Australia: Casual employment: The new rules of engagement

Last Updated: 26 August 2018
Article by Michael Byrnes

A recent decision of the Full Court of the Federal Court of Australia, WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene), held that an employee who had been categorised as a "casual" by the employer, WorkPac, was not in fact a casual but rather a permanent employee and, as a result, entitled to the annual leave associated with such employment.

The decision overturns the conventional wisdom that an employee who is "paid and engaged" as a casual pursuant to an industrial instrument (that is, described as a "casual" and paid the casual loading) can be treated as a casual employee even in circumstances where the pattern of days and hours worked by the employee might, applying common law principles, suggest otherwise.

Skene opens up the real prospect that many casual employees are currently being miscategorised and, as a consequence, might have valid claims for entitlements associated with permanency (such as annual and personal leave). It is a decision with potentially significant ramifications for many employers.

THE CONVENTIONAL WISDOM

The conventional wisdom was reflected in the decision of Telum Civil (Qld) Pty Limited v Construction, Forestry, Mining and Energy Union [2013] FWCFB 2434 (Telum) in which the Full Bench of the Fair Work Commission (FWC) held that employees who were engaged and paid as casual pursuant to an industrial instrument were "casual employees" for the purpose of the redundancy provisions of the Fair Work Act.

The relevant clause considered in Telum was in the following terms:
"A casual employee is one engaged and paid in accordance with the provisions of this clause. A casual employee shall be entitled to all of the applicable rates and conditions of employment prescribed by this Award except annual leave, personal leave, parental leave, jury service, public holidays and redundancy."

The approach adopted by the FWC in Telum eschewed the common law indicia of casual employment (such as number, regularity and variation of hours and direction as to attendance) instead treating the engagement and payment of employees as "casuals" consistent with the terms of the applicable industrial instrument as determinative.

As such, consistent with Telum, many employers operated on the assumption that provided they "engaged and paid" an employee as a casual then, irrespective of the pattern of hours worked or other factors, they would be considered as a casual employee for the purpose of entitlements under the Fair Work Act.

THINGS HAVE CHANGED

In Skene the Federal Court rejected the approach in Telum and had regard to the broader common law tests of casual employment to determine whether an employee was in fact a "casual" for the purpose of the applicable industrial instrument.
In doing this, the Federal Court placed particular significance on casual employees not having a "firm advance commitment" from the employer for continuing and indefinite work according to an agreed pattern.

The Federal Court developed this further at paragraph 173:
"The indicia of casual employment referred to in the authorities – irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability – are the usual manifestations of an absence of a firm advance commitment of the kind just discussed. An irregular pattern of work may not always be apparent but will not necessarily mean that the underlying cause of the usual features of casual employment, what Hamzy identified as the "essence of casualness", will be absent."

It was held that the payment of casual loading might reflect the intention of the parties but is not determinative. In this regard the Federal Court observed at paragraph 182:
"The payment by the employer and the acceptance by the employee of a casual loading, like the description of the type of employment given by the parties in their contractual documentation, speaks to the intent of the parties to create and continue a casual employment. But the objective assessment will need to consider whether that intent has been put into practice and if achieved, has been maintained. The objectively demonstrated existence of a firm advance commitment to continuing and indefinite work (subject to rights of termination) according to an agreed pattern of work will ordinarily demonstrate a contrary intent and the existence of on-going full-time or part-time employment rather than casual employment. The key indicators of an absence of the requisite firm advance commitment will be irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work of the employee in question. Those features will commonly reflect the fact that, whilst employed, the availability of work for the employee is short-term and not-ongoing and that the employer's need for further work to be performed by the employee in the future is not reasonably predictable."

Applying this analysis to the instant facts led the Federal Court to find that Mr Skene was not a casual employee and therefore WorkPac was liable to pay both compensation for its failure to meet entitlements to annual leave and penalties in respect of that failure.

WHAT SHOULD EMPLOYERS DO?

Understandably, this decision has caused consternation among many employers. The common assumption that an employee engaged and paid as a casual pursuant to an industrial instrument (such as a modern award or enterprise agreement) can be safely treated as a casual (that is, paid a casual loading but then not paid entitlements such as annual leave and personal leave associated with permanency) has been proven false.

Compounding the problem, an employee may be able to "double dip" in circumstances where they are wrongly categorised as a casual; they receive the loading but may still be entitled to the very entitlements for which the casual loading is intended to compensate. Further, an employer who wrongly categorises an employee as casual may also be liable for penalties under the Fair Work Act.

Employers should carefully examine the employment patterns of employees they have categorised as casuals (particularly those so categorised on the basis they are engaged and paid as casuals pursuant to an industrial instrument). Given that the decision in Skene also contemplates the proper category of an employee varying over time as circumstances change, such reviews should be undertaken periodically.

Where there are employees who are categorised as "casual" but don't have irregularity, uncertainty, unpredictability, intermittency or discontinuity in the pattern of their work, then the employer may need to seriously consider whether those employees are actually part-time rather than casual, and ultimately implement an orderly transition to give effect to the conclusions reached.

For further information please contact:

Michael Byrnes, Partner
Phone: + 61 2 9233 5544
Email: mjb@swaab.com.au

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.

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