A recent Full Bench decision of the Fair Work Commission highlights the value in using an enterprise agreement to remove the doubt that can exist about whether a casual is truly a casual. In this way, an employer can reduce the risk that a person engaged on a casual basis might be found to have the same employment benefits of permanent employees.
The decision arose from a dispute referred to the commission under section 739 of the Fair Work Act 2009 (Cth) (FW Act). The dispute was raised under the Telum Civil (Qld) Pty Limited ABN 98 134 691 482 Section 329 Union Greenfields Agreement Contract Labour Hire - Civil Works February 2009 (Agreement). The dispute was settled by the Commission's power of private arbitration.
Telum Civil (Qld) Pty Limited (Telum) operates a construction business in Queensland. The dispute related to a group of Telum employees who had worked on the 'Origin Alliance Project' whose employment had come to an end because the project was complete and the employees were no longer required.
The Construction, Forestry, Mining and Energy Union (CFMEU) contended on behalf of the employees that they were entitled to redundancy payments under the National Employment Standards (NES) which are set out in the FW Act. The group of employees had been regarded by Telum as casual employees and paid a casual loading. Telum refused to make redundancy payments on the basis that the employees were casual employees and were not therefore entitled to redundancy.
Relevantly, Clause 3.3 of the Agreement provided:
Employees under this Agreement will be employed in one of the following categories:
- permanent employees; or
- casual employees.
At the time of their engagement, Telum will inform each employee of the terms of their engagement and, in particular, whether they are to be a permanent employee or casual employee.
Casual employees will be engaged by the hour. A person engaged as a casual will be paid a loading of 25% on the permanent employee ordinary time wage rates prescribed in clause 6 of this Agreement. The casual loading will be paid in lieu of and compensate for all benefits such as leave, notice, redundancy and other full-time entitlements that do not apply to casual employees.
The Agreement set out the entitlements of notice of termination and redundancy benefits to permanent employees only.
Amongst other things, the CFMEU contended that the employees were not casuals regardless of the label used or the forms surrounding their employment.
At first instance Commissioner Booth held that:
- The employees were engaged for full-time equivalent hours.
- The hours worked by the employees were regular and not subject to variations of any kind. The employees worked regular, consistent start and finish times.
- The employees attended work at the same time each working day without specific direction as there was an expectation they would do so.
Commissioner Booth considered a number of authorities on what constitutes casual employment under the general (common) law. Commissioner Booth decided that the expression 'casual employee' in section 123(1)(c) of the FW Act should be given a meaning consistent with the common law.
On this basis the Commissioner held that the employees were not casual employees and that regardless of the provisions of the Agreement (including the payment of a 25% casual loading), in accordance with the common law, the employees were not 'casual employees' and therefore were entitled to redundancy benefits under the NES.
On appeal the Full Bench of the Fair Work Commission held that Commissioner Booth should not have applied the notion of casual employment under the common law to the FW Act.
After considering a number of historical cases the Full Bench concluded that a range of NES entitlements did not apply to a casual employee including the following:
- Parental leave and related entitlements (other than "long term casuals" as defined);
- Annual leave;
- Paid personal/carer's (sick) leave and compassionate leave;
- Notice of termination and redundancy pay; and
- Public holidays.
The Full Bench noted that all of the entitlements of permanent employees were compensated for in casual loading. To adopt the approach taken by Commissioner Booth would allow for 'double dipping' by employees engaged as casuals and paid the casual loading, but who worked regular and systematic hours. The Full Bench's reasons included:
- It is unlikely the legislature intended that outcome.
- It is an outcome that is inconsistent with the purposes and objects of the FW Act.
- It is an outcome that would tend to impede productivity and flexibility.
In effect, the Full Bench found that any reference to 'casual employee' in the FW Act is a reference to an employee who is a casual employee for the purposes of a Federal industrial instrument. That is, the legislature intended the casual employee, for the purposes of the NES, would be consistent with the characterisation of the employee as a casual employee under an enterprise agreement that applies to the employee. Further, if no enterprise agreement applies, then categorising the employee as casual should be consistent with any Modern Award that applies to the employee.
The decision highlights the importance of having a clause in an enterprise agreement that identifies:
- how a person may be engaged as a casual;
- the casual loading; and
- the particular benefits that are satisfied by the casual loading.
According to the reasoning of the Full Bench, this would prevent an employee engaged as a casual from having entitlements under the NES (such as redundancy and annual leave) that apply to non-casuals, irrespective of the length or regularity of the casual employment. Ultimately the decision demonstrates how important an enterprise agreement (or Modern Award) is when characterising the type of employment and determining any benefits under the NES owing to that employment.
Some caution should be exercised though in relying on this decision in every circumstance. It will not always be the Commission that is called upon to determine the entitlement. A court is not bound by the decision. Whether a court will take the same view remains to be seen.
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