Case law background relevant to Federal Government ICT contracting & labour-hire (recruitment) companies
In September of 2022, Recruitment Hive came to the end of a four-year employment legislation and case law odyssey when we implemented casual employment and the provision of paid long service leave (LSL) as best practice for our federal government ICT Contractors.
The purpose of long service leave is to provide our ICT Contractors (employees) with a period of extended leave to rest and recharge, reward loyalty and encourage long-term employment.
These are the same benefits all other Australian workers enjoy.
The reason we have implemented LSL is to ensure that Recruitment Hive does
not misclassify our ICT Contractors and deny them any legislated employee leave entitlements.
Also – at Recruitment Hive, we strongly believe it is simply the right thing to do.
The employment case law odyssey
1. In 2018, the decision of the Full Court of the Federal Court in WorkPac Pty Ltd V Skene sent a shock-wave through the recruitment (Labour-hire) industry. The Full Court determined that Mr Skene, a casual worker employed by WorkPac (a Labour-hire company) should have been employed as a permanent full-time employee and thus ordered WorkPac to pay backdated accrued annual leave entitlements to Mr. Skene. This determination by, the Federal Court, essentially broke the business model of Labour-hire companies. It established that an employee who is classified as a casual worker may still be entitled to receive accrued paid annual leave if their employment is regular, systematic, and ongoing. Any long-term casual employee whom worked regular and systematic hours could be entitled to receive paid annual leave if a court ruled that they should have been employed under a full-time agreement, as the Federal Court had done in WorkPac v Skene.
This Case Law had significant, even catastrophic implications for the labour-hire industry, particularly long-term federal government ICT Contracting.
2. In the case of CFMMEU v Personnel C ®ontracting (2020), the Federal Court found that a Labour-hire worker, Mr McCourt, was an independent contractor and
not an employee of the Labour-hire company Personnel Contracting. The CFMMEU unsuccessfully argued that unpaid accrued annual leave entitlements were owed to Mr McCourt as he had been misclassified and should have been employed as a permanent full-time employee, not engaged as an independent contractor, due to his regular and systematic hours of work of many years.
3. In another significant case, WorkPac v Rossato (2020), the Federal Court ruled that Mr. Rossato, also a long-term casual employee working regular and systematic hours, was not a true casual employee in accordance to the Fair Work Act (2009) and therefore should have been a employed by WorkPac under a full-time permanent agreement and that he was entitled to be paid his accrued annual leave. This further confirmed the earlier ruling of WorkPac Pty Ltd V Skene (2018).
4. Between 2018 and 2020, the case law confirmed by both WorkPac Pty Ltd V Skene (2018) and WorkPac v Rossato (2020) established that Labour-hire companies bore significant risk of misclassifying their casual employees and being ordered to pay-out multiple years or accrued annual leave to their on-hired workers. Such leave entitlements were not budgeted for within the fees Labour-hire companies charged to their Clients.
In the same period, the case law established by CFMMEU v Personnel Contracting
(2020), suggested to the Labour-hire industry that the Court(s) supported Labour-hire companies engaging their on-hire workers as independent contractors. Previously, courts had turned to the ‘multi-factor test’ to determine if a worker should be classified as an employee or independent contractor. Through the ruling of CFMMEU v Personnel Contracting (2020) the court had focused on the ‘label’ of independent contractor rather than looking into the realities of the work performed that the ‘multi-factor’ test had, in the past, been used to uncover.
With the focus of reducing business risk, prior to this period, labour-hire companies were being guided by their legal advisors to engage on-hire workers as casual employees, not independent contractors. The employment case law laid down from 2018 – 2020, however, flipped this entirely. In 2020, it appeared that the Labour-hire companies would reduce their risk by engaging on-hire workers as independent contractors not casual employees.
In the meantime, however, the federal government responded with the Fair Work Amendment Act (2021) to include a definition of casual employment, for the first time, and section 545A, that protects employers who misclassify permanent workers as casuals by allowing them to access offset monies already paid within a casual loading (no-double dipping amendment).
This amendment, 545A, essentially “saved” the business model of Labour-hire companies and re-established casual employment of on-hire workers as the best method for Labour-hire companies to mitigate the significant financial risk of misclassifying workers. 545A of the Fair Work Amendment Act (2021) allows employers to offset certain entitlements, such as annual leave, against the casual loading paid to an employee. If a court ever determines that a Labour-hire company miss-classified a worker as casual when the worker should have been a full-time permanent employee any accrued annual leave owed to the worker is reduced by the amount already paid to that worker as a casual loading (often referred to as no double-dipping).
5. WorkPac won an appeal in the High Court, WorkPac v Rossato & Ors (2021) HCA overturning the WorkPac v Rossato (2020) Federal Court ruling that Mr. Rossato should have been employed as a full-time permanent employee and was owed outstanding accrued annual leave entitlements. The High Court ruled that Mr. Rossato was correctly classified, by WorkPac, as a casual employee. The High Court also determined that the ruling In WorkPac Pty Ltd V Skene (2018) was in error, negating any case law established by it. Prior to the 545A being legislated as part of the Fair Work Amendment Act
(2021). This High Court appeal decision would have been significant in re-establishing the business model of Labour-hire companies by eliminating the risk of employing on-hire workers under casual agreements. However, the inclusion of 545A within the Fair Work Amendment Act (2021), lessened the relevance and importance of this new case law.
6. In 2022, in CFMMEU v Personal Contracting (2022) HCA the High Court overturned, on appeal, the earlier Federal Court determination from CFMEU v Personnel Contracting (2020). The High Court’s ruling on the CFMEU’s appeal confirmed that workers under labour-hire arrangements are not independent contractors because such workers are not running independent businesses and the Labour-hire companies are expected, by their Host-clients, to exert a degree of employer control of the workers they provide.
This ruling clearly confirmed that miscategorising an employee as an independent contractor can have significant legal and commercial implications for an organisation. The High Court’s granting of the CFMEU’s appeal that Mr McCourt should have been working under an employee agreement and not as an independent contractor resulted in WorkPac being ordered to pay accrued annual leave for Mr. McCourt.
Just as the Federal Court case law rulings of WorkPac Pty Ltd V Skene (2018), WorkPac v Rossato (2020) and CFMMEU v Personnel Contracting (2020) had sent shockwaves through the Labour-hire industry from 2018 – 2020 and threatened the catastrophic demise of the Labour-hire business model, so too did the High Court determinations resulting from the appeals CFMMEU v Personal Contracting (2022) HCA and WorkPac v Rossato & Ors (2021) HCA which effectively flipped, once again, the employment risk calculus that Labour-hire companies applied to their method of engaging on-hire workers.
Following these two successful High Court appeals in 2022, Recruitment Hive is:
1. Employing on-hire workers under casual employment agreements (with clearly stated casual loading on pay rates), and
2. Actively dissuading the use of independent contractor agreements in engaging on-hire workers.
As our casual employees, Recruitment Hive is obligated to provide the following entitlements to our federal government ICT Contractors:
• Long Service Leave:
– ACT = 6.0667 weeks after 7 years of continuous employment
– Victoria = 6.062 weeks after 7 years of continuous employment
– NSW = 8.67 weeks after 10 years of continuous employment
– Western Australia = 8.67 weeks after 10 years of continuous employment
– Queensland = 8.67 weeks after 10 years of continuous employment
– Tasmania = 8.67 weeks after 10 years of continuous employment
• 10 days paid Family and Domestic Violence leave
• Access to a pathway to become a permanent employee (If desired)
Protecting the rights of Australia’s most valuable workers
We are committed to ensuring that as some of Australia’s most valuable workers – federal government ICT Contractors – are not treated simply as machines of work and beasts of burden. Recruitment Hive is leading the way to establish the employment of federal government ICT Contractors, by labour-hire companies, as industry best practice. Rather than ignore, obfuscate or contract out to a third party our employer obligations we are determined to make long service leave available to federal government ICT contractors.