In a landmark judgment, the Federal Court of Australia has ordered an employer to pay penalties of $42,500 for contraventions of an enterprise agreement, which included failing to convert an employee from casual to permanent employment.[1]

This case serves as an important warning to employers whose employees are covered by awards and enterprise agreements, particularly in light of the Full Bench of the Fair Work Commission’s (FWC) recent ruling that it would insert casual conversion clauses into 85 modern awards. Affected awards include the Banking, Finance and Insurance Award 2010, Commercial Sales Award 2010 and Fast Food Industry Award 2010.[2]

Mr Tomvald was employed as a casual freight handler by various Toll Transport Pty Limited companies (Toll) for almost a decade. He regularly worked 38 hours per week on Monday to Friday and averaged just over 8 hours per shift (including both ordinary hours and overtime).

The Toll Group – TWO Enterprise Agreement 2013-2017 (EA), which covered Mr Tomvald, permits casual workers employed on a regular and systematic basis to elect to become a permanent employees on a ‘like for like basis’. When Mr Tomvald sought to exercise his right under the EA to convert his casual position to a permanent position, he was offered a permanent position, but his shifts were capped at 30 hours per week. He argued that the position offered was not on a comparable or ‘like for like’ basis and therefore Toll had breached the EA and the Fair Work Act 2009 (Cth) (FW Act).

LIKE FOR LIKE?

In assessing if the permanent position was ‘like for like’, the Court adopted a practical approach, stating that ‘mathematical precision is not required’, but rather it required ‘a comparison between the nature and extent of the work previously performed by a casual employee with that of a permanent employee performing much the same work.’

The Court held that offering a permanent position to Mr Tomvald with a maximum of 30 hours per week was not ‘like for like’ conversion and failed to comply with the EA.

That said, the Court ordered a low range penalty of $10,000, as it believed that Toll’s contravention was based on a misunderstanding of Mr Tomvald’s entitlement and not a deliberate attempt to avoid its obligations.

OTHER CONTRAVENTIONS

The Court also levied penalties on Toll for breaches of several other obligations under the FW Act and the EA:

  • Toll failed to produce copies of records of overtime worked by Mr Tomvald when requested by Mr Tomvald;
  • Toll failed to consult with Mr Tomvald about changes to be made to his roster; and
  • Toll employees misrepresented Mr Tomvald’s right to appoint a representative, thus breaching the FW Act.
  • This case serves as a warning that the Court will enforce casual to permanent employee conversion clauses contained in relevant enterprise agreements as well as modern awards.
  • When assessing ‘like for like’ conversions, the Court will adopt a practical approach in considering the nature of the permanent position offered. As such, any permanent position offered to a casual employee seeking to convert to permanent employment must not be a token offer, but genuinely reflect the nature of the employee’s role prior to the conversion. Employers that fail to do this could be liable for penalties for failing to comply with their obligations under any relevant industrial instrument.
  • Although the ‘like for like’ provision is not currently contained in the model conversion clause proposed by the FWC, employers should definitely watch this space to see what their obligations will be under the final model clause.
  • Despite the Court saying that this situation was based on a misunderstanding rather than anything more sinister, employers should do their best to comply with any casual to permanent conversion obligations.