Employers should carefully review their current casual workforce to assess whether there is a risk they may be considered to be permanent employees. If an employer pays an employee a casual loading, this alone will not make that employee a casual employee. It's crucial to correctly characterise employees. Employers who incorrectly classify employees as casual instead of full-time or part-time could be responsible for back paying various entitlements under the National Employment Standards (NES), following a recent Federal Court of Australia decision in Workpac v Skene [2018] FCAFC 131

However, the Government has varied the Fair Work Regulations 2009  to clarify that employers, in certain circumstances, may claim that an employee's casual loading payments should be offset against certain NES entitlements owing to the employee.

This was prompted by the Skene v WorkPac case, which paved the way for casual employees to accept a casual loading in lieu of permanent employee benefits, but then also receive payment for permanent entitlements when deemed a permanent employee.

The regulation provides that, where an employer has paid identifiable casual loading to a casual employee, it could potentially be offset against any subsequent claim for NES entitlements.

This regulation comes into effect on 18 December 2018 and applies to employment periods that occurred before, or that occurred on or after, that date.

How does the new regulation work?

The new regulation applies 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 an amount paid to compensate the person in lieu of 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
• 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 didn't receive for all or some of the time that they were incorrectly classified as a casual.

If all of these points are satisfied, an employer can make a claim to have the casual loading payments made to the employee taken into account when working out the entitlements owing to the employee for the relevant NES entitlements.

This comes in the wake of the Workpac decision which found that an employee who was engaged as a casual and paid a casual loading was in fact a permanent employee and entitled to paid annual leave.

The Workpac decision attracted plenty of attention with subsequent calls for legislative change, concerns about the implications for employers and class actions being prepared against Workpac and other labour-hire companies in the mining industry.

Recommendations

Employers should carefully review their current casual workers, particularly long-term regular casuals, to assess whether there is a risk they may be considered to be permanent employees. 

Relevant criteria to consider include:                                

• is there a set duration of the individual’s employment or the particular days or hours they work?
• is there a firm advance commitment from the employer to continuing work according to an agreed pattern of work?
• are there regular work patterns, as well as certainty, predictability and continuity of work?

Together with assessing the true nature of the employment relationship, employers should also review their employement contracts

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