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The changing face of labour hire

The changing face of labour hire

By Mark Yorston and Claire Munro-Smith

Workplace 


A recent Full Federal Court decision has caused the legal profession to focus attention on the proper characterisation of workers who have been hired on a casual basis but may since be considered permanent employees. Snapshot: Employers need to examine the work history of their labour force to properly characterise the individual worker as casual or permanent. Workers need to analyse their own work history to ascertain whether they have received all proper entitlements. Employers need to properly document their ongoing labour requirements, especially when dealing with external labour partners. Casual labour in Australia Approximately one quarter of all employees in Australia are employed on a casual basis,1 and the number has been steadily increasing over recent decades. It is uncertain at this stage how many of these “casual” workers might be affected by the Federal Court decision in WorkPac v Skene (Skene),2 however, it is clear that it does raise a level of uncertainty for employers and has the potential to disrupt the way Australian businesses handle their labour requirements. The decision in Skene, together with the casual conversion clauses which are being incorporated in more and more of the modern awards,3 may cause Australian employers to reconsider their labour needs between casual and permanent employees. It may even slow the workforce casualisation trend – a change that would be welcomed by many in the workforce, especially younger workers who occupy a significant portion of the “casual” workforce. The obvious concern for employers is that they may find themselves liable to pay employee entitlements for annual leave and loadings to one or more employees without having planned for such a contingency. This concern will be exacerbated where the employer had been paying a rate per hour which was believed to incorporate a loading for casual work notwithstanding that the “loading” was not separately identified in the specified rate. The difficulty for lawyers is to properly advise clients regarding the adequacy of specific employment arrangements and to properly define the employment relationship to ensure that their clients will understand and be prepared for any changes in their obligations which may occur as that relationship develops. Skene While a detailed analysis of the facts in this case is beyond the scope of this article, key factors need to be identified to understand the conclusions reached by the Court: Mr Skene was employed on a casual basis according to his agreement with his employer he was in a labour hire arrangement where he was contracted out to work on the site of a mining company he was in a seven days on, seven days off continuous roster arrangement for the period of his employment and was provided with a 12 month roster in advance he was paid weekly and required to fill out a weekly timesheet there was one occasion where he was stood down during a shift and not required to work the next day, but he was paid for that time regardless and he didn’t work any shifts other than the ones in his roster.4 The primary judge had found that Mr Skene’s employment was regular and predictable, continuous, and the fly in-fly out arrangement was inconsistent with the notion that he would elect to not work on any particular day. There was a plain expectation that he would be available. There was also very little fluctuation in shifts.5 It has been generally understood that while the term “casual employee” has no fixed meaning in Australian law,6 it has been accepted that the description assigned by the contracting parties to each other will not of itself be determinate.7 It will be essential that there be an “absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work, but that is not inconsistent with the possibility of the employee’s work pattern turning out to be regular and systematic”8 (see below). It is clear that no single characteristic will be capable of defining a casual employment relationship, but rather it will be necessary to look at a range of indicia in reaching a conclusive view. These include: identifying whether the contract identifies significant fluctuations in the availability of work whether hours of work are irregular or uncertain whether there is a stable, organised and certain roster whether the contract is for short periods of time on an irregular basis whether the contract identifies a flat hourly rate that purports to include a loading for various leave entitlements whether the contract provides when and where the worker is required to be and also how he or she is to get there.9 Additional factors include: the duration of the forward roster whether payment would still be made if workers were stood down or required to not work for any period of time whether the amount of the loading was identified as a discrete payment sum and above the “regular” hourly rate the period of notice required to terminate the contract10 how the worker is notified of each period of work and whether he or she is able to refuse it without prior arrangement with the employer11 the absence of payments for annual leave, sick leave and public holidays.12 In reaching its conclusion that Mr Skene was not a casual employee, and was on a proper characterisation of the relationship an employee entitled to annual leave or payments in lieu thereof, the Full Court also had regard to the applicable legislation. In particular the Court noted that “the National Employment Standards have primacy over terms and conditions of employment provided by all other instruments including an enterprise agreement, modern award or a contract of employment”.13 One of the standards set out in s61(2) of the Fair Work Act14 (the Act) is annual leave, and while it was this standard and Mr Skene’s entitlement to it which was central to the WorkPac matter, regard might be had to almost all of the standards in appropriate factual scenarios. Importantly, Division 6 of Part 2-2 of the Act deals with annual leave and related entitlements. Section 86 provides that the division does not apply to casual employees. While, as noted here, the term is not defined in the Act, it is taken to have the meaning attributed to it in earlier judicial interpretations.15 In the Court’s analysis of the meaning to be attributed to the term “casual employee”, it was noted at [145]-[146] that: “The seventh proposition that Parliament intended that awards, enterprise agreements and the National Employment Standards interact consistently and harmoniously cannot be denied. That intent is expressly effectuated by s55 of the FW Act which addresses the interaction between the National Employment Standards and a modern award or an enterprise agreement. Sections 56 and 61 are also part of the hierarchy established by the FW Act in which priority is given to the National Employment Standards over enterprise agreements and awards. Section 57 deals with the interaction between awards and enterprise agreements. It is via those provisions, in which priority is accorded as between the National Employment Standards, awards and agreements that consistency and harmony is achieved. The construction of the expression ‘casual employee’ in s86, which we prefer, respects those priorities and the intended harmony for the reasons already given. The construction preferred in Telum and contended for by WorkPac does not. “The fifth proposition, that there would be ‘double dipping’, is related to the proposition just addressed. If the priority order or the hierarchy just mentioned is respected, as Parliament must have intended, there would be no ‘double dipping’. There is nothing in the FW Act that requires employees who are not casual employees and thus entitled to annual leave under s87 to be paid a casual loading. If so much is recognised and respected by awards and enterprise agreements, as the hierarchy established by the FW Act must envisage, no ‘double dipping’ is possible.” Such a conclusion underpins the ability of the workplace system to conveniently identify in the main three types of workers, namely full-time, part-time and casual. Full-time and part-time workers are differentiated by the pattern of work each worker agrees to:16 “A full-time employee’s pattern of work will be the ordinary full-time hours applicable at the particular workplace (eg eight hours each week-day). A part-time employee’s pattern of work will be a fixed number of ordinary hours, the number of hours being less than the full-time ordinary hours applicable at the workplace, worked at a regular time on regular days (eg 9am to 1pm every Monday, Tuesday and Thursday). “In contrast, a casual employee has no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work. Nor does a casual employee provide a reciprocal commitment to the employer. That characteristic, drawn from Hamzy, is what White J referred to in more general terms in South Jin at [71] as ‘any commitment by the employer or the worker to ongoing employment’. In our view, what is referred to in Hamzy as the ‘essence of casualness’, captures well what typifies casual employment and distinguishes it from either full-time or part-time employment.”17 While it may be accepted that at any given time an employee will fall into one category or another, it is entirely possible that on an objective analysis at a later point of time, that same objective analysis will lead to a different characterisation of an employee’s status. That analysis will incorporate considerations not only of the applicable circumstances in a specific case, but also those circumstances identified in the Act and any applicable awards or enterprise agreements. Conclusion The decision of the full Federal Court in Skene, while on the one hand creating a degree of uncertainty regarding the proper characterisation of workers in their past employment relationships, on the other provides a far clearer guide as to the indicia which need consideration to allow a proper conclusion to be reached in the future. While accepting that the list of matters is not exhaustive, the challenge for those advising employers and workers will be to ensure that as much certainty as possible is reflected in awards, enterprise agreements and contracts of employment. It may also be necessary to consider whether, on the sale of any business, past employment practices will need to be specifically dealt with in terms of employee transition. It may be that additional certainty will be provided when the Federal Court considers matters to be raised in the allied but separate proceeding of WorkPac v Rossato. It should be noted that the Commonwealth has been granted leave to become a party to that proceeding. In the authors’ view, legislative change is unlikely before the next federal election and the Skene decision is likely to remain as establishing the law in this area for a considerable time to come. It should also be noted that Industrial Relations Minister Kelly O’Dwyer is suggesting she may seek to create a regulation which would, she claims, deal with “double dipping”.18 However, if such a regulation is created, it will only deal with employment where the amount of any casual loading is able to be identified. Mark Yorston is a consultant at Hope Earle Business and Property Lawyers. He is an LIV accredited specialist in business law and commercial litigation. Claire Munro-Smith was a solicitor at Hope Earle Business and Property Lawyers at the time of writing. 1. Australian Bureau of Statistics, Characteristics of Employment, Australia, August 2017, No. 6333.0 (2018). 2. WorkPac Pty Ltd v Skene [2018] FCAFC 131. 3. For more information about which modern awards have been amended and the casual conversion clauses which have been added, see the decisions of the Fair Work Commission in 4 yearly review of modern awards – Casual employment and Part-time employment [2017] FWCFB 3541, 4 yearly review of modern awards – Casual employment and Part-time employment [2018] FWCFB 5846. 4. Note 2 above, at [33]. 5. Note 2 above, at [35] and [36]. 6. Reed v Blue Line Cruises Ltd (1996) 73 IR 420 at [452], per Moore J. 7. Williams v McMahon Mining Services [2009] FMCA 511 at [35]. 8. Hamzy v Tricon International Restaurants trading as KFC [2001] FCA 1589 at [242]. 9. Williams v McMahon Mining Services [2010] FCA 1321 at [36] – [40], per Baker J. 10. Note 9 above, at [42]. 11. Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 at [71], per White J. 12. Note 11 above. 13. Note 2 above, at [87]. 14. Fair Work Act 2009 (Cth). 15. Note 14 above, at [107]; see also Re Alcon Australia Limited; ex parte Federation of Industrial Manufacturing and Engineering Employees (1994) 181 CLR 96 at [106]-[107]. 16. Note 2 above, at [171]. 17. Note 2 above, at [171] and [172]. 18. The Age, Dana McCauley, 11:45 PM, 10 December 2018.

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