The Morrison government will offer an improved path to permanent work but retrospectively wipe out billions of dollars of potential claims for misclassified casual employees under industrial relations changes.
The first section of the industrial relations omnibus bill, to be released by the attorney general, Christian Porter, on Monday, will introduce a definition of casual employment and improved rights to request permanent work after 12 months.
Unions have already rejected the proposal, arguing it will allow employers to continue hiring people as casuals despite them performing ongoing permanent work, and employees would be powerless to dispute refusals to convert.
In addition to a separate bill to encourage disaffected union branches to demerge, Porter will this week unveil the remaining four sections of the omnibus bill – on award simplification, workplace pay deal making, deals for new worksites and compliance.
The bill aims to save employers up to $39bn in claims from casual workers, by stating that if a court finds they were owed the entitlements of a permanent worker the casual loading already paid will count towards this liability.
The legislative fix addresses uncertainty created by the WorkPac v Rossato decision, in which the full federal court held that employees described as casuals could be owed further entitlements if they performed regular, permanent work.
The case is on appeal to the high court. The Attorney General’s Department estimates that employers could be liable for between $18bn and $39bn if the current interpretation stands.
Unions had called for the government to aim to halve insecure work, and the omnibus bill proposes stronger rights to request permanent work.
Under the proposal, an employer must offer a casual employee conversion to permanent work if they have worked for a period of 12 months, with a regular pattern of work for the past six, and could continue as full or part-time without a significant adjustment to hours.
Employers will retain a right to refuse if they have “reasonable grounds” to do so. In that case, a casual may request permanent work again every six months.
The bill will define a person as a casual employee if work was offered and accepted on an indefinite basis without an agreed pattern of work.
Factors to determine if the employer has made a “firm advance commitment” of permanent or casual work will include whether the employee can elect to accept or reject work, whether the job is described as casual, and whether the employee receives the casual loading of up to 25% on their base pay.
Casual employees were among the hardest hit by the downturn, accounting for 500,000 of the 800,000 jobs lost at the start of the pandemic.
Australia’s gross domestic product recovered by 3.3% in the September quarter, although current estimates suggest unemployment is above 7% and likely to remain above 6% for several years.
Porter told Guardian Australia with “so many Australians still out of work, or doing fewer hours as a result of the pandemic, we cannot do nothing”.
He argued employers “are delaying making hiring decisions because of ongoing confusion about the legal status of casual employment”.
“Similarly, Australia’s 2.3 million casual employees need certainty about their work arrangements and entitlements.”
Porter said the government’s definition of casual employment “struck the right balance on this issue and delivered a fair and equitable outcome that will benefit both workers and employers”.
Similarly, the right to casual conversion will ensure “those working regular shift patterns who want greater job security can convert to part-time or full-time work, while maintaining the existing rights for employers to refuse such requests if there are reasonable grounds for doing so”.
Porter said reforms on casuals’ entitlements prevented “double-dipping” as businesses know “they will not have to pay people twice for things like sick leave and loadings always meant to compensate casual workers for those things”.
“Getting Australians back to work has always been the sole aim of the government’s industrial relations reforms and I would urge Labor to back our legislation in the interests of Australian workers.”
The secretary of the Australian Council of Trade Unions, Sally McManus, said the proposal “takes rights off casual workers” and was a “missed opportunity” to counter the “virus” of insecure work, reprising a metaphor she deployed at the National Press Club on Wednesday.
The changes would allow employers to “legally label someone a casual, even if they are hired for a permanent, ongoing job” – a “fiction” courts had rejected, she said.
“Even though we know so many casual workers are not paid more than permanent workers, it also retrospectively takes away rights they would have to paid leave.
“Casual workers who are incorrectly classified by their employers currently have this right, this legislation would take it away.”
McManus argued if employers refused to convert a casual to permanent employment “there is little they can do about it” without a right to contest the decision in the Fair Work Commission.
At a doorstop on Monday, Porter countered that employees would have recourse to FWC conciliation, and to “consent arbitration” if the employer agreed.
Porter also appeared to confirm the IR bill would deal with the extension of jobkeeper flexibilities that allow employers to changes workers’ duties and location of work.
An extension was needed to prevent a “cold flip” when the powers expired, he said, but he reserved further details until the bill is released on Wednesday.