The Fair Work Commission interpreted the Fair Work Act to take a
broad view of "continuous service", and require certain
previous casual employment to be taken into account when
calculating redundancy pay.
Employers will need to reconsider how they calculate redundancy
pay following a recent decision of the Fair Work Commission ? or
risk not discharging their statutory obligations.
Redundancy pay has commonly been calculated by reference to
employees' part-time or full-time service only, and not
previous casual employment. This has now changed. In AMWU v Donau
Pty Ltd  FWCFC 3075, the Commission interpreted the Fair Work
Act to take a broad view of "continuous service", and
require certain previous casual employment to be taken into account
when calculating redundancy pay.
A risk of employees transitioning from casual to permanent
Employers must now carefully consider the possible consequences
when a casual employee (who is performing regular and systematic
casual work) transitions, without a break in time, to a part-time
or full-time role. In these circumstances, should the permanent
role subsequently be made redundant, when calculating the number of
"years of continuous service" for the purpose of
redundancy pay, the period of casual employment must be
It should be stressed that this does not have any bearing on
situations in which the role of a (genuine) casual employee is
being made redundant. This is because section 123 of the Fair Work
Act continues to provide that the redundancy provisions do not
apply to casual employees. The decision relates only to situations
in which a permanent employee's role is made redundant in
circumstances where the employee has previously transitioned from
(regular and systematic) casual employment.
"Regular and systematic casual" employees are to be
considered under section 22
For the purpose of defining "continuous service" under
section 22 of the Fair Work Act, the Commission determined that
this phrase includes a period of "regular and systematic
casual employment", partly on the basis that section 22 does
not contain any words excluding such an interpretation. However, as
the one dissenting Commissioner put it, the danger is that a casual
employment relationship based on one day of work per week for seven
years might be considered "regular and systematic", with
the entire seven-year period then being subsequently
The implications of the decision are broad because many casual
employees do indeed have some level of prescribed regular working
hours. Moreover, the inclusion of regular and systematic casual
employment in the definition of continuous service under section 22
may have far-reaching ramifications with respect to other
provisions of the Fair Work Act. In particular, although not
considered in this decision, entitlements to annual leave and paid
personal/carer's leave, for example, are also calculated by
reference to years of continuous service as defined by section
Next steps ? minimising the risk of larger redundancy
Employers need to review their redundancy practices, consider
legal implications, and seek advice when changing the status of
employees. In cases where an employer may acquire employees through
a transfer of business, consideration may need to be given to the
sale conditions and indemnities with respect to liabilities arising
from redundancy payments. As discussed above, given the
far-reaching effect of section 22, it is imperative that employers
seek advice as to employees' entitlements when there has been a
change of employment status.
The Commission's interpretation is controversial. One of the
three members of the full bench disagreed with it, and the
likelihood is that there may be an appeal of the decision. For the
time being, however, employers should ensure that their employment
practices adapt and their redundancy liabilities are reconsidered
in response to this decision.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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