Any organisation which employs casual employees needs to be aware of the implications of the recent decision of WorkPac Pty Ltd v Skene  FCAFC 131.
In this decision, the Full Court of the Federal Court of Australia (Court) found that if an employee engaged as a 'casual' has a firm advance commitment as to the duration of the employee's employment or the days (or hours) the employee will work, the employee is likely not to be a casual employee.
Importantly, the Court found that such an employee would be entitled to annual leave (and payment for annual leave on termination), even if the employee's remuneration includes a casual loading.
The decision will have significant and costly consequences for many employers across Australia. It is also a timely reminder to consider your obligations to 'true' casuals under casual conversion clauses, now present in most modern awards.
WorkPac Pty Ltd (WorkPac) operates a labour hire business. In 2010, it employed Paul Skene (Mr Skene) and deployed him to work as a truck driver at various mines in Queensland. The first was operated by Anglo Coal and the second was a Rio Tinto mine at Clermont.
Mr Skene was given a "Notice of Offer of Casual Employment" and executed a document entitled "Casual or Fixed Term Employee Terms & Conditions of Employment". WorkPac paid him weekly, firstly at a flat rate of $50 an hour and later $55 an hour. He had to fill out a weekly time-sheet and was paid for the hours he worked.
For the entire period of his employment at the Clermont mine, Mr Skene performed the duties of a dump-truck operator working a pattern of seven shifts of 12.5 hours per shift, followed by seven days off in accordance with a pre-set roster provided by Rio Tinto. The rosters were set 12 months in advance. Mr Skene did not work any other shifts apart from those provided for by his rosters.
The Court considered the relevant case law and statutory framework and held:
- The essence of casualness is 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'.
- Put another way, a casual employee has no firm advance commitment from the employer to continuing and definite work according to an agreed pattern of work. Nor does a casual employee provide a reciprocal commitment to the employer.
- This 'essence of casualness' will usually manifest in irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability of work.
- Whether the requisite firm advance commitment to continuing and indefinite work (subject to rights of termination) is absent or present must be objectively assessed.
- An employment arrangement which commences as casual employment may become full-time or part-time because its characteristics have come to reflect those of an on‑going part-time or full-time employment arrangement.
- Payment of a casual loading to compensate for the inability to take paid leave does not remove the obligation to pay annual leave under the National Employment Standards in the Fair Work Act 2009 (Cth).
Applying these principles, the Court found the essence of casual employment was missing in relation to Mr Skene's employment. Mr Skene's pattern of work was regular and predictable, continuous and not subject to significant fluctuation. This was in circumstances where there was plainly an expectation that Mr Skene would be available, on an ongoing basis, to perform the duties required of him in accordance with his roster (set 12 months in advance).
Consequently, the Court dismissed WorkPac's appeal. The Court ordered that WorkPac was liable to pay Mr Skene for accrued annual leave which should have been paid on the termination of his employment. It also ordered the case be sent back to the Federal Circuit Court of Australia to determine the penalties to be imposed on WorkPac for its breaches of the Fair Work Act arising from the failure to pay the annual leave.
Lessons for employers
Employers can draw the following lessons from the Court's decision in WorkPac v Skene:
- Avoid engaging 'casual' employees to work regular and predictable hours of work, regular work patterns, or on a continuous basis (in particular, avoid rostering casual employees too far in advance).
- Ensure your casual employment agreements clearly describe the casual nature of the engagement and the consequences flowing from this.
- Paying a casual loading does not mean an employee is a casual and may not remove the obligation to pay annual leave.
- Nonetheless, ensure your casual employment agreements provide for a separate casual loading and specification that the loading is and can be set off against leave entitlements.
- Casual employees should never be used to fill a permanent position. Use of casual employees is generally better limited to situations such as covering short term absences of other employees, fluctuations in workload, and where the nature of the work/industry is such that hours and patterns of work are unpredictable and varied.
If your organisation employs casual employees, in light of the decision in WorkPac v Skene, you should review all their employment arrangements, including their employment agreements.
Why? To assess whether your organisation may need to seek legal advice to determine whether it is exposed to liability for unpaid annual leave owing to 'casual' employees. Your organisation may also owe such employees other unexpected obligations, such as providing paid personal/carer's leave, notice of termination of employment, and redundancy pay (depending on the size of your business).
You should also consider the impact of casual conversion clauses in applicable modern awards (and enterprise agreements, if your organisation has one). Such clauses impose various obligations on employers to offer permanent employment to casual employees after they have been employed for specified periods of time. This is likely to impact your organisation if you employ award-covered employees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.