No second bite at the cherry for casual employees seeking leave entitlements: Government introduces new regulations to tackle “double dipping”

In response to last year’s landmark Full Federal Court decision, WorkPac Pty Ltd v Skene,[1] (see our earlier article here) the Government has introduced new regulations which allow employers, in certain circumstances, to offset the casual loading paid to an employee against certain entitlements that may otherwise be owed to the employee if they are found in the future to be a permanent employee. The new regulations will effectively prevent casual employees from ‘double dipping’ and claiming permanent entitlements in addition to their casual loadings.

The new Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) took effect on 18 December 2018.

In WorkPac Pty Ltd v Skene, the Full Federal Court found that a casual employee (who received the benefit of casual loading) was not a casual employee for the purposes of the Fair Work Act 2009 (Cth) (FW Act), but a permanent employee and therefore entitled to leave entitlements. This highly publicised decision sets a new precedent and means that an employer will not be immune from claims for entitlements under the FW Act, even if the outcome results in the employee “double-dipping” with respect to entitlements.

When can the new regulations be applied?

The Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) can be applied immediately by employers and in circumstances where all of the following criteria are met:

• an employee is employed by their employer on a casual basis;
• the employee is paid a casual loading that is clearly identifiable as being paid to compensate the employee in lieu of receiving entitlements that casual employees are not entitled to under the NES, such as personal or annual leave;
• despite being classified by the employer as a casual, the employee was in fact a full-time or part-time employee for some or all of their employment for the purposes of the NES; and
• the employee has made a claim to be paid for one or more of the NES entitlements (that casual employees do not have) that they did not receive for all or some of the time that they were incorrectly classified as a casual.

If the above criteria are satisfied, an employer can make a claim to have the casual loading payments made to the employee taken into account when determining the entitlements or amount payable to the employee.

A Loophole Closed

The Minister for Jobs and Industrial Relations, Kelly O’Dwyer MP (Minister), considered the new regulation to be necessary to provide “greater clarity” around employers’ legal rights to offset payment of casual leave loadings against the NES entitlements which are not otherwise available to casual employees. The Minister echoed employer concerns that “every employer must comply with their legal obligations, but being forced to pay for entitlements twice is unfair and potentially crippling for many small businesses.”

Due to the Government’s “concern(s) that the legal right to offset an obligation against payments already made for the same entitlements was not dealt with in Skene v Workpac”, the new regulations were introduced to ensure “the same thing does not happen again.”

Test Case

In addition to the new regulations, the Government has also intervened in a separate Federal Court ‘test case’, WorkPac v Rossato,[2] in which Workpac is seeking declarations that:

1. former casual employee Robert Rossato is not entitled to be paid leave under the FW Act, or the relevant industrial instrument; and
2. WorkPac be entitled to set off payments made to Mr Rossato against any leave entitlement that Mr Rossato may be found to have.

The outcome of this case will be important for all employers affected by the decision in Workpac v Skene, and we will provide an update as the case unfolds. If WorkPac is successful in obtaining the declaration, the risk to employers in connection with the engagement of casual employees will be materially reduced moving forward.

Recommendations

Due to the current uncertainty in what is otherwise a complex area, it is important that employers minimise their exposure to risk. To reduce risk around the status of casual employees, employers should:

• where possible, re-think the classification of employees from the outset and ensure employment contracts reflect the appropriate type of employment (i.e. permanent part time/full time or casual);
• constantly monitor their casual workforce, particularly any long term casuals employed on a “regular and systematic basis”;
• consult with employees about converting them from long term casuals to permanent employees (noting the relevant award requirement to convert casual employees to permanent employees, where the employee is award-covered); and
• review existing casual employment contracts to ensure they are drafted to allow the employer to utilise the offset in the new regulations.

If your business requires assistance in navigating this area, please contact our Employment Advisory team. Our team will be able to assist in reviewing your business’ commercial and employment arrangements, including casual employment contracts and ensure proper classification of your employees.

[1] [2018] FCAFC 131.
[2] [2018] FCA 2100.

Authored by: 
Natasha Horvat, Senior Associate
Stacey Devitsakis, Lawyer