In a surprising decision that is likely to have far-reaching
implications, the Full Bench of the Fair Work Commission
("Commission") has ruled that, in calculating redundancy
payments, the employee's period of continuous service must take
into account certain periods of prior casual employment.
The employer, Forgacs Engineering Pty Ltd ("Forgacs"),
and its employees were covered by an enterprise agreement
("Agreement"). As part of a large-scale redundancy,
Forgacs calculated redundancy payments for workers, some of whom
were employed on a permanent basis but had prior contiguous periods
of casual service. In doing so, Forgacs counted the prior casual
service for the purpose of long service leave, but not for
calculating notice or severance payments. At first instance, the
Commission held that Forgacs had acted correctly in not counting
periods of casual service as "continuous service." On
appeal, the Full Bench of the Commission overturned the
The Agreement in question specified that redundancy payments
should be calculated by reference to periods of "continuous
service," a term defined in section 22 of the Fair Work
Act 2009 (Cth) ("Act"). The Commission observed
that, while it might seem contrary to "industrial
justice" to allow an employee who has received a casual
loading to have the same period of employment counted toward
severance payments, neither the Agreement nor section 22 of the Act
excluded a period of regular and systematic casual employment from
the definition of "service" or "continuous
service." As a result, where a worker completes a period of
regular and systematic casual employment and immediately thereafter
commences permanent employment, the earlier period should be
included in the calculation of that worker's years of
continuous service. In dissent, Commissioner Cambridge disagreed
with the majority's interpretation of section 22 of the Act and
asserted that casual employment, by its very nature, does not count
as service and is not intended to attract service-related benefits
under the Act.
As a result of this decision, employers who have a practice of
transitioning casual employees to permanent employment should be
aware that any future redundancy entitlements may include casual
periods of service completed immediately prior to the commencement
of permanent employment. This decision has divided many, especially
employer associations. Indeed, in a submission to the Commission as
part of its four-yearly review of modern awards, the Australian
Industry Group asked the Commission to reject the majority finding
in this decision and follow the dissenting judgment, which is more
consistent with previous authorities.
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