Closing loopholes or creating a noose?

From JDSupra, Chris Gardner and Henry Skene discuss the Closing Loopholes Bill that was introduced in Australia. Chris and Henry write:

Anything but casual…

In the first of our series examining the Closing Loopholes Bill introduced into Parliament yesterday, we look at the new measures for casual employment.

The Orwellian title of the Closing Loopholes Bill foreshadows its intentions: casual employment is double-plus-ungood. Premised on the doublethink notion that casual employment is a bad moon on the rise, the Bill proposes wholesale changes to the casual employment test, including measures to protect casuals from their own choices.

The objective

The stated objective is to close the “loophole” of what the Minister has called “permanent casual employment”, by introducing a new “what’s really going on” test. For more information, see the article in The Australian Financial Review Labor is closing the permanent casual worker loophole.

Accepting this is the genuine policy intention, the test of the measures is: do they do what they say, and will they work as they want?

We have serious reservations.

The new test

In their steely determination to place choice about status in the hands of employees, and to prevent abuse of casual employment, the Government has devised a test that:

  1. Requires employers to evaluate and re-evaluate the “true nature” of each casual’s employment circumstances on an ongoing basis;
  2. Introduces a complex definition based on the absence of something (A Future Advance Commitment), effectively requiring employers to disprove a negative to defend their decisions;
  3. Defines the absence of advance commitment by a multi-factorial test of relative considerations, none of which is decisive, but any of which could be in a given case;
  4. Relies on a combination of abstract novel terms, that are very much in the eye of the beholder: “real substance”, “practical reality”, “true nature”, “regular” but not uniform: who knows what they mean sitting here;
  5. Introduces a right for casuals to request conversion every six months and requires employers who wish to refuse to provide detailed reasons informed by the test and based on the circumstances of each employee: administratively burdensome but very convenient for later evidence collection;
  6. Continues the existing obligations for employers to offer conversion after 12 months; and
  7. Creates ongoing liability for misrepresentation of casual arrangements at any point in time, including penalties and back payments (think sham contracting for casuals – so don’t get it wrong).

These measures, however well-intentioned, risk having precisely the opposite effect. Driving uncertainty and insecurity for those people who actually want, and feel well-served by, casual employment.

We will explain why.

The practical implications

Our concern is that the thinking does not take into account how businesses manage risk in the real world. The practical reality is that by failing to define clearly what casual employment is, and using a complex test based on what it isn’t, any ongoing casual relationship is going to carry substantial risk for businesses.

Simply put: too uncertain + serious consequences = high risk. Well-resourced employers will identify and take steps to mitigate this risk. As they do with any risk. And how can a small business owner possibly hope to apply more than 10 abstract notions, to assess the “real substance” and “true nature” of their casual employees on an ongoing basis?

This means that the use of casual employment will change at the initiative of employers, regardless of the choice exercised by employees. It will not result in casual employees having the choice of permanent employment in all circumstances. Some employers will avoid casual employment altogether. Others will change their work practices to reduce the risk.

The risk profile created by the Bill means employers must manage their affairs to:

  1. Avoid regular patterns: Employees will not have the certainty of working on particular days, employers will be compelled to change it up. To ensure not just that there is not a uniform pattern of days but a sufficiently disrupted pattern to avoid the test of “regular” but not “uniform”.
  2. Avoid any future commitments: This is not focussed on the casual with the 12 month roster or, even the promises made during the employment. It will be assessed by things like “mutual expectation” and “understandings” derived from conduct (that do not have to be sufficient to be contractual terms) and the likelihood of future work. What you do and what you say – even how you say it – can affect the outcome.
  3. Increase turnover: Longer service under this test increases risk. The rational thing to do will be to turnover casual employees so the time-based tests are not triggered. Casuals will end up having multiple short-term jobs rather than building experience and potentially other career opportunities with one employer.

The bottom line is that any casual employment relationship is now contestable. The Bill creates a world where legitimate casual employment is confined to fragmented occasional single day employment (on different days). Anything else will carry increasing risk over time.

The result is unlikely to be good for most casual employees.

Most casuals want to be casuals….but now they can make claims

The Minister has said that he sees the legislation providing employees choice and that most will decide to remain casual. The data on that is in: just to illustrate, a large employer who made offers to more than 500 casuals to convert to equivalent part-time, had fewer than 10 acceptances (a conversion rate of under 2). Our experience is that sectors that rely heavily on casual employment typically have conversion rates of 5-10%. Most of those are long-term casuals with settled employment. The Minister seems to acknowledge this, but the Bill does not. Rather than address the specific harm (long term casuals in permanent arrangements) it applies to the norm: all casuals at any point in time.

This is a critical point where the new test fails: it removes the capacity for employers to get certainty from the decision of a casual to remain a casual in respect of their past period of employment. The relationship is all contestable and carries significant financial risk if employers are later found to have got it wrong.

And it is important to remember how these risks manifest as claims. As explained above, very few casual employees elect to change status while they remain employed. The challenges will come when the relationship breaks down. Where arrangements that were agreed are re-characterised through a prism of discontent. And the legislation permits events throughout the relationship to be contested. We know where this ends…

Not all aggrieved employees bring claims. But some will. The choice not to convert will be characterised by fear of losing their job or claims that they were forced not to convert. Most claims will fail. Or be settled to avoid the high cost of litigation that outweighs the value of the claim (rather than because of any genuine wrongdoing). However, this will compel employers to further alter their use of casual employment to reduce that risk.

Where to from here?

You could be forgiven for thinking that the Bill views all casual employment as a subversive form of exploitation to be treated with suspicion, and deserving of legal sanction. This is where the ideology of the Bill bites hard: an underlying assumption that casual employment could not possibly be in anyone’s interests.

This law is not just about the perceived evil of the “permanent casual”, it would apply to all casual employment from day one. And in doing so, it would impose an unworkable test that opens the door for a range of bad outcomes for all involved.

The extent of the changes is unnecessary to address the “permanent casual” loophole the Minister wants to close. They are clumsy, heavy-handed and will affect people who, even on the government’s position, are doing no wrong. These are the hallmarks of bad legislation. If the government really wants to address “permanent casual” employment, the Bill should be substantially amended. It would be a simple fix to introduce positive limitations on the use of long-term casual employment.

Unless what the government really wants is to stamp out casual employment more widely. In which case, this presents as an old-school bait and switch: to hold up the example of the casual truck driver with eight years’ service and a 12-month roster (that most people think shouldn’t happen) and use it to make wholesale changes to something the government and their union stakeholders don’t like (but which most people won’t read in the detail).

The Bill squarely raises that question.

Source: Closing loopholes or creating a noose? | Seyfarth Shaw LLP – JDSupra

See also Untangling the Closing Loopholes Bill – Lexology and The proposed sham contracting defence – “I didn’t know” may no longer suffice – Lexology

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