On 20 May 2020, the Federal Court of Australia ruled that casual employees could be entitled to annual leave, sick leave and other entitlements full-time employees get.
In this video, Steve outlines how this decision could affect small businesses.
Just last week the Federal Court confirmed that a casual employee can still be considered a permanent employee (and therefore entitled to paid leave) despite their work agreement stating otherwise.
The Full Federal Court decision handed down on 20 May 2020 may well scare many employers especially in the already smashed hospitality industry.
What has happened is - not only has the Court upheld a view that casual employees who work stable, regular and predictable hours aren’t to be classified as casual employees (which quite frankly is fair enough), regardless of what their agreement says, it has struck a further blow by deciding that any casual loadings paid to those employees cannot be set off against the entitlements they gain as a result of being classified as a permanent employee. What that essentially means is that casual employees can receive the loadings as well as their paid leave. Seriously!?! Who in their right mind would employ someone under these circumstances? Not a small business in hospitality that’s for sure. It makes it near impossible for employers to engage casual employees for regular spasmodic or ad hoc work.
The Federal Government may need to act swiftly to change the laws governing casual employment or maybe there will be a successful appeal of the decision in the High Court. Employers who utilise casual labour will likely be facing claims for entitlements to annual leave (and other forms of leave) from casual staff.
Under the rules (prior to this decision) casual employees were not entitled to paid annual leave, personal/carer’s leave, compassionate leave and payment for not working public holidays. They are entitled to receive a loading of 25% of the permanent rate payable for their role to compensate for “missing out” on those entitlements.
Most casual employment agreements are drafted to allow the amount of the loading to be “offset” against the value of the entitlements owing to the employee if it was later determined that they were deemed a permanent employee rather than a casual. This position has always been viewed as reasonable and acceptable. The Full Federal Court’s decision renders the contractual offset clauses redundant and provides those employees both the casual loading and the permanent employee entitlements.
We are encouraging our clients to consider reviewing all agreements with staff to assess whether they would, in fact, be considered “permanent” employees. The employment relationship must be scrutinised to determine how long the employment was intended to last, whether the employment was to be regular and predictable, and whether the employer or employee were permitted to change the working pattern. Once this is established the next step is to consider how to minimise the risk and exposure.
This is a serious turn of events for small business and they should seek professional assistance if they feel they are exposed. For more information ring our team at UHY Haines Norton on +61 7 49 721300.