Guarding against the risks of casualisation

Care must be taken by HR practitioners to ensure employees are properly classified under applicable modern awards

Guarding against the risks of casualisation

By John Wilson, managing legal director of BAL Lawyers

The ACTU’s current ‘Change the Rules’ campaign is drawing attention to what it contends is the increasing casualisation of the Australian workforce.

While the overall proportion of casual employees has remained relatively consistent over the last twenty years, since 2013 there has been an increase in the number of casual employees whose work hours and patterns are similar to those worked by full time or part-time employees.

As it stands, more than 30% of casual employees have been engaged by their current employer for more than three years, and 17% have been engaged by the same employer for more than five years.

Reasons for casualisation
There are many reasons why employers prefer casual employment, including the relative ease with which the employment can be terminated without notice.

Casual employees don’t have certain entitlements like annual leave and paid personal/carer’s leave, and an employer does not have to provide a minimum number of hours of work (unless prescribed by a modern award).

Employees too are not left without benefits—casual employment affords them flexibility, which is particularly important if they have familial or study obligations, and modern awards provide employees with a 25% casual loading.

However, the trend does come with some potentially adverse implications for an organisation’s human resources. These include a feeling of less security, and slightly lower job satisfaction for certain demographics. From a legal perspective too, HR teams should be aware of the risks of misclassification of employees as ‘casual’ when, legally, they are not.  

Risks of misclassification
Misclassification occurs where an employee who is called a ‘casual’ by their employer is able to demonstrate that they were really a full time or part-time employee. Misclassification exposes businesses to claims for paid leave and redundancy entitlements, and unfair dismissal.

The Fair Work Act 2009 (Cth) does not define the term “casual employment”, and its meaning is otherwise opaque. Indeed, the Fair Work Commission (FWC) has said “…the notion of casual employment remains ill-defined under common law”. However, where a definition is provided in a modern award or enterprise agreement (EA), the FWC will apply that definition, which is typically that a casual employee is one who is “engaged and paid as such”.

However, if the matter is litigated, the court is able to determine that the employment really was not ‘casual’ at all but, because it had all of the features of such employment (as defined by the modern award) other than the payment of casual loading and non-payment of annual leave and personal leave, full time or part-time. 

Thus, care has to be taken by HR practitioners to ensure that employees are properly classified under applicable modern awards having regard to the reality of their work hours and patterns.

Where a modern award or EA does not apply to the employment or where the particular right or entitlement under the Fair Work Act excludes ‘casual employees’, then the common law will apply, which defines casual employment by its irregular and unsystematic nature.

Thus, for example, if HR guarantees their casual employees a fixed number of hours, places them on a fixed roster, provides them with a level of certainty of future work in the organisation, then this does give rise to a genuine risk of misclassification.

No factor is determinative, but HR should account for the regularity of payment, the length of engagement, the number and consistency of hours, the existence of a roster system, the amount of notice given to the employee about further work, and the employee’s reasonable expectation of ongoing work.

In the case of Ponce v DJT Staff Management Services Pty Ltd, the FWC determined that a casual employee who worked varying hours week-to-week or month-to-month, was not in itself conclusive evidence of irregular non-systematic work — unpredictable but frequent casual work, it said, may constitute regular and systematic work.

However, the FWC also found that if the number of hours worked are small, and the gap between days and times worked is long and irregular, this is evidence of irregular and non-systematic casual employment.

A further difficulty lies in the fact that an employee can be considered a ‘casual’ for the purposes of a modern award (because even though his or her employment is regular and systematic, they fit in with the definition of a ‘casual’ under the modern award).

Therefore, the person is not entitled to the rights that are reserved to full time or part-time employees under the modern award, but not considered to be a ‘casual employee’ under the Fair Work Act (because the employment is regular and systematic) and therefore entitled to, say, redundancy pay.

Unfair Dismissal
Unfair dismissal will arise where an employee is dismissed from their job in a harsh, unjust or unreasonable manner. Casual employees aren’t protected from unfair dismissal unless they can demonstrate that they:

  1. Were employed for a period of 12 months of more.
  2. Were employed on a regular and systematic basis.
  3. Had a reasonable expectation of continuing employment. 

Right to conversion
When engaging casual employees under certain modern awards or EAs, there may be provisions that create a right to convert casual employment to part-time or full time. Where this occurs, the right generally arises after a specified period of time elapses. However, an organisation typically has the option to refuse any requested conversation on ‘genuine business grounds’.

Casualisation of the workforce provides clear benefits for employers. Although the challenges in doing so lawfully are not insurmountable, HR needs to stay vigilant to ensure they don’t expose an organisation to legal risk.

John Wilson is the managing legal director of BAL Lawyers and an accredited specialist in industrial relations and employment law.

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