ASIC issues guidance note for employers on financial reporting and audit requirements

The Australian Securities and Investment Commission (ASIC) has issued a guidance note (Guidance) in relation to financial reporting and audit requirements under Chapter 2M of the Corporations Act 2001 (Corporations Act).¹

The Guidance states that companies should:

• calculate how much may be owed in employee entitlements for past and present casual employees working regular and systematic hours; and
• make a provision for this in their next financial statement.

The Guidance follows the recent Full Federal Court (Court) decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato),² which held that a person cannot be a casual employee where there is a firm advance commitment to on-going work. Any person who is employed on such a basis is a permanent employee and is entitled to paid leave rights accordingly.

The Court also held that the extra pay which the employee received as a result of being designated as a casual (the casual loading), could not be taken into account in determining the quantum of compensation payable because of the denial of paid leave rights. We considered this decision in our earlier publication.

WorkPac Pty Ltd has sought special leave of the High Court to appeal the Rossato decision. The Industrial Relations Minister, Christian Porter, has confirmed the Government would intervene in an appeal, stating the decision in the Court has created "confusion and uncertainty . . . during a period where businesses are facing their greatest ever challenge". The Minister has also said that it may "be necessary to consider legislative options".³

Employee entitlements provisions for (past and present) casual employees who worked regular and systematic hours

The Guidance indicates that for “past and present ‘casual employees’ who were employed in circumstances covered by the recent Federal Court decision” in Rossato, the following calculations and provisions should be made:

• annual leave;
• personal and carer’s leave;
• compassionate leave;
• public holiday pay; and
• redundancy payments.

ASIC also indicates that while no provision would be required for casual employees who are unaffected by the decision, “a provision or contingent liability may be required for ‘casual employees’ employed in circumstances that were not clearly covered by the decision”.

Guidance’s implications for employers

Chapter 2M of the Corporations Act provides that a financial report and a directors' report must be prepared for each financial year by:

• all disclosing entities;
• all public companies;
• all large proprietary companies; and
• all registered schemes.⁴

In light of the Guidance, employers who have obligations under Chapter 2M of the Corporations Act should:

• identify past and present casual employees who are effected by the Rossato decision. This includes casual employees: (i) working regular and systematic hours; and (ii) with a firm commitment in advance from an employer about how long they will be employed for, or the days (or hours) they will work. Pursuant to the Guidance, employees who are not clearly covered by the Rossato decision should also be identified;
• calculate how much they are owed on account of annual leave, personal and carer’s leave, compassionate leave, public holiday pay, and redundancy payments; and
• make a provision for such amounts in their financial report.

Finally, given that under s544 of the Fair Work Act 2009 (Cth), the limitation period to bring a claim regarding underpayments of wages is 6 years, the above-mentioned provisions must be made for relevant casual employees employed within the past 6 years.

If in doubt, employers should seek legal advice or speak to us about strategies.