EMPLOYERS TO END UP AS JOBSEEKERS

JUDITH SLOAN

MAY 26, 2020

The Australian 

That $60bn miscalculation by the Australian Taxation Office is good news for long-suffering taxpayers, with JobKeeper now expected to cost us “only” $70bn rather than $130bn. The problem is that every urger is out and about suggesting ways in which the $60bn “saving” can be spent.

When confidence in government is extremely important, this enormous fiscal error carries the danger that the public’s trust in government competence is eroded. Or should that be further eroded?

The revelation of this error came in the same week as the activist judges of the Federal Court handed down a decision that ensures the Australian labour market is now close to being completely dysfunctional.

The judgment that a casual worker should be entitled both to a wage premium and payment for leave entitlements (annual, personal/carer’s, compassionate and public holiday leave) means employers will be wary of employing any worker on a casual basis apart from on a short-term and intermittent basis.

Recall that this was a case about a casual mine worker (he worked for a labour hire firm) who had been engaged on a series of contracts but with each contract involving predictable shifts agreed ahead of time.

This sort of arrangement suits many workers, in part because it is possible for them to make plans about other aspects of their lives. Not all of them want permanent work and, in any case, many employers won’t offer permanent work as an alternative because of the operational and financial requirements of the workplace.

One of the most immediate dangers of this decision is that many employers of casual workers, now and in the past, face claims for back pay based on the characteristics of the work performed. In particular, those casual workers who are given or have been given “firm advance commitments” (the legal phrase used in the judgment) in relation to their work patterns could be entitled to both the premium attached to their pay — generally set at 25 per cent — and paid leave.

There are various estimates about the cost of the back-pay bill, with some figures as high as $8bn based on estimates of 1.6 million long-term casual workers who work regular hours. There are several class actions being undertaken to secure compensation for the affected workers and the areas of employment extend far beyond labour hire firms in mining. Needless to say, these actions also will enrich the law firms handing the cases.

Many firms hit with these claims simply will go broke. They have paid the wage premium on top of the hourly wage to their casual workers but few, apart from some large firms and the public sector, will have the funds to cover the additional bill, particularly given today’s circumstances.

Mind you, many individuals may end up being paid out via the Fair Entitlements Guarantee scheme, which exists to come up with the entitlements of workers whose employer’s business has gone broke. That is, if the employer can’t pay up, the taxpayer will. This is just one of the nightmare scenarios of this fiasco.

It’s easy to see how this judgment also blows up the prospect of any bounce-back as the COVID-19 restrictions are lifted. Employers will be loath to take back previous casual workers or to employ new ones — the risks have become too great given the scope for double dipping.

But to take on permanent workers, full- or part-time, with fixed shifts will be impossible given the uncertainty of business conditions. It will be lose-lose, including for those on JobKeeper.

The government must act now. Casual employment is a very Australian invention where workers are generously rewarded for the absence of leave entitlements. It’s not as if temporary work doesn’t exist overseas but there is generally no wage premium.

The arithmetic tells us that casual workers are indeed over-rewarded for the absence of paid leave by virtue of the 25 per cent premium. But the real point is that casual work suits many workers as well as many employers given the nature of their businesses — think weekly variations in demand and seasonal factors.

Note here that the vast majority of awards (and agreements that provide for casual employment) include “casual conversion” clauses. These enable casual workers, after certain periods, to request that their employment be made permanent, a request employers cannot reasonably refuse. Tellingly, a substantial number of casual workers never makes such a request.

Whether the government can strengthen these casual conversion clauses to extract some agreement from the unions to reject double dipping for casuals is unclear. The government’s earlier attempt to solve the problem by inserting a regulation in the Fair Work Act has not worked — the judges simply brushed this aside as having no effect.

For those who think the COVID-19 crisis has led to some easing of the rigid (and oftentimes bizarre) industrial relations regulations that bedevil the workings of our labour market, think again. Apart from some early concessions, it has been a case of defiant resistance from the union movement since the JobKeeper scheme was announced, as well as inflexibility on the part of the Fair Work Commission.

While it’s clear that the government has plenty on its plate, the casual work issue must be sorted out — and quickly, if there is to be a chance of a decent recovery later in the year.