The Hon Tony Burke, the Federal Minister for Employment and Workplace Relations, has announced pending changes to the Fair Work Act to provide greater job security for workers who are engaged as casuals, essentially overturning legislation passed by the Morrison Government a couple of years ago.

So what is the real story?

A few years back, there were a couple of cases in the Federal Court where decisions were made that, notwithstanding the fact that an employment arrangement was described as casual in the employment contract, it was not really casual if the employee was engaged on regular and systematic hours and had a reasonable expectation of continuing employment.

The Morrison Government legislated to overrule those determinations.

There was also a subsequent High Court decision that overturned those rulings determining instead that the contract had primacy in determining whether or not a working arrangement was casual in line with the new legislative provisions.

The proposed amendments are intended to return us to the situation where the arrangement is determined on the basis of its true nature in practice rather than just on what might be written into the contract. Minister Burke has dubbed it ‘the what’s really going on test’.

Casual conversion

Through the legislation passed by the Morrison Government, the National Employment Standards were amended to provide casual workers with a right to request conversion from casual employment to permanent employment subject to certain conditions and generally based on a consistent pattern of hours over at least 6 months during a continuing period of employment of at least 12 months.

Prior to this, many modern awards already included rights for employees to convert from casual employment after 6 months of continuous employment and these provisions have been around for decades so it isn’t anything new, just the mechanics and the rules can change.

It sounds like the proposed legislation might reduce the required period of continuing employment back to 6 months before an employee can request casual conversion.

A bit of middle ground

We already have some benchmarks in place on this stuff for access to the unfair dismissal jurisdiction. A casual employee can access this jurisdiction if they have been regularly and systematically engaged on a continuing basis and have a reasonable expectation of continuing employment if:

• they have been employed for at least 6 months in a business with 15 or more employees or
• they have been employed fora at least 12 months in a business with less than 15 employees 

  Do we really need to create a different set of rules and timeframes for determining whether an employee is a real casual or not? 

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The Fair Work Ombudsman has two cases before the courts for prosecution of a “responsible franchisor” for Fair Work breaches by their franchisees – these are the first prosecutions of their kind.

Back in 2017, legislation was passed to increase penalties for serious contraventions of workplace laws. Among other matters included in the legislation were new legal obligations for franchisors and holding companies that effectively meant that they could be held legally responsible if their franchisees or subsidiaries did not comply with workplace laws.

In order for franchisors to be held accountable, they would have to be found to be a “responsible franchisor” –  one which has a significant amount of influence or control over the business affairs of the franchisee. This could be the case if the franchisor can provide direction on (or exercise control over) financial, operational or corporate affairs  which could involve such matters as trading hours, sales targets or quotas, business expenses and costs, staffing levels, etc.

Consideration is also given to the degree to which the franchisor is involved in management or operational decisions of the franchisee’s business in practice. 

Case #1 – 85 Degrees Coffee Australia Pty Ltd

The Fair Work Ombudsman alleges that 85 Degrees was liable as a “responsive franchisor entity” for alleged non-compliance by eight 85°C Daily Café outlets in Sydney in 2019. This includes underpayments of wages totalling $32,321 and breaches of record keeping and payslip requirements.

85 Degrees, which is based in Taiwan, entered into an Enforceable Undertaking with the Fair Work Ombudsman in 2015 following the identification of significant underpayments of wages back then.

85 Degrees was also fined $475,000 in court proceedings last year for exploiting young Taiwanese students in Sydney through sham internship arrangements. in 2016 and 2017.

The FWO now alleges that 85 Degrees’ knowledge of compliance issues as a result of the Enforceable Undertaking and subsequent audits, its knowledge of its franchisees’ financial circumstances, and its knowledge that the franchisees had limited English and limited awareness of workplace laws, is also relevant to its liability. 

This recurrent non-compliant behaviour is a good example of the conduct that has given rise to laws making wage theft a criminal offence.

Case #2 – Bakers Delight Holdings Pty Ltd 

It is alleged that 142 mostly young staff at Bakers Delight outlets in Kingston, Lindisfarne and Eastlands in Hobart Tasmania were underpaid $1.25 million between July 2017 and October 2020. In one case of a young apprentice baker, it is alleged that he was underpaid $106,281.

Fair Work Inspectors allegedly discovered that staff were underpaid entitlements including minimum wages, weekend and public holiday penalty rates, overtimes rates, leave entitlements and minimum shift pay, and had money unlawfully deducted from their termination pay.

It is alleged Bakers Delight Holdings is liable for $642,162 in underpayments at the three stores that occurred after February 2019 because it became aware the franchisee operating the stores had been underpaying staff but failed to take preventative action – and therefore it either knew or should reasonably have known further underpayments would occur.

Bakers Delight Holdings commissioned an audit of the franchisee (Make Dough Enterprises) and provided the findings of the audit which identified a number of contraventions to the franchisee in February 2019. The Fair Work Ombudsman alleges that, as a result, from that point on the franchisor knew about the underpayments and breaches but did not take action to ensure that they were remedied. 

So it appears that while in this case, the franchisor made some attempt to educate the franchisee about their obligations but has been found by the Fair Work Ombudsman not to have done enough to exercise its “responsible franchisor”obligations.

How we can help

When the legislation came in in 2017, we developed a suite of services to assist franchisors to meet these new “responsible franchisor” responsibilities under the Fair Work Act.

These services included:

• Franchisee compliance kits tailored for the particular industry and franchise group covering National Employment Standards, relevant award provisions, record keeping and payslip requirements, superannuation
• Online compliance questionnaires with reports generated for individual franchisees on their compliance status
• Payroll audits of franchisees and calculation of underpayments where applicable
• Representation and support in dealings with the Fair Work Ombudsman on any alleged underpayments