Australian government enacts major attack on casual workers

The Industrial Relations (IR) Omnibus Bill was adopted in the Australian Senate on Thursday 18 March, 2021 by 35 votes to 33, with the support of One Nation and Centre Alliance Senator Stirling Griff.

The Coalition government failed to gain the support of the Senate crossbench for three out of five areas of proposed reform to the Fair Work Act, so the resulting Bill was significantly stripped down.

The Bill changes the definition of casual employment to one that will be based solely on the original offer made to the worker, without considering “any subsequent conduct of the parties”. Employers’ liability for misclassifying casuals in the past – estimated at up to $39 billion – will be significantly reduced.

Casuals will have the right to request conversion to permanent status after 12 months, but employers have the right to refuse the request “on reasonable grounds”. Casuals working in small businesses are not included.

Despite having crossbench support for the fifth reform proposal on compliance and enforcement, the government withdrew the proposed new higher penalties and criminal offences for wage theft.

Union campaigns and public opinion successfully pressured key crossbench Senators into opposing large parts of the Bill – but the resulting legislation marks a major attack on casual workers. It will save employers potentially billions of dollars in back payment of unpaid entitlements for misclassifying their staff as casuals in the past, while making it easier to classify workers as casuals in the future, regardless of their actual working patterns. The new legislation will intensify the growth of precarious work in Australia, while entrenching long-running wage stagnation.

What was adopted? 

➢ New definition of casuals 

Schedule One of the Bill, on casual employees, was adopted. It provides a new legal definition of what constitutes a casual employee. An employee will be classified as casual when “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”. 

The legislation specifies that: “To avoid doubt, a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work,” and, “the question of whether a person is a casual employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party”. 

This will make it easier for employers to legally designate an employee as a casual regardless of the objective situation. 

➢ Right to request conversion to part-time or full-time status 

Under the Bill, employers must make an offer to casual employees who have been employed for 12 months and who, for the past six months, have been working a “regular pattern of hours on an ongoing basis” to convert to part-time or full-time employees. Casual employees have the right to request such a conversion if they do not receive an offer. 

However, the Bill gives employers the right to not make a conversion offer, or to refuse a conversion request from an employee, if they have “reasonable grounds” to do so. There are several “reasonable grounds” identified that provide employers with broad leeway to avoid conversion, including if there will be changes to the days or hours worked by the employee in the following year. 

Instead of being able to dispute their conversion by seeking arbitration in the Fair Work Commission the way workers can currently do in relation to general protections, the employee will need to take the conversion dispute to the small claims court within the Federal Circuit Court or state and territory courts. 

Small businesses – companies with less than 15 employees – will be exempted from offering casual employees conversion (as a result of an amendment from One Nation). Casuals may request conversion in their contract but there is no obligation to grant it. More than 40% of the Australian workforce is employed in small businesses. 

What was withdrawn from the Bill? 

➢ Modern awards – cutting pay and conditions for part-time workers 

Two key negative proposals regarding modern awards were withdrawn

  • A proposal for part-time employees who work at least 16 hours per week and who are
    covered by certain modern awards, such as the retail and hospitality industries, to be directed to work additional hours at their ordinary rate of pay by entering into a “simplified additional hours agreement”.
  • A proposal for employers to be allowed to issue workers with “flexible work directions” regarding the duties or location of an employee’s work.

➢ Enterprise agreements – weakening safeguards and sidelining unions and FWC

The Bill proposed to make it easier for employers to have EBAs approved by restricting the role of unions and the Fair Work Commission (FWC) in the process.

  • Pre-approval process: Employers are not required to present all the facts about a new agreement to workers but only need to give them a “fair and reasonable opportunity” to decide how to vote.
  • Approval process: The right of unions who are not bargaining agents for the agreement would have their right to be heard by the FWC in relation to the agreement limited to “exceptional circumstances”; and the FWC would have to decide on whether to approve EBAs within 21 days.
  • Employers will no longer have to demonstrate that a proposed enterprise agreement does not exclude the safety net provided by the National Employment Standards.

➢ Greenfields agreements – banning industrial action for eight years

  • The Bill proposed that Greenfields agreements for major construction projects could expire after eight years instead of after four, if it includes a nominal pay increase each year. 
  • Any industrial action taken during the lifetime of the agreement over safety, pay and conditions, or any other industrial issue, would be illegal and penalised by fines. 

BOOT changes were withdrawn previously 

Attorney General Christian Porter announced on 16 February that the government was withdrawing the proposed changes to the Better Off Overall Test, which would have allowed employers affected by the Covid-19 pandemic to push through agreements that did not meet the BOOT over the next two years. 

Wage theft provisions scrapped by government 

The Coalition had the support of the crossbench required to proceed with the “Compliance and Enforcement” schedule of the Bill. This would have introduced higher penalties and new criminal offences for wage theft by employers. But when it became clear it would not get many of its proposed reforms through the Senate, the government took the wage theft provisions off the table. 

Bill overrules recent court decision giving casuals more rights 

In 2018, the full Federal Court in WorkPac Pty Ltd v Skene found that workers who do work that is regular, ongoing and permanent in nature are entitled to benefits such as paid annual leave. In 2020 the full Federal Court upheld this approach in WorkPac Pty Ltd vs Rossato, which the labour hire company is currently appealing before the High Court. 

The court found in Rossato that employers are liable for misclassified employees’ entitlements to annual leave, sick leave and redundancy pay going back six years, and that employers cannot use casuals’ extra loading to offset this. 

The Attorney General’s Department estimated last year that if the High Court upholds the Rossato decision, employers could be liable for between $18bn and $39bn in back pay to workers who have been misclassified as casuals instead of permanent workers. 

The adoption of this Bill retrospectively strips workers who were misclassified as casuals of the right to claim the full amount of their unpaid annual leave/redundancy. The new law will have a big impact on class actions currently before the courts targeting major labour-hire companies in the mining industry who are being pursued for more than $150 million in underpayments over six years. The retrospective application of the law may be open to a legal challenge on constitutional grounds.

Government rejects compromise on liability for unpaid entitlements  

Just prior to the vote in the Senate, a compromise text was reached by the ACTU and the Council of Small Business Organisations Australia, where casuals’ could make backpay claims for permanent entitlements based on the pattern of their work hours, but some of these entitlements would be offset by any casual loading the employee had received. The compromise was proposed as amendments, which were defeated. 

The business lobby argued the new definition of casuals was necessary to prevent casuals from “double dipping” by receiving both casual loading (a 25% premium paid on top of the standard hourly rate to compensate for the lack of annual and sick leave) and permanent paid entitlements. But ACTU research shows that more than one-third of casuals don’t receive any loading at all, and of those who do, most receive a 2-6% loading rate instead of 25%. 

Who voted in favour of the attack on casuals? 

The Liberal National Party and One Nation voted in favour of the Schedule One provisions on casuals. Centre Alliance Senator Stirling Griff voted in favour, while Centre Alliance federal MP Rebekha Sharkie voted against in the Lower House. Labor, the Greens, and Senators Jacquie Lambie and Rex Patrick voted against.

The amended Bill will return to the House of Representatives to approve the Senate’s amendments on Monday 22 March.

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