The future of casual overtime

In the midst of the 2020 Modern Award updates and applications for Award changes to cater for challenges posed by COVID-19, employers will be faced with a further round of changes to our Modern Awards as the result of a decision last week by the Full Bench of the Fair Work Commission (Commission) which determined casual overtime entitlements under nearly 100 Awards.

As part of its consideration of the ‘common issue’ of overtime for casual employees, the Commission has been identifying and attempting to resolve potential ambiguities in a number of Modern Awards relating to casual overtime.

Employers may have noticed that while most of the new 2020 Modern Awards now include helpful hourly rates guides in their schedules, some were missing rates for casual employees when working overtime. This is because the calculation of those rates was still under discussion and debate as a result of this decision.

We have extracted the outcomes of 16 of some of the most commonly used Modern Awards from this decision below:

Health Professionals and Support Services Award 2020 (HPSS Award)

Following industry debate about the recent ANMF v Domain Aged Care (QLD) Pty Ltd T/A Opal Aged Care [2019] FWCFB 1716 (Opal Decision) in respect of whether it was correct for the Commission to find that casual overtime should be calculated inclusive of the casual loading under the Nurses Award 2010, the Commission has now confirmed that this was the correct approach to take, and as a result of the similarity of wording between the awards, it will be applying the same interpretation to the HPSS Award.

The Commission intends to vary the HPSS Award’s terms to make this clear. This means that the casual loading is included in the overtime rate on a compounding basis.

For example – time and a half overtime for casuals will effectively become 187.5% of the permanent hourly rate (150% x 125%), while overtime calculated at double time will be 250% (200% x 125%).

The above interpretation will not be capable of ambiguous interpretation, as the Commission has expressly spelt out the applicable percentages in the draft clause it proposes to introduce to the HPSS Award.

Aged Care Award 2010 (Aged Care Award)

The Commission has refused the HSU’s request to limit the entitlement to weekly overtime for casual employees to 38 hours per week. As such, the Aged Care Award will continue to allow casual hours to be averaged over 76 hours across the period of a fortnight.

However, the Commission confirmed that casual overtime rates will be calculated as per the Opal Decision, being that the overtime rate will be calculated inclusive of the casual loading, “unless there is some provision which expressly indicates otherwise”. This means that the casual loading is included in the overtime rate on a compounding basis.

For example –overtime calculated at time and a half will effectively become 187.5% of the permanent hourly rate (150% x 125%), while overtime calculated at double time will be 250% (200% x 125%).

Nurses Award 2010 (Nurses Award)

A debate had arisen in respect of when casual employees are entitled to overtime under the Nurses Award, as currently the Award is silent. The Commission has now confirmed that clauses 28.1(a) to (c) of the Nurses Award “apply equally to all categories of employees”, meaning that casual employees will receive overtime where they work in excess of 38 hours in a week/76 hours in a fortnight/152 hours in a 4-week period or 10 hours in a single day. It confirmed that the fact “that clause 21.1 applies in terms only to full-time employees does not affect this approach, since clause 21.1 uses it as the reference point to establish the overtime entitlements for all employees”.

Educational Services (Schools) General Staff Award 2020 (Schools General Staff Award)

The Commission intends to vary the Schools General Staff Award to make it clear that casual employees will receive the casual loading on overtime, calculated on a cumulative rather than compounding basis (the casual loading is added on top of the overtime penalty rather than being compounded in the overtime calculation). The new clause will specifically refer to casual employees being eligible for overtime, and what rates that overtime shall incur.

Fitness Industry Award 2010 (Fitness Award)

Following years of dispute, the Commission found that casual employees are entitled to overtime under the Fitness Award because “clause 26.1 applies to employees generally, and no basis has been advanced to read the word “employee” in the provision as not including casual employees”. As such, casual employees are entitled to overtime where they work outside the span of hours, in excess of 38 hours in a week averaged over 4 weeks, or in excess of 10 hours in any one day.

The Commission further found that the specified overtime penalty rates do not include the casual loading, either on a cumulative or compounded basis. It intends to vary the Fitness Award to make these views clear in the wording of the Award.

Building and Construction General On-site Award 2010 / Children’s Services Award 2010 / Clerks – Private Sector Award 2020 / Fast Food Industry Award 2010 / General Retail Industry Award 2010 / Hair and Beauty Industry Award 2010 / Real Estate Industry Award 2020 / Storage Services and Wholesale Award 2020

The Commission confirmed that under the above Awards, the casual loading and the overtime penalty rate are added separately to the minimum permanent rate when calculating casual overtime (in other words, the casual loading is added on top of the overtime penalty rather than being compounded in the overtime calculation). In these awards, there was no dispute about this interpretation, and all relevant stakeholders agreed on the approach.

Food, Beverage and Tobacco Manufacturing Award 2010 / Graphic Arts, Printing and Publishing Award 2010 / Manufacturing and Associated Industries and Occupations Award 2020

The Commission confirmed that under the above Awards, the overtime penalty rate is calculated on the loaded casual rate (a compounded approach). In these Awards, there was no dispute about this interpretation, and all relevant stakeholders agreed on the approach.

Next steps

The draft determinations (the proposed new clauses) for all of the above Awards and the other Awards referred to in the Commission’s decision are available here.

While this decision represents the Commission’s position on these Awards, many of the changes have not yet been enacted or may be subject to further submissions from relevant stakeholders, so it is important for employers to keep in contact with their employment law or HR practitioners to ensure they are aware of when the changes will take effect so they can be compliant with the relevant Modern Awards that apply to their business.

For more information on this decision and what it means for your business, contact the team at enableHR.