Changes to the Law and Your Practice

Important Legal Developments 

This week sees four important decisions that have significant implications for Practices that have stood down staff; are utilising Jobkeeper; and that employ casuals. This will likely cover most Practices. Employment law is rapidly changing and evolving and it is important for employers to keep up to date with these developments. We summarise these developments below.

1. No personal leave during stand down

On 18 May 2020 the Federal Court found that employees who are lawfully stood down as a result of Covid-19, are not entitled to take paid personal leave.

This decision involved an employer standing down a large number of employees under section 525 of the Fair Work Act, on the basis there was no work to do as a result of Covid-19. On behalf of the employees, various Unions applied to the Federal Court seeking an order that employees can access available paid personal leave during this time for a variety of reasons, including being unwell and being covered by a medical certificate.

The employer argued that paid personal leave is intended to operate as income protection if employees need to be absent from work. The Unions argued employees are not taken to be stood down when on authorised leave - and personal leave is authorised leave.

The Court agreed with the employer and found that where employees are lawfully stood down (including under the Fair Work Act or Jobkeeper), there is no income for them to earn, and so there is no income to be protected. As such employees are not entitled to access and be paid for personal leave when stood down. The situation is different for authorised absences such as annual leave, public holidays and jury leave because they are absences which are authorised under the Fair Work Act.

The effect of this decision is that if an employer has lawfully stood down employees it is not required (but can choose to agree) to pay those employees their personal leave entitlements.

Some Practices are permitting stood down employees to take paid personal leave if under Jobkeeper, because that leave will be subsidised and reduce the balance available once Jobkeeper expires.

2. Fair Work excluded from some Jobkeeper disputes

Under the Jobkeeper legislation and rules, employers must offer Jobkeeper to all eligible employees. Fair Work reported receiving hundreds of applications from disgruntled employees claiming their employers failed to nominate them due to other issues such as poor performance or lack of cash flow, meaning they have missed out on the Jobkeeper payments. Most of these applications were from casuals.

In a recent decision of 18 May 2020 which involved a long term casual employee being excluded from the scheme by the employer, Fair Work held it had no power to hear the dispute.

Under the Jobkeeper legislation and rules, Fair Work is empowered the hear disputes arising under the Fair Work Act. Most of the Jobkeeper disputes will likely involve matters covered by the Fair Work Act such as unfair dismissal, unlawfully changing working conditions, lawfully standing down employees, and general protections. However the question of whether or not an employer has breached the Jobkeeper legislation by failing to nominate eligible employees was not a matter covered by the Fair Work Act, it was a matter governed by the Jobkeeper legislation itself. As such, Fair Work had no power to decide on applications from employees who were not nominated.

The effect of this decision is that if an employer fails to comply with its nomination obligations, employees will need to seek redress through a Court or other jurisdictional body, which will probably be more difficult and expensive. Employees will not have the benefit of the easily accessible, affordable and informal processes that come with Fair Work.

3. Employee loses in refusal to take annual leave

In a recent decision of 13 May 2020, Fair Work found that an employee unreasonably refused her employer's request to take paid annual leave under Jobkeeper. Interestingly, Fair Work also commented on the employee's "unwarranted attacks" on the employer for making its request.

In this case, the employee was receiving double her normal income under Jobkeeper, and had accrued about 10 weeks annual leave, as well as 9 weeks long service leave. The employer requested she take 16 days of annual leave, comprising one day each week for 16 weeks. The employee refused the request saying it was unreasonable as she had already planned to use the leave for a future holiday, and arguing Jobkeeper should not be used by employers to subsidise annual leave obligations. The employee also presented a medical certificate stating she was suffering from stress and anxiety as a result.

The employer argued it had asked various employees to take annual leave, that the employee had not applied (and it had not approved) her taking leave at a future date for a proposed holiday, and given the large amount of leave available, it was a reasonable request.

Fair Work agreed with the employer, that the employee had unreasonably refused the request. It further found that the employee's conduct was unsympathetic, belligerent and unwarranted, which was for the employer to now consider and manage.

This effect of this decision is that if an employer makes a request for leave in similar circumstances, such as where there is a large amount of leave available and no scheduled leave into the future, the employer will likely be supported in enforcing its request. This decision also supports employers to set an expectation that employees will conduct themselves with respect and understanding when communicating about such issues.

4. Staggering decision granting casuals paid leave

Perhaps most importantly of all these developments, is a Federal Court decision handed down yesterday 20 May 2020, finding that permanent casuals are entitled to paid leave, in addition to the 25% loading already being paid to them.

This decision forms part of a long standing dispute involving a third party labor hire company that employs and deploys casual staff, rostered to work regular full time hours over a long term period.

In this case the employee had worked regular and predicable hours over a period of years, with an expectation that it would continue. The employee was paid a 25% casual loading as a substitute for accessing paid leave entitlements, as is the normal course with casual employees.

The employee argued (through the support of his union representatives) that he was effectively a permanent employee, missing out on his lawful rights to paid leave as provided in the National Employment Standards. The employer argued that the employee was a casual, who was paid a 25% loading in exchange for not receiving these entitlements, and that if the Court held the employee was actually permanent, he should be required to reconcile or set-off these entitlements against the 25% loading.

In a decision that has shocked employer bodies and the government, and for which unions are celebrating, the Court decided the employee was entitled to the permanent leave entitlements because the facts support the relationship being charachterised as permanent rather than casual; the employer would be in breach of the Fair Work Act if it did not comply with the National Employment Standards and pay these entitlements; AND that the employee was not required to reconcile the entitlements against the 25% loading because in this case there was no correlation between them.

The effect of this decision is that casuals who work long term permanent hours, are entitled to paid personal leave.

It is pertinent to note this decision may be appealed and the government has already indicated its willingness to address this issue through legislation, which may override the decision, given the hugely anticipated economic consequences this may have on businesses at an already difficult time.

In the meantime, we suggest Practices assess and identify any casual employees who are working regular and predictable hours, and have done so for at least 6 months. This will help plan and prepare for any anticipated liability. Over the last few years we have seen extra protection being afforded to regular casuals including the application of unfair dismissal laws, as well as the right to request conversion to permanent roles. This trend continues with yesterday's decision.

Please note the laws are evolving rapidly and the may change in the coming days and weeks. The above information is current as at the date of publication and is based on information made publicly available. It is important to stay appraised of any developments or changes. This Circular is produced for guidance purposes only and is not a substitute for legal advice. Legal advice should be sought for individual circumstances. For tailored advice for your Practice, please contact us for a confidential discussion:[email protected]