Most recent commentary on the recent High Court decisions in Jamsek and Personnel Contracting suggests that the Court has confirmed the primacy to be given to the terms of the written contract when determining the nature of the relationship between the parties. Whilst that is a fair observation, there is much more to the story. Key to understanding the real commercial impact of the two High Court cases for business is an appreciation of two matters.

First, neither of the losing parties – the two truck drivers held to be contractors in Jamsek; and the labour hire company held to be an employer in Personnel Contracting – argued at any stage of the proceedings that the contracts in place:

  • were not genuine or were somehow a “sham”; or
  • should be set aside or held invalid for any one of the many reasons the law recognises that can occur such as unconscionable conduct, undue influence or misleading conduct of the other party.

Second, in both cases, everyone involved (the litigants themselves and their very capable legal teams) agreed that the contracts in evidence recorded the full and complete terms of the contracts and therefore contained all of the relevant terms and conditions between them. No party argued, for example, that the contracts had been superseded by fresh unwritten contracts or that they had been varied in some way, whether in writing or, as can happen, orally or by conduct.

Let us explain why these two points matter so much.

Much of the media, academic and legal coverage of what happened in these cases, and the result, positions the outcomes as extreme or somehow, not what should be the expected result. Critics of the outcome in Jamsek, for example, put forward the view that two hard working truck drivers working for the benefit of the same company for decades, in a way that looks like employment should be recognised as employees and receive all of the benefits – annual leave, long service leave, minimum hourly rates, etc., that truck driving employees are entitled to. So, the argument goes, a conservative and “black-letter” High Court has given the contract terms primacy over the “reality” of how things actually operated, to the detriment of real working people who, so the thinly veiled criticism goes, have little bargaining power when they enter into contracts and have been outsmarted by companies and clever lawyers.

Critics of the outcome in Personnel Contracting argue that the tri-partite Odco style arrangements that took off particularly in the early 1990’s are now dead. They say that this is because the finding that the individual concerned was an employee of the labour hire company (rather than an independent contractor as labelled in the contracts), means that settled industrial arrangements that have been in place for 30 years have now been undermined, probably fatally. In fact, the one Judge who dissented in the outcome of the case, formerly an elite tax specialist barrister no doubt experienced in seeing tax rulings chopped and changed after clients had made business decisions relying on them – described the damage that the decision of the majority Judges would do, not only to Personnel’s business but to the businesses of many others, as “undesirable”. There is more than a little bit of wisdom in these observations. The CFMMEU has, if recent newspaper reports are accurate, launched a $60m backpay case as a result of the Personnel Contracting decision.

In our view, these decisions have been subjected to more than their fair share of misguided criticism and the commercial implications are both modest and manageable. Here’s why:

The Court in both cases re-iterated a number of principles that are not new – that Judges should not go on wide-ranging inquiries after a contract is made to help interpret the contract (but making these inquiries for other reasons – such as deciding on an argument about whether the contract has been varied – is perfectly permissible); and that amorphous arguments about concepts like “unequal bargaining power” shouldn’t be countenanced unless the argument is that an established legal remedy is being sought. On the latter point, it did not go without comment in Jamsek that by entering into independent contracting relationships, the two truck drivers were able, through partnership agreements, to split 50% of their income with their wives, who played no active role in the business, and on top of that, paid tax on income at much lower rates (the corporate rate rather than employee marginal rates). The decision does not indicate the tax savings over the decades and whether they were more or less than the employment benefits (leave, etc.) that the truck drivers would have been awarded had they won the case. But one can see how the argument that the drivers were exploited or treated unfairly can wear thin when the full circumstances are considered – they enjoyed material financial advantage by virtue of these arrangements which they presumably did not intend to pay back if they won their claim for employment benefits foregone.

The idea that Courts must strictly apply contracts ignorant of the way things work in practice doesn’t square with either decision or the way the parties litigated their cases. There are a myriad of reasons a Court can look beyond the written contracts which have been signed – for example, on the basis that the contracts have been superseded, varied or terminated, or should not be enforced because of the way they were negotiated or made. In other cases, the terms of the contracts are so ambiguous or amorphous that it is necessary to look at how the contracts were performed to try to understand what the contracts’ terms meant in the first place. All parties in these cases were represented by experienced legal teams who did not go near any of those arguments – we assume for good reason. To take this point a step further, the criticism of Jamsek to the effect that the Court is too “black-letter” in its interpretation overlooks the decision in Personnel Contracting, where the Court held that the individual concerned was an employee of a labour hire agency rather than, as described in the contract, an independent contractor. The Court said, essentially, that the contract terms will be rigorously scrutinised, but the parties characterisation of or label given to the legal relationship – employee or independent contractor – is not determinative and is something for the Court to ultimately decide. A true and strict “black-letter” approach would have honoured the contract as drafted and held that the individual was a contractor because that was the way the parties had described the relationship.

With all that said, what are the commercial implications?

  1. Right it is, that robust, well-written contracts which accurately capture the arrangements between the parties are more likely to be upheld and will be the focal point of the analysis – the idea that a Court could apply a “multi-factor” test to assess whether a contractor was really an employee, with the contract playing a relatively minor role in the analysis, is out of favour. But the central question – who controls the work and how it is performed, and is the individual running a business on their own account, remain central. It will be critical to ensure that the terms of the contract reflect the parties’ intentions about those matters.
  2. For organisations engaging people to provide services or perform work, there is great value in taking steps to ensure that the contracts in place do reflect the totality of the arrangements, and say so. There are different drafting techniques that can be utilised to achieve that objective. Great care will be needed because the terms may be subject to significant scrutiny – as was the situation in Personnel Contracting, the contract terms themselves may show that one party has such a high degree of control over the individual on the other side of the contract, and that the individual could not be said to be running their own business, such that the individual is an employee not a contractor.
  3. With the above in mind, at a practical level, when entering into agreements for individuals to perform work or supply services, organisations will need to think carefully about the degree to which they actually want or need to control the manner in which the relevant work is performed – and the consequences of that decision for the nature of the relationship between the parties. Contracts which give the “principal” a high degree of control over the manner in which work is performed by the individual are likely to carry a higher risk that the individual is doing such work as an employee, and that employment obligations are owed to them.
  4. The part of the labour market most sharply and negatively affected by these cases is likely to be labour hire companies engaging individuals as contractors, and then on-hiring them to other organisations. We don’t think it’s right to say that Odco style arrangements are dead, but they are certainly more vulnerable to legal attack. One issue that the Court did not consider was whether the outcome in Personnel Contracting would have been different if the individual didn’t contract directly with the labour hire agency, but did so through a company – a very common arrangement in our experience. Following the logic set out, the labour hire agency could not control the individual’s work – it would engage a company that would in turn do so. Absent an argument that the intermediary company involved a “sham” or some other invalidating aspect, such an arrangement may have made a difference to the outcome.
  5. Having said all of this, the terms of the contract will not (despite what some commentators have suggested) be the start and end of the analysis. These cases say nothing about the situation where the arrangements in place are not fully captured by the written contracts in evidence or there is an effort to invalidate or set aside the contracts. What has occurred during contract negotiations or after the contracts were signed can become highly relevant to the litigation outcome for many reasons, as described above. We think future litigation in this area will focus on these aspects.

Whether there will be a “Great Resignation” in Australia has been fiercely debated for weeks. But whatever the different viewpoints, stabilisation, recovery, and growth in 2022 will be critical for most businesses. Timing is everything – the need for growth coincides with widespread fatigue and burnout among the workforce, ongoing uncertainty associated with the new Omicron COVID-19 variant, and anticipated high levels of job transitioning and career downsizing. Add to the mix that remote and hybrid working is here to stay in 2022 and beyond.

Will this combination of factors brew into the perfect storm or little more than a storm in a teacup? One thing is certain, though – most employers can’t afford to find out the hard way.

To best prepare, employers should now focus on supporting top talent to revive and thrive in order to minimise attrition. Revitalising culture will be important. Extended COVID-19 lockdowns have seen most businesses improve the accessibility and seamlessness of their apps and platforms for facilitating remote work. The downside is that workers report their workdays have extended, and colleagues are less cohesive and connected. Finding sustainable ways to address these concerns will go a long way to minimising burnout and attrition.

But if your best efforts aren’t enough, what then? Sophisticated employers are starting to think about some of the things that will be relevant to employee departures, including:

  1. Future-proofing employment contracts. Are there appropriate contractual notice periods and post-employment restraints in place? For those employers looking to implement remuneration reviews in the new year, this presents a timely opportunity to bolster these protections. Moving forward, it will be particularly important to carefully define the parameters of post-employment restraints, including who your competitors are, given that top talent are now uniquely positioned to access remote work opportunities with competitors far and wide.
  1. Re-writing the playbook for remote exits. Employers will need to think about the systems they have in place for managing employee exits in remote working environments, including:

(a) how they will ensure employees return confidential and sensitive information to the employer

(b) retrieving work devices from remote workers, and

(c) establishing a clear line of sight over departing employees’ actions during their notice and gardening leave periods (any delays in acting upon suspected misuse of confidential information or intellectual property, or breaches of restraints, can seriously impede the ability to enforce those obligations).

  1. Enforcing post-employment restraints. The consequence of a “Great Resignation” may be that employees resign in order to work for direct competitors. 2022 may well be the year for a resurgence in litigation about the reasonableness of restrictions on working for competitors or soliciting customers from former employers. Employers ought to think carefully about how they approach this – and any pre-planning that might need to be done so that they are best positioned to succeed in any dispute.

The pandemic has prompted many organisations to adopt ‘hybrid’ work models. Seyfarth’s global Future of Work pulse survey in 2021 found that navigating remote and hybrid work was the number one concern that in-house legal and business leaders had coming out of the pandemic. There are a number of key reasons why ‘hybrid’ work is predicted to continue, including:

  • health and safety: with new COVID variants an ongoing risk, home working will likely remain a key safety measure for businesses.
  • employee engagement: surveys show that employees increasingly value and expect home working.
  • productivity: recent studies indicate many employees work very productively at home.

Given these pressures on businesses, now is a great time to take stock, strategise and prepare for the future. So, what are some of the key issues that future focused businesses and HR leaders should think about when looking at longer term hybrid working options in 2022 and beyond?

How do you support health and safety best practice when you don’t control the workplace?

Employers and their officers have a range of work health and safety legal obligations that cannot be contracted out of, and still need to be discharged regardless of whether employees are working at the desk next to their manager or from their living room. Employers often have much lower visibility and practical control of remote working hazards such as un-ergonomic work station arrangements, cables, tripping hazards, electrical or equipment safety, excess work hours, stress, anxiety, isolation or loneliness. Risks to physical and mental health and safety need to be considered and addressed (noting there has been an increasing focus on mental health risks as a direct result of the pandemic).

How do you build an inclusive culture and effectively mentor staff when people rarely meet in person?

There can be unintended cultural downsides of having a team who rarely interact in person. Many businesses will be looking for initiatives that enable all team members to feel included and valued, have opportunities to share ideas and progress, and access support and mentoring. Two-way communication has never been so important in a world where, without the right measures in place, employees can go a long time without meeting each other or their managers.

Technology can certainly go a long way to keeping people connected and engaged, but it is not the be all and end all. In fact, there is always a danger of issues like bullying and harassment flourishing when workers think no one is watching that need to be carefully managed.

As more and more businesses embrace flexibility, we are seeing reports of creative solutions to boost personal engagement and foster collaboration and team-building, such as ‘keeping in touch’ days (where all staff or certain teams meet in the office on agreed days), making smaller satellite offices available in the suburbs, and more in-person training and celebrations.

How do you account for industrial instrument restrictions on flexible work?

Many industrial instruments restrict when and where work can be performed, when breaks must be taken and what amounts have to be paid to employees for work at different times. This adds a layer of complexity for hybrid working policies, which might inadvertently breach a legal standard or fundamentally change the remuneration required to be paid. Any hybrid working arrangements need to be assessed against legal requirements to ensure there are no unintended consequences of permitting worker choice.

How does cross-border hybrid work affect employer compliance, insurance and risk?

Employees working across jurisdictions create a number of challenges for global employers that need to be carefully considered. In Australia, employers need to consider impacts of any cross-border work on state-based compliance requirements, including, for example, any changes regarding the applicable choice of law, jurisdictional coverage under discrimination and work health and safety laws, local workplace surveillance requirements and confirming the correct payroll tax and workers compensation arrangements are in place. Some states have also introduced criminal sanctions for breaches of labour hire licensing laws, industrial manslaughter and wage theft, which would need to be complied with if workers commence working in those jurisdictions.

How do you ensure that remote working arrangements are not inadvertently discriminatory?

While flexible working has long been considered a tool to remove barriers to diversity and inclusion, this also requires navigation of a range of possible diversity and discrimination risks that can arise from remote working.

What legal changes and claims may be on the horizon for hybrid work?

The law is playing catch up to fast-moving cultural and technological change. Globally, we have seen hybrid work driving a range of industrial pressures and legal reforms. For example, Portugal has recently followed countries such as France, Spain, Belgium, Italy, the Philippines, Argentina and India by introducing a legal right to disconnect. The UK government is also considering a proposal to make flexible working the default. Locally, the ACTU has also developed a series of claims for working from home.

In short, employers can and should expect to face additional claims and/or legal challenges as more workplaces move to implement hybrid working models. Employers that invest in comprehensive planning and risk management at the outset will be best placed to meet these challenges.

Our project was finished. With grins on our faces, my colleague and I walked towards each other, hands sailing through the air in synchronised arcs. Onlookers shouted, “No, don’t! It’s not COVID-safe….” Our grins faded, but it was too late. We high fived. Cringed. And hand sanitised.

There’s going to be an awkward adjustment period while we all figure out how to interact with people at work again. Unfortunately, the timing overlaps with both the predicted ‘summer of love’ and the new Roadmap for Respect changes to Australian sexual harassment and discrimination laws, which commenced operation on 1 September 2021.

The Roadmap for Respect didn’t account for the fact that people who have been in extended lockdowns may be out of practice at reading the room or have different thresholds for what is acceptable, normal, welcome, offensive, humiliating or intimidating conduct. It’s easy to see how water-cooler conversation may run dry. Pauses could be filled with overly personal stories or awkward banter. Physical proximity could be much more confronting now than it has been in the past.

This creates a ‘perfect storm’ of risk, noting that:

  • There is now a broader range of conduct that will amount to unlawful ‘sexual harassment’ under the Sex Discrimination Act 1984 as well as a new type of unlawful conduct (‘harassment on the grounds of sex’).
  • A larger population of people are now covered by these laws. Claimants also have a longer period of time in which to bring claims to the Australian Human Rights Commission.
  • All “persons conducting businesses or undertakings” (or PCBUs) are covered and can also be liable as an accessory if they cause, instruct, induce, aid or permit sexual harassment and sex-based harassment.
  • The Fair Work Commission can also now hear applications for orders to ‘stop sexual harassment’ (which is similar to the existing ‘stop bullying’ framework).

To navigate these risks, leaders may need to recalibrate. Key points to check off the list are:

  • Policies and procedures should be dusted off to ensure that the standards are clear and companies have the tools needed to respond to any claims of inappropriate conduct. Consider reminders and training, particularly as we head into the festive season.
  • If office attendance is down, how do you ensure leaders oversee interactions, spot any red flags and respond swiftly to prevent sexual harassment and discrimination, if needed?
  • Invest in support for anyone who is struggling, including drawing on some of the great tools we have all been using while working from home.
  • Have genuinely open dialogues (and sometimes hard conversations) about the line between acceptable and unacceptable behaviour, focusing on the practicalities of interpersonal interactions and the nuanced ways workplace sexual harassment and discrimination can arise depending on the dynamics and power imbalances between those involved.
  • Ensure people know they can and should ask questions or raise issues – and that the employer values and supports input on how it can continue to create a productive, respectful and inclusive workplace where people can thrive.

All the modelling done and released by our governments to support the roadmaps out of lockdowns tell us the same thing: as our businesses and borders reopen, the COVID numbers will increase. We will need to learn to live with the virus. Given this, it is likely that a lot more workers will get COVID and transmit it to others.

The key question for every business leader to consider is how will you plan now to be ready for this next phase?

Many or all of the COVIDSafe measures that businesses have now respond to a pandemic with low community transmission. Reopening with higher community transmission rates presents a different risk profile for businesses. Vaccination has formed a key part of the public debate about how to keep workers safe. But it is not the only issue here that employers will need to navigate (particularly in those states, including Victoria, where industrial manslaughter is a criminal offence).

Some of the other bigger picture issues that Boards and business leaders should be thinking about now include:

  • Ensuring sufficient resourcing and processes are put in place to support the challenge of remaining up to date with changing and varied government requirements, public health advice and best practice guidance as things change quickly. Already stretched HR and Operations teams are likely to need additional support, to assist with changes and deal with employees who object or fail to comply, particularly given the myriad of other people challenges that have been triggered by the pandemic.
  • Planning for a localised outbreak as for any other business interruption as part of the risk register. This includes contingency planning if a large number of employees are forced into self-isolation (as we have seen recently among large employers and in some country towns).
  • Taking a rigorous and broad risk assessment and mitigation approach to protecting the health and safety of employees and contractors that includes environmental factors that could contribute to outbreaks with unknown sources. For example, several outbreaks have been linked to ventilation system issues in hotel quarantine, which has also been highlighted as an issue by the ACTU. How many employers have included building design and ventilation as potential infection sources in the planning to date or considered what (if anything) can be done?
  • Identifying commercial tensions and how they will be managed. What happens if a key client of a business says ‘we’re not happy to have our confidential information at employees’ homes’? Will the business’s response be to require on-site work (where permitted by law) or is that a relationship issue to be addressed with that client?
  • Mental health will need to be a continued area of focus as we know that all the predicted changes (higher case numbers, more hospitalisations, changing government requirements which are likely to result in uncertainty about work arrangements) can all contribute to mental health concerns.
  • Anecdotally, many companies have experienced spikes in employee grievances during the pandemic. Employees who raise concerns about COVIDSafe arrangements at work could be making legally protected whistleblowing disclosures, even if that is not how the complaint is described by the employee. Managers and senior business leaders who might receive these complaints should ensure that they know how to spot them, how to deal with them and what their (personal) obligations are as the recipient of a legally protected whistleblowing disclosure.

Employers who work through the above issues will be best placed to support their people, take advantage of opportunities to implement new systems and processes now (before community transmission increases further) and protect their business and the safety of their people and clients. We know that those that get this right will position themselves well for the future.

We recently had the pleasure of hearing from Futurist Ross Dawson in an exclusive conversation about the powerful drivers that are reshaping work at a dramatic pace in the coming years.

Join us for the second of a two-part series on the future of the world of work. During this discussion-based session, our US and International Employment team will address the high-level legal issues and implications of the key themes that Ross discussed in Part 1, including technology, society, structure, work, location, performance, and leadership.

The discussion will address critical questions employers should consider when it comes to employment in the future, including:

• What does the move to distributed work models and the gig economy mean for employment protections and representation across the globe?
• How do talent acquisition and performance management models keep up with “any time, any place” working?
• Where the law does not reflect the new reality, how do employers balance compliance with keeping their competitive edge, and how do employers take advantage of the new possibilities that Ross outlined?

The speakers are:

Dave Baffa, Partner, Labor and Employment
Rachel Bernasconi, Partner, International Employment Law
Ana Cid, Partner, International Employment Law
Chelsea Mesa, Partner, Labor and Employment

If you missed out on Part 1 of this series, you can view the recording here or read our recap here.

Register here for the webinar.

The future of work is in the process of being created. The leaders who seize the immense opportunity to attract and leverage the best talent in a swiftly changing world will excel. Interestingly, our own data shows that more people are hopeful about the future of work than they were five years ago.

You are invited to join Seyfarth co-hosts, David Baffa and Jesse Pauker, for a conversation with Ross Dawson, futurist and one of the world’s leading thinkers on the future of work. This keynote will explore the powerful drivers reshaping work at a dramatic pace in coming years, including:

  • Technology such as pervasive data capture, AI, and 3D videoconferencing that will shift the role of humans in work
  • Rising expectations from employees, investors, and customers that will shape business practices
  • The shift to platform business models which is reshaping the nature of value creation

As a result of the pandemic, companies will have to make fundamental strategic decisions among a diverse array of location-focused or hybrid work configurations, and optimise work practices for the reality of distributed workforces.

As organisations redesign work to focus on the unique human capabilities that complement AI, the war for talent will intensify and job roles will become more fluid. These shifts will accentuate uncertainty and risk in workforce management, but also offer the potential to build exceptionally effective organisations.

If the timing doesn’t work for the first live webinar, you can get a recording to watch in your own time by registering.

Register Here for the webinar and to secure your recording.

Stay tuned for information for part two of the Future of the World of Work, for insights on the legal implications and issues that organisations should consider as workplaces evolve.

 

 


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The first time a global client asked me for a template employment diversity form, I didn’t know what they were after.

They wanted to track their workforce’s diversity attributes (asking every person about race, gender identity, sexual orientation, disabilities, etc.) so that they could track performance on their broader diversity targets. This is typical practice in the US, where both discrimination and data privacy considerations are different.

When I flagged there were restrictions in Australia, they patiently explained to me “this is for diversity” and were incredulous when I had to give them the bad news that it still might be unlawful here.

In Australia, it is generally not sufficient for an employer to simply seek to achieve workforce diversity. Discrimination is prohibited at Commonwealth and state level. Under many of these laws, positive discrimination is only lawful if an employer can demonstrate that there is currently substantive inequality which will be remedied by the proposed measure.

Further, some laws (such as the NSW Anti-Discrimination Act 1977) require a formal exemption from a Tribunal, with limited or no capacity for unilateral positive discrimination. There are around 750,000 Australian business with NSW as their main state, but fewer than 150 organisations have current exemptions permitting positive discrimination. If information will be used for discrimination, it can be a separate breach of some state laws to collect it, raising the prospect that even asking for diversity details can result in risk for an employer.

This is a concern given that many diversity goals seem like aspirational rather than reachable targets. For example, 2017 research showed that there were fewer Australian companies run by women than by men named Peter or John. By 2020, there had been some improvement for gender diversity, but only around 5% of board directors in the ASX300 came from non-Anglo-Celtic backgrounds.

Australia is not alone in these issues. In Europe, positive action is only allowed within narrow limits. In the UK, the Equality Act 2010 allows positive action where there is demonstrated under-representation or disadvantage for a protected group and, specifically, the individual concerned. The employer also has to show that the positive action is proportionate – another hurdle to get over. For hiring and promotion, the exemption is even narrower – essentially allowing under-representation to be a “tiebreaker” only where candidates are equally qualified.

Ultimately, positive action which goes beyond target-setting and into practical steps is a risk for employers. For example, a UK police force recently lost a case for selecting a minority candidate over a white candidate to improve its diversity, on the basis the candidates were “not equally qualified”.

There are complex reasons for lack of diverse representation in many companies, and we do not suggest the discrimination laws are a cause. However, they result in complexity, risk and difficulty instead of making it simple or easy for businesses to implement diversity initiatives.

Many global companies are increasingly looking at diversity as a commercial issue, and seeking to partner with business that meet various diversity targets. Some employers are willing to take these risks, for example by insisting on all women shortlists for board roles, in order to speed up the pace of change. In countries where discrimination laws create complex hurdles to navigate, we might miss the opportunity to get on board.

Is it time to diversify our discrimination laws so that we can all do better?

 


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The original idea

A worker stands at the gates of the docks hoping for work. The boss approaches the fence separating dozens of huge containers from those milling outside wanting to unload them.

“30 workers!” is the call.

The first 30 file inside, heads counted as they pass; a day’s work in front of them. There are no guarantees for tomorrow, just as there were none yesterday, but at least today is taken care of.

In 2021, the concept of casual employment is starkly different to the purist idea that started out – that of ad hoc work, no promises or expectation that it would continue, with a modest premium on the hourly rate. It is now not unusual to hear stories about casual employees engaged consistently over many years by the same employer and later claiming permanent employee entitlements. It is telling that, in the mid-1980’s, legislation was amended in a number of States and Territories to give casuals long service leave entitlements.

 

Problems emerge concerning increased use of casual employment

In its 2015 report on Australia’s workplace relations framework, the Productivity Commission found that the rate of casual employment nearly doubled between 1980 and 2000. In some industries the use of casual employment is endemic.

What accounts for this significant increase over time? The reasons are various, with some employers using these arrangements to try and maintain some flexibility and variable cost within their labour model. In many cases, workers simply prefer casual employment and the premium that comes with it. There are many situations in between.

Over time some limited employment protections for long-term casual workers have been put in place, such as protection from unfair dismissal for casuals with systematic employment and a reasonable expectation the employment would continue.

Until now, the term “casual employee” was not defined in the legislation for general purposes and took its meaning from the common law. This called for an assessment of the substance and totality of the employment relationship. There were a number of problems with this lack of definition and the law concerning casuals more generally.

First, at common law, the concept of a casual employee was vague and complex, evolving as it did with each decision considered the best and latest precedent. Second, the common law failed to assist in the identification of when an employee’s legal status which started as casual later became permanent – a major problem given a lot hangs off the difference. Third, when an employee, at some indeterminate point in time became permanent, logic dictated that he or she would be entitled to additional conditions (such as annual leave, sick leave and redundancy pay) under the NES or another source such as an enterprise agreement. However, along the way the casual employee had been paid a casual loading of 25% intended to cover these same entitlements. The principle that an employee should not receive the same entitlement twice (the so-described “double dip”) clashed in these cases with a complicated body of case law concerning the law of offsetting payments. These issues gained public attention recently with cases such as Workpac Pty Ltd v Skene [2018] FCAFC 131 and WorkPac Pty Ltd v Rossato [2020] FCAFC 84.

 

Three major changes to casual employment rights

The passage into law this week of the Government reforms is the next step in a regulatory evolution of casual employment rights. The Fair Work Act (“the Act”) makes three major changes by introducing:

  • a statutory definition of “casual employee” into the Act which gives primacy to the parties description of the relationship when the employment commenced;
  • a limited entitlement to convert from casual employment status to permanent employment under the National Employment Standards (“NES”); and
  • a statutory power obliging a court to offset any casual loading paid against any shortfall amount being claimed by an employee where it is later determined that the employee should have been treated as permanent.

 

Casual employee defined

The Act defines a casual employee as an employee who accepts an offer of employment in circumstances where the employer made “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work”. Codifying factors developed by the common law, the Act provides an exhaustive set of considerations which must be taken into account in determining whether the offer meets the definition of casual employment, which changes the position where Courts would consider an unconfined universe of potentially relevant factors and it was never certain which would win the day.

Now, a regular pattern of hours will not determine the issue, and the question of whether a person is a casual employee is assessed based on the offer and subsequent acceptance, not by the subsequent conduct of the parties. By putting heavy emphasis on the terms and parties’ own characterisation of the employment relationship at the start, the Act will have the effect that employment offered on a casual basis will later be considered casual even if subsequent conduct is characteristic of permanent employment. Subsequent conduct is irrelevant which means a person’s employment status cannot unintentionally change over time.

Importantly, the new definition has retrospective effect – it applies to offers of employment given before the amendment became law, unless there is a pre-existing determination by a Court that an employee was not a casual, or an employee exercised a “casual conversion” right under an award or agreement before the amendments take effect.

 

Casual conversion to permanent employment

The Act gives various rights to casuals including that an employer (other than a small business employer with fewer than 15 employees) must offer a casual employee conversion to permanent status if the employee has been employed for a period of 12 months, and during at least the previous 6 months, the employee has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, could continue to work as a full-time or part-time employee. An employer need not make an offer if there are reasonable grounds to decline, such as:

  • where the employee’s position will cease to exist within 12 months; or
  • there will be a significant change in the days on which, or times at which, the employee’s hours of work are to be performed which cannot be accommodated by the employee’s availability.

Should a dispute arise it will be governed by any procedure for settling disputes that applies to the employee contained in the employee’s contract, a fair work instrument (including importantly an enterprise agreement) or a separate written agreement. If none of these apply a default procedure is set out in the legislation which provides for conciliation and/or consent arbitration. There is a sleeper issue here where, for example, an enterprise agreement made before these amendments provides for arbitration as the final dispute settlement step. It appears that procedure, including arbitration, will apply to a dispute about casual conversion rights and the “reasonable refusal” issue – disputes clauses invariably apply to disputes arising under the NES, which will contain the new conversion mechanism. There is also a small claims procedure set up giving access to a Court.

We can expect to see many “unreasonable refusal to convert” cases in the future, particularly in circumstances where an employer uses large pools of casuals consistently and over regular work patterns. The employer requirement to provide new casuals with a Casual Employment Information Statement setting out their rights will see that casuals are fully informed about their options.

 

Offset of casual loading

Following the uncertainty created by the Skene and Rossato decisions mentioned above, the Attorney’s General Department estimated that employers could be liable to pay approximately $18 billion to $39 billion (over a six-year period) to employees who, while initially engaged as a casual, may have become permanent over time and subsequently entitled to be paid entitlements such as annual leave.

The Act seeks to address this liability in two ways. The first is the retrospective application of the “casual employee” definition in most cases. The second is that where this does not apply, where a claim is made by a person who has been employed and paid on the understanding that he or she is a casual employee, but is later found to be a permanent employee entitled to additional entitlements, the court must reduce (or “set off”) any amount payable by the employer by an amount equal to the casual loading already paid.

This change also has retrospective effect, applying to entitlements accrued before commencement of the amendment. Employers can rely upon this legislation to defend existing claims where the new definition of casual employment does not apply retrospectively.

 

Other changes

The Act also contains several other provisions which have been less heralded than the marquee amendments, but are worth noting. Principally:

  • The Act amends NES provisions that refer to casual employment. Most significantly, it amends provisions relating to notice of termination and severance entitlements to clarify that service as a casual prior to converting to permanent employment does not count towards an employee’s length of service. This resolves an issue which has been of concern to employers since the Full Bench of the Fair Work Commission held that prior casual service should be factored into redundancy entitlements in AMWU v Donau Pty Ltd [2016] FWCFB 3075.
  • The Act’s transitional provisions require that within 6 months, the Fair Work Commission review modern awards’ provisions defining, regulating the engagement of, and allowing for the “conversion” of, casual employment. This is to ensure harmony with the new legislative provisions. Given the short timeframe, and that the ACTU and peak employer associations all supported the recent abolition of four-yearly award reviews, this may not be a welcome development for a Tribunal already dealing with a heavy workload.

 

Where to from here?

Of interest to many employers will be the new right to convert from casual to permanent employment. At a strategy level, this directs attention to whether casual employment is being used in a manner that creates exposure to conversion to permanent employment. Long term, this exposure will motivate greater employer discipline in proactively deciding upon the right labour mix (permanent, fixed term, casual, contractors, etc.). There will be less tolerance for bringing on large numbers of casual employees that are used as a flexible labour pool if a change in status can be brought about by a relatively inexpensive Tribunal application rather than a complex and expensive court case seeking unpaid permanent employee entitlements.

In the shorter term, there will be a need to manage the issue of casuals that are already on the books, and the potential for conversion disputes, particularly where resolution will be by compulsory arbitration.

The changes concerning offsetting are sensible. They are largely common sense – something the legal system does not always demonstrate. The Government’s efforts to fix this particular problem will be welcomed by many businesses.

 

 


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During the Australian summer, media reports have documented a tragic spike in drownings at unpatrolled Australian beaches, as people search for remote swimming spots they might not normally use during the ongoing COVID-19 pandemic. Millions of swimming lessons – a rite of passage to a core element of Australian life — have also been missed during the pandemic and associated lockdowns.

These statistics call up a related question about the ongoing effects of the COVID-19 pandemic on the perception and tolerance of other critical safety risks in Australian businesses, workplaces and workforces. Critical safety risks are those that can kill or seriously injure people.

In 2020, faced with a once in a 100 year pandemic, the lion’s share of attention (from regulators, governments, businesses, and the public at large) was unsurprisingly focused on the newly emerging (and continuing) risks associated with COVID-19 infection and transmission. Huge resources were diverted to controlling that risk, and devising and responding to entire new legal and regulatory schemes and ways of working and living which quickly evolved under Australia’s OHS/WHS laws and public health legislation to guard against that emerging threat.

But the emergence of a new critical safety risk (COVID-19) does not diminish the continuation or potential accentuation of critical safety risks in Australian workplaces that pre-date the onset of the pandemic. Resource implications and psychological impacts on workforces who had to adapt to new ways of working in the context of life during a global pandemic, may have created new and different health and safety risks which need to be identified, and managed in accordance with risk management principles under Australian OHS/WHS law.

Employers that have been managing the work health and safety risks posed by COVID-19 alongside their other health and safety risks have done so by considering the following questions:

  • Is there a potential for us to take our eyes off the ball in terms of identifying and managing critical health and safety risks because we are focused primarily on COVID-19 risks?
  • What, if any, new and different health and safety risks are we introducing by trying to manage health and safety risks associated with COVID-19?
  • What are the impacts on risk perception, risk tolerance and engaging in high risk behaviour for workforces who have now been working under an increased strain of a global pandemic for almost 12 months?
  • What are the potential impacts of winding back some of the COVID-19 control measures as workers head back to workplaces?
  • Does the change in these control measures impact or require amendment to existing health and safety controls or only those directed to COVID-19?

No doubt these questions are under current consideration by academics, safety professionals and regulators globally.

Work health and safety law – balancing competing risks and applying the risk management process to all critical safety risks

At its core, the risk management process is the practical way to facilitate compliance with safety duties imposed by OHS and WHS law.

A summary of these concepts is outlined in Part 3.1 of the harmonised WHS Regulations and the approved Codes of Practice on How to Manage WHS Risks, which is modelled on the version published by SafeWork Australia.

The risk assessment process should not only identify critical safety risks (i.e. what could kill people), but other health and safety hazards, assess the risks, identify existing control measures and if any additional control measures should be introduced. Importantly, internal processes should include triggers for review of the hazards, risks arising from those hazards and the control measures to manage those risks. Those processes should align with workplace health and safety laws which require duty-holders to review, and if necessary revise, their control measures in certain circumstances.

COVID-19 no doubt falls into the category of a ‘critical safety risk’ and warrants continued focus. However, control measures that are introduced in response should not be at the expense of other critical safety risks in work processes or workplaces, nor should they introduce new, greater health and safety risks.

 

 


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