agreements) and employment contracts (bearing in mind that an employer cannot contract out of statutory minimum wage obligations) to determine the correct minimum wage;
- Conduct regular reviews of pay rates based on each employee's actual working hours (for example, overtime, penalty rates, loading, etc.), and positions/roles, in particular ensure that any changes in classification levels which result in an employee being entitled to different rates are appropriately reflected; and
- Keep accurate records relating to employment (including, but not limited to, hours and days worked, details of overtime and any deductions made from an employee's gross pay).
If you are in doubt about any of your obligations as an employer in relation to pay entitlements, then you should seek legal advice and consider conducting an audit of your payroll practices.
1 Explanatory Memorandum, Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2020 (Cth).
2 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2021 (Cth).
3Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 15A(1).
4 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 15A(2).
5 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 15A(3)
6Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 15A (4).
7 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 66B(1).
8 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2020 (Cth) s 66B(2).
9 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2020 (Cth) s 66D.
10Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2020 (Cth) s 66AA.
11 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 66C(2).
12 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 66F.
13Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 66G.
14 WorkPac v Rossato  FCAFC 84.
15  FCAFC 84 at .
16 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 545A.
17 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 545A(3).
18Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 125A.
19 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Act 2021 (Cth) s 125B.
20 Wage Theft Act 2020 (Vic) s 2.
21Wage Theft Act 2020 (Vic) s 6, s 7 and s 8.
22 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2020 (Cth).
23 Victorian Chamber of Commerce and Industry, 'Wage Theft Laws put Victorian business environment at risk', (Media Release, 18 March 2020), https://www.victorianchamber.com.au/news-media/all/2020/03/wage-theft-laws-put-victorian-business-environment-at-risk
24 Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2021 (Cth).