With the gig economy increasingly affecting how businesses operate, in particular with regards to how they procure and deliver labour, we put the key issues for employers under the microscope.
In this guide, our national Workplace Relations & Safety team outline the latest developments that employers need to know, and summarise a series of key recent cases that have helped provide some guidance to business on the challenges of the gig economy.
The casual workforce: Key issues
What is a casual?
The Full Federal Court in Workpac Pty Ltd v Skene  FCAFC 131 (WorkPac) has provided some guidance. The Court sought to identify when an employee is a casual for the purposes of the exclusion of casuals from the entitlement to paid annual leave under the National Employment Standards (NES) of the Fair Work Act 2009 (Cth).
According to the Court, the casuals that are excluded from the annual leave NES are characterised by the absence of any ongoing obligation to provide their services. They will therefore have the capacity to take a break from work and do not need to be guaranteed annual leave.
The Court referred to the “essence of casualness” as being the absence of a firm obligation to provide on-going work and therefore a capacity for the employee to have access to rest and recreation. This is usually manifested by:
- irregular work patterns
- intermittency of work
However, these are not essential characteristics of casual employment.
Relevant but not decisive factors in determining the existence of casual employment are:
- engagement of an employee through a casual offer of employment
- payment of casual loading
- right to terminate on one hour’s notice.
These might reflect the parties’ subjective intention at the outset, but may not reflect the reality of that employment over time. The Court in Workpac referred to the need to focus on the “real substance, practical reality and true nature of the relationship”.
The WorkPac ruling is that an employee designated to be casual will not be a casual in the ordinary meaning of that term, unless there is an absence of a firm advance commitment from both the employer and employee as to the duration of the employment or the days (or hours) the employee will work.
Therefore, if an employer designates an employee as a casual, and they do not meet the WorkPac test they will in fact be entitled to NES paid leave entitlements, regardless of the loading that would be paid to the employee.
The Court found in WorkPac that Mr Skene was employed on a casual basis and was in fact a permanent employee.
Fair Work regulation 2.03A
Employers may claim that an employee’s casual loading payments should be offset against certain entitlements owing to the employee under the NES.
Regulation applies if:
- the employee is employed on a casual basis
- the employee is paid casual loading that is clearly identifiable as the amount paid to compensate the employee for not having one or more relevant NES entitlements (for example, personal leave or annual leave)
- despite being classified by the employer as a casual, the employee was in reality a full-time or part-time employee for some or all of their employment for the purposes of the NES
- the employee makes a claim to be paid an amount in lieu of one or more of the NES entitlements that they didn’t receive for all or some of the time they were incorrectly classified as a casual.
Modern award casual conversion rights
A Fair Work Commission (FWC) decision on 9 August 2018 developed a new model clause providing for a right by casual employees to request conversion to full-time or part-time employment.
The majority of the award-covered casual workforce now have a mechanism to convert to permanent employment.
Right to request, not a right to convert
The new clause provides certain casual employees the right to request their casual employment be converted to permanent status. There is however no right to require conversion.
To be eligible to make a request, a casual employee must be a regular casual: “A casual employee who in the preceding 12 months, has worked a pattern of hours on an ongoing basis, without significant adjustment, which they could continue to perform in full-time or part-time employment.” Employers can only refuse a request on ‘reasonable business grounds’.
Refusal – reasonable grounds
The modern award clause suggests that refusal will only be reasonable if it is based on “facts which are known or reasonably foreseeable”. Reasonable grounds include:
- not a true regular casual, because the conversion would require a significant adjustment to hours
- other reasonably foreseeable circumstances in the next 12 months, such as where it is known that an employee’s position will cease to exist in the next 12 months
- where it is known that an employee’s hours will significantly reduce in the next 12 months
- where it is known that an employee’s days or times of hours of work will change in the next 12 months, which cannot be accommodated within the hours the employee is available to work.
Process for casual conversion rights
Before refusing a request, the employer must have consulted with the employee. Refusal must be provided in writing within 21 days.
Employees who disagree with an employer’s decision can bring their dispute to the FWC under the dispute resolution clause under the modern awards.
Employers need to advise employees of the casual conversion clause by providing a copy of the clause to casual employees within the first 12 months of their first engagement.
When a casual converts to a permanent employee this raises the issue of whether the prior casual service is to be counted in calculating a permanent employee’s entitlement to paid leave or redundancy pay entitlements under the NES in the Fair Work Act 2009 (Cth).
The decision a majority FWC Full Bench in AMWU v Donau  suggests you do count prior contiguous casual service. But the later decision of the FWC Full Bench in Unilever v AMWU  suggests you don’t. Neither decision is authoritative on this question, because each was a decision on the meaning of a particular redundancy clause in an enterprise agreement.
Independent contractors or employees?
The Fair Work Act offers no definition and courts and tribunals have taken divergent approaches. No single criterion is determinative and courts and tribunals will have regard to a variety of factors in determining a worker’s status.
Meanwhile the advent of the ‘gig’ economy has outpaced the lawmakers.
Uber drivers and Deliveroo riders exhibit many of the traditional indicia of the independent contractors (i.e. they can choose when they work, they use their own tools).
The difficulty is that the gig worker can operate with very little infrastructure (e.g. an App and a bike), which is not usually regarded as characteristic of a person carrying on their own business separate from the company they work for.
It is important to correctly classify employees as such as the costs of misclassification can be severe. These include liability for unpaid PAYG tax, penalties for unpaid superannuation, claims for unpaid leave entitlements, claims for backpay of modern award entitlements, and penalties under the ‘sham contracting’ provisions of the Fair Work Act 2009 (Cth).
There have been several key cases recently that have helped provide some guidance on challenges for business of the gig economy and casualisation of the workforce.
Rajab Suliman v Raiser Pacific Pty Ltd  FWC 4807
In this case an Uber driver’s unfair dismissal application was dismissed because they were found to be an independent contractor.
- control: The driver couldn’t turn down fares but could control when he worked
- equipment: The driver rented the car from Uber marketplace. Uber was not a party to the rental agreement
- work for others: The driver didn’t have to drive only for Uber
- remuneration: The driver was paid for each task completed.
Klooger v Foodora Australia Pty Ltd  FWC 6836
A Foodora rider made an unfair dismissal application. They were found to be an employee protected from unfair dismissal because:
- control: Only worked on shifts offered and these were controlled by Foodora
- equipment: Bicycle used was also used for leisure
- uniform: Required to wear uniform
- work performed by others: Practically difficult to do so.
Pallage v Raiser Pacific Pty Ltd  FWC 2579
An Uber driver’s unfair dismissal application was dismissed.
The FWC found he was an independent contractor because:
- control: The worker could log in and log off the Uber App when he wanted to and had control over the hours he worked
- tools or equipment: The worker was contractually required to provide his own capital equipment (vehicle and associated registration and insurance costs, smart phone and wireless data plan)
- uniform: The worker was not permitted to display any Uber branding on his car and did not wear any uniform or Uber-branded clothing
- method of remuneration/tax and entitlements: The worker did not receive a wage but rather a proportion of the fee charged to riders for each trip.