This month we look at a recent Full Federal Court decision which found that an employee engaged as a casual and paid a casual loading was in fact a permanent employee and entitled to paid annual leave.  The employee was placed at a mine-site through a labour hire company – the employer (WorkPac).

The employer has not pursued a further appeal and is now awaiting a hearing which will determine the compensation figure it must pay the employee as well as any financial penalties for breach of the NES under the Fair Work Act.

The controversial decision has attracted plenty of attention on the potential implications for employers with calls for a definition of ‘casual employee’ to be inserted into the Fair Work Act.  IR Minister Kelly O’Dwyer is currently seeking legal advice on the decision and the extent to which it raises uncertainty around casual employment.  Many employer associations are pushing for the consequences to be remedied.  It is unknown whether the Federal Government will pursue a legislative remedy, although the IR Minister has now intervened in another case that will examine similar circumstances with a labour hire placed casual employee.

As such, change, if it is to occur, will be some time away.

All employers with casual employees should be aware of the decision, assess their risk, and take careful steps and assessment on their current and future casual employees, and particularly long-term regular casuals.  What the decision raises though is the difficulty of just what is ‘long term’ and what other factors are relevant in the assessment of what is a casual employment arrangement.

We discuss the decision and the actions that employers should take below.

WorkPac v Skene [2018] FCAFC 131

FACTS:  Mr Skene was employed by WorkPac, a labour-hire company, as a dump-truck operator at a coal mine.  He worked a 7 day on, 7 day off continuous roster which was set in January for the rest of the year.  Mr Skene worked the same hours and with the same crew every shift.

His contract classified him as a casual and provided for one hour’s notice of termination.

He was paid a flat rate per hour, had to submit timesheets and did not receive any paid leave.

Following termination of his employment Mr Skene lodged an application in the Federal Circuit Court claiming he was a permanent employee and entitled to annual leave under the NES and the WorkPac enterprise agreement.

The trial Judge in the Federal Circuit Court found he was a permanent employee under the NES (but a casual under the enterprise agreement) and awarded him compensation and interest of almost $28,000 for untaken annual leave.

WorkPac appealed the decision to the Full Federal Court.

FINDINGS:  The Full Court upheld the decision that Mr Skene was a permanent employee under the NES but also found he was a permanent employee under the enterprise agreement.

In considering the meaning of ‘casual employee’, the Court held that the essence of casualness was ‘the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work’.

The Court stated that each case should be assessed on its own facts, and that this is objectively assessed with the ‘conduct of the parties and the real substance, practical reality and true nature of the relationship’ to be assessed.

The Court noted that the key indicia of ‘casualness’ or the ‘absence of a firm advance commitment’ are:

• irregularity,
• uncertainty;
• unpredictability;
• intermittency; and
• discontinuity;

in the pattern of work.

Importantly for employers, the Court stated that the payment of casual loading, the

description of the employment relationship as casual, engagement of employees by the hour and the right to terminate at very short notice may be relevant factors but are not necessarily absolute indicators of casual employment.

In relation to Mr Skene, the Court upheld the decision that the essence of casualness was missing as the work was regular, predictable, continuing and not subject to significant fluctuation with the expectation that Mr Skene would be available for ongoing work in accordance with his roster which was set 12 months ahead.

There was an argument by the Employer of Mr Skene ‘double-dipping’ by receiving a casual loading in lieu of annual leave and then claiming annual leave entitlements.  The Court held that it was not clear that Mr Skene had been paid a casual loading as his contract did not allocate any part of his flat rate to a casual loading or as monies paid in lieu of annual leave.

As such, WorkPac’s claim of setting-off Mr Skene’s casual loading against his claim for annual leave failed.

In relation to the WorkPac enterprise agreement, the Court found that the agreement did not define ‘casual’ and as such the above key indicia of casualness applied.  It found that Mr Skene was a permanent employee and was entitled to annual leave under the agreement.

The Court rejected WorkPac’s argument that there was a well-recognised position that an employee designated as a casual under an award or enterprise agreement is a casual for all purposes.  The court confirmed the above assessment of casualness was correct for all employees.

Lessons for employers

On the basis of the Full Court’s decision, employers of ‘long term’ casuals may be at risk of claims for permanent employee entitlements including annual leave, personal leave and redundancy payments.  There will always be a question about what is ‘long term’ and arguably on the Full Court’s interpretation an employment relationship might begin as ‘permanent’ although called ‘casual’.

If a claim is prosecuted, employers may face civil penalties for breach of the NES under the Fair Work Act.  The Full Court noted that ignorance of the law or unknowing contravention of the NES is not ordinarily an excuse.

A court will look beyond the naming of an employee as a casual, payment of casual loading, short termination periods and engagment by the hour and will objectively assess whether there is ‘a firm advance commitment to continuing and indefinite work according to an agreed pattern of work’ and assessing other key indicia to ascertain the true nature of the employment.

Steps employers should take

Review casual employment relationships – are they really casual?

All employers should review their casual employee engagements and consider how their casual employees are engaged in practice (or have become engaged in practice).

This would include considering patterns of work, whether there is a firm advance commitment to work agreed hours and days and whether the employment is ongoing or irregular, unpredictable, uncertain and intermittent.

Undoubtedly legal advice will need to be obtained on any areas of concern.

It may be that following a review and advice further steps will be necessary for employers to reduce their risk with their casual employees.

Possible Option:  Offering permanent employment

Now placing to one side the very real issue of casual conversion clauses in Awards and compliance steps necessary under those Awards, then if practical, employers may consider offering relevant casuals full time or part time employment.  This would be best done as soon as it is apparent that the employment is no longer ‘casual’ to avoid claims for earlier unpaid entitlements.

It should be noted that whilst many employees do prefer to be casual, then as this decision has demonstrated they may later change their mind and make a claim for unpaid permanent employee entitlements.

As a general comment about the Casual Conversion process such conversion to permanent may be requested by a casual employee or be required to be offered by an employer under the casual conversion clauses in modern awards.  We expect legal advice in many circumstances will be necessary as consideration and care should be taken in compliance with the clause in the offering of a casual employee permanent employment as this process might lead to an enquiry about the past – with employee claiming entitlement to earlier unpaid permanent employee entitlements.

Possible Option:  Change of work arrangements

Another consideration is that of a change to work arrangements.  This would need to be carefully considered and again would need to be done as soon as the nature of the casual employment loses the ‘essence of casualness’ discussed above.

Possible Option:  Clearly set out the casual definition and payment arrangements in the contract of employment

Employers should be reviewing their contracts together with assessing the true nature of the employment relationship.  There may be able to be steps taken with structure of wording in the contracts that clearly meet concerns of casuals generated by this decision.  There will still be many instances where the nature of the relationship is clearly one of permanent employment.

Contact us for assistance

If you would like advice about the impacts of this decision, casual employees in your business or any other employment law related matter, please contact us.