Employment Law Developments – 2021

DEVELOPMENT 1:  IR Omnibus Bill

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (“the Amendment Act”) received royal assent on Friday 26 March 2021. The Amendment Act seeks to resolve and clarify the uncertainty surrounding casual employment arising out of two major 2020 Full Federal Court decisions[1]  dealing with the substantive meaning of “casual employee” and subsequent entitlements. These decisions opened employers up to “double-dipping” by their casual employees who had been receiving casual loading but were subsequently able to access various entitlements after being considered part-time or permanent employees. As such employer’s should be mindful of the following

A. “Casual employee” has been defined with reference to the intentions of the parties at the beginning of the employment relationship, emphasising the conditions agreed to as opposed to an employee’s pattern of work after their engagement.

B. The National Employment Standards have been amended to include an additional requirement which facilitates the casual conversion of employees rostered on a regular and systematic bias, provided there is no reasonable business justification for maintaining their casual status.

C. Courts are now authorised to offset casual loading amounts paid to employees against certain entitlements (e.g., annual, personal, and sick leave) that the casual loading was paid in compensation for, where they are later found to be permanent employees.

Importantly, these amendments will apply retrospectively with limited exceptions, and a 6 month transitional period will apply in respect to an employee’s right to casual conversion so that employers can make the necessary arrangements and ensure their compliance with the new amendments.

DEVELOPMENT 2:  New Answers to an Old Question: Contractor or Employee?

Incorrectly classifying an employee as a contractor or vice versa can have costly consequences for employers attracting significant superannuation and taxation implications in addition to employee entitlement disputes, this is particularly so now.

The two major 2020 Full Federal Court decisions[2] reflect three changes in how courts determine whether an individual is an employee or contractor. These changes are explained below.

1. Operating a business not necessarily indicative of contractor status

Historically, case law appeared to indicate that where an individual operated their own business, this was decisively indicative of a contractor relationship.

The Full Federal Court in a 2020 decision, Jamsek v ZG Operations Australia[2020] FCAFC 1934 rejected this approach. The court here confirmed that the appropriate question to consider is whether the person is an employee, not whether they conduct their own business. Whilst the carrying out of a business may support a finding that such persons are contractors, the reverse is not correct in that an individual who does not operate a business will not necessarily be characterised as an employee.

2. Multifactorial approach is not a checklist approach

Whilst the correct test to apply in considering the true status of an employment relationship includes balancing a variety of factors, and is termed multifactorial, it does not involve the mechanical exercise of checklist balancing. Further, the ‘mechanical disaggregation and deconstruction’ of varying aspects of relationship tests arising out of other cases is frowned upon and goes against the courts emphasis on the importance of considering the ‘totality of the relationship’. In taking the employment relationship as a whole, weight must be attributed to the most relevant factors on the basis of the particular circumstances of each case.

3. Intention of parties is significant

It is becoming increasingly common for employers to face disputes with individuals hired as contractors, who later claim to be employees and accordingly entitled to various benefits. Whilst the relationship status is not conclusively ascertained with reference to the label given by the parties, this label does illuminate their intention with respect to the context wherein their services would be provided. Courts’ have emphasised the weight of the parties intentions especially where the agreement is negotiated as opposed to a standard contract process.[3]  

What is the test?

The fundamental question employers should ask when ascertaining the substance of the employment relationship centres squarely on determining “whether the worker has been engaged to serve, or to provide services”.[4] In determining whether an individual is servingtheir employer, courts have highlighted a number of relevant factors that may shed light when applied correctly, avoiding a mechanical checklist approach. Such factors are:  

(a) The terms of the contract;

(b) Intention of parties;

(c) Whether tax is deducted;

(d) Whether sub-contracting is permitted;

(e) Whether uniforms are required;

(f) Whether tools are provided by the employer;

(g) Whether holidays are allowed;

(h) The extent of control an individual has over their work arrangements;

(i) The existence of a commission structure as opposed to wages;

(j) Tax return disclosures;

(k) Whether one party is taken to be a representative of the other;

(l) The existence of systems, manuals and invoices; and

(m) Who benefits from the goodwill of the business.

EMPLOYER TAKEAWAYS FOLLOWING THE RECENT DEVELOPMENTS:

The legal landscape in the midst of COVID-19 and economic reform, has seen significant changes which have the potential to greatly affect employers. It is important that employers are aware of their changing obligations to employees and ensure their compliance with the amended legislation particularly with respect to the appropriate classification of workers, be it casuals, contractors, or employees.

If you or someone you know would like assistance in clarifying and ensuring compliance with these changes please contact our experienced Employment Law Team, as they would be happy to talk you through the relevant amendments and their potential impacts on your employment structures.

This article was written by Brittany Everett


[1] WorkPac Pty Ltd v Rossato [2020] FCAFC 84; Skene v WorkPac Pty Ltd [2018] FCAFC 131

[2] WorkPac Pty Ltd v Rossato [2020] FCAFC 84; Skene v WorkPac Pty Ltd [2018] FCAFC 131

[3] CFMEU v Personnel Contracting Pty Ltd [2020] FCAFC 122

[4] MWWD v Commissioner of Taxation [2020] AATA 4169

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