The federal government will recommend regulatory changes to try and prevent casual workers from ‘double-dipping’ on back-pay claims in response to a recent Federal Court ruling.
The government will recommend the Governor-General create a Fair Work regulation to protect against casuals claiming they’re entitled to casual loadings and national employment standards entitlements such as annual leave.
However, Minister for Jobs and Industrial Relations Kelly O’Dwyer has stopped short of committing to Fair Work Act changes that would clarify the definition of casual work, despite calls from business groups to change the law.
Instead, the government will leave it to the courts to decide whether identifiable casual-loading payments can be offset against any back-pay claims for leave and other entitlements.
Nevertheless, O’Dwyer said the change will provide clarity after the Federal Court ruled in favour of a casual labour hire employee who claimed he was entitled to annual leave entitlements because he worked regular hours in his role for four years.
The finding set off alarm bells among industry groups over fear it set a precedent that so-called ‘regular casuals’ were entitled to casual loadings and leave entitlements otherwise reserved for part-time and full-time workers.
Australian Industry Group analysis estimated it could cost employers, many of whom are small businesses, a combined $5.7 to $8 billion in back payments.
“Small businesses have told us they are concerned a recent Federal Court case may give rise to claims to pay additional amounts for leave entitlements when they have already paid a casual loading in lieu of those leave entitlements,” O’Dwyer said in a statement on Tuesday.
O’Dwyer has previously intervened in a test-case being brought by work-hire business Workpac (a party in the initial Federal Court ruling) in a bid to further clarify the nature of the original decision.
Council of Small Businesses of Australia chief executive Peter Strong says the decision is a “no brainer”.
“The thought that someone would get paid twice, of course, doesn’t pass any realistic test,” he tells SmartCompany.
However, Strong believes the definition of casual work in the Fair Work Act still needs to be changed.
“It needs to be done, that’s one of the great problems of workplace relations, it’s so stupidly complicated that these sorts of things arise.”
SmartCompany understands the government has no plans to amend the Fair Work Act currently.
While the regulation will provide employers with an avenue for offsetting back-pay claims, workplace lawyer Peter Vitale says employers should proceed with caution.
“There are always likely to be shades of grey, and whether or not the regulations have the intended effect is not going to be certain,” he tells SmartCompany.
“From a practical perspective, it means contracts for casual employees should clearly and separately identify what portion of remuneration relates to casual loading.”
While Fair Work Act amendments could completely close the casual ‘loophole’, changes would not be able to be put before parliament until next February, at which time any potential reforms would have to pass a contested Senate.
However, Vitale notes even the regulatory change could fail before parliamentary scrutiny.
“If the regulations are disallowed by the Senate in due course while there’s litigation in progress, they may have a problem.”
The Australian Industry Group, which in September said the government should change the Fair Work Act “without delay”, welcomed the change of regulation on Tuesday.
“The most pressing issue at the moment is to address “double-dipping” claims. The definition remains important and we will continue to seek to have this issue addressed over the months ahead.” Ai Group chief executive Innes Willox said in a statement.
Scott Barklamb, director of workplace relations for the Australian Chamber of Commerce and Industry, tells SmartCompany he’s confident the regulation can provide reliable protection for employers.
“All other things being equal we would prefer to see a legislative amendment, but this matter is urgent and the government needs to take the actions it can take,” he says.
Australian Council of Trade Unions secretary Sally McManus said O’Dwyer’s decision shields employers from the costs of ripping off workers.
“Employers should pay a price for decades of abusing loopholes in our broken system to rip off workers. It is not the place of the Minister to protect businesses from the consequences of their actions,” she said in a statement.
“The Minister should be more concerned with ensuring that workers who are forced into casual work have access simple and effective recourse so that they can claim the correct entitlements.”
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