Offsetting of casual loading is now a thing
One of the most controversial questions in Australian Industrial Law has been whether employees who are ostensibly engaged as casual employees, but are later found by a Court to be other than casual employees, should have any claims for employee entitlements (e.g. annual or personal leave) reduced by any casual loading they have been paid. By the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Act), the Federal Government is of the view that such reduction should occur.
The Act inserts into the Fair Work Act 2009 a new provision, section 545A. This section applies if:
- a person is employed by an employer in circumstances where the employment is described as casual;
- the employer pays the person an identifiable amount (the loading amount) to compensate the employee for not having one or more relevant entitlement during a period (being an entitlement under the National Employment Standards, a Fair Work instrument or contract of employment to annual leave, paid personal/carers’ leave, compassionate leave, payment for absence on a public holiday, payment in lieu of notice or redundancy pay);
- during the period, the person was not a casual employee; and
- the person makes a claim to be paid one or more the entitlements for the relevant period.
It provides that, when making any orders in relation to a such claim, a Court must reduce (but not below nil) any amount payable by the employer to the person for the relevant entitlements by an amount equal to the loading amount.
Notwithstanding, the Court may reduce the claim by an amount equal to an appropriate proportion (which may be nil) of the loading amount, having regarding only to:
- if a term of the Fair Work Instrument or contract of employment under which the loading is paid specifies the relevant entitlements the loading amount is compensating for and specifies the proportion of the loading amount attributable to each such entitlement – that term (including those proportions); or
- if such a term specifies the relevant entitlements the loading amount is compensating for but does not specify the proportion of the loading amount attributable to each such entitlement – that term and what would be an appropriate proportion of the loading amount attributable to each of those entitlements; or
- if neither of the above two paragraphs apply, the entitlements and what would be an appropriate proportion of the loading amount attributable to each of those entitlements in all the circumstances.
The Attorney- General’s Department has estimated employers who have paid employees a casual loading in the mistaken belief they are casuals could otherwise be liable to pay those employees between $18 billion to $39 billon over a six year period for entitlements casual employees do not normally receive. The Act will provide employers with a valuable mechanism to respond to such claims.