Earlier this month we reported on the decision of AMWU v
Donau Pty Ltd  FWCFC 3075 (Donau),
where the Full Bench of the Fair Work Commission
(Commission) found that service of an employee as
a casual employee prior to becoming a permanent employee is to be
taken into account when calculating redundancy pay entitlements. We
noted that it is likely that this decision will not only affect the
calculation of redundancy payments, but will also have significant
ramifications on the calculation of other
"service-related" entitlements, such as annual leave,
personal/carer's leave and notice of termination.
Decision at First Instance
At first instance, the Commission considered the interpretation
of a certain provision in an enterprise agreement of which the
Respondent was a party (the EA). In doing so the
Commission looked also to the construction of the Fair Work Act
2009 (Cth) (the Act), on the basis that the
EA incorporated provisions of the National Employment Standards. At
first instance, Commissioner Riordan found that employees who had
been employed by the Respondent as casuals before being appointed
to permanency were paid a casual loading which compensated the
employees for notice and redundancy pay entitlements. It was held
that prior contiguous service did not count towards the calculation
of the period of service when calculating notice and redundancy
pay. The Australian Manufacturing Workers' Union
(AMWU) appealed the decision.
Full Bench Appeal
Senior Deputy President Drake and Deputy President Lawrence
granted permission to appeal, and quashed the earlier decision of
Section 22 of the Act was considered, and it was found that the
definition of "continuous service" included
periods of "regular and systematic casual
employment". While only the redundancy provisions of the
Act were considered in the proceedings, as other entitlements (such
as annual leave and personal/carer's leave) are calculated with
reference to the definition of "continuous service" it is
likely other service based entitlements will also be required to
calculate service as a casual. Casual employees who do not have any
periods of "permanent" employment will continue to be
excluded from receiving redundancy pay entitlements.
In a dissenting judgment, Commissioner Cambridge was of the view
that "any arrangement of casual employment, by its
intrinsic nature, does not count as service, nor does it attract
service related benefits...", and raised concerns with
the wider effects the decision is likely to have to the calculation
of other entitlements. In considering the reasoning applied by the
majority, Commissioner Cambridge highlighted the risk and
implications of the decision, by noting that a permanent employee
who formerly worked on a casual basis for one day per week for a
period of seven years (this being "regular and systematic
employment"), would receive redundancy entitlements based on
the full seven year period.
Subsequent to Donau, the Australian Industry Group
(Ai Group) has requested that the Commission
reconsider and overturn the Full Bench's majority decision
arguing that casual service should not be included when calculating
termination entitlements. The request has been made in conjunction
with submissions lodged in respect of the Commission's 4 yearly
review of modern awards. Ai Group have noted that Donau
involved the construction of certain provisions in an enterprise
agreement and argued that different principles apply to the
construction of statutory provisions. Further that because casuals
receive a casual loading, to count casual service would be
Submissions have also recently been filed by the AMWU and the
Australian Council of Trade Unions (ACTU) opposing
Ai Group's submissions, and by the Australian Chamber of
Commerce and Industry, in support of Ai Group.
Currently the decision in Donau stands. If you employ
casual employees it is imperative that you review your redundancy
and termination procedures (including redundancies arising from a
transfer of business) and seek advice when the status of an
employee changes and when calculating termination payments. We will
keep our readers updated as to further developments on this
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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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