With an ever increasing demand for flexibility in employment relationships, the use of casual employees has become widespread. Both employers and employees often rely on casual employment to ensure maximum flexibility in the business. However, are your casual employees actually casual? This is an ongoing debate and one that does not have a simple answer. Describing an employee as casual and even paying a casual loading does not guarantee the employee is in fact casual.
The implications for a business depending on whether an employee is casual or permanent are significant. The entitlements to paid leave, notice of termination and redundancy pay all hinge on the classification of the employee.
Casual employees usually receive a loading amount in lieu of accruing many of the benefits that permanent employees get. This amount is often 25% of their base pay rate.
In August 2018 the Full Court of the Federal Court handed down its decision in WorkPac Pty Ltd v Skene. The Court upheld the decision of the Federal Circuit Court finding that Mr Skene was a permanent employee, despite being described as casual and being paid a higher rate due to casual loading. The result meant that Mr Skene was entitled to be paid for annual leave upon termination of his employment.
Mr Skene was employed by WorkPac as a dump truck driver at a Queensland mine under a labour hire arrangement. He worked in this position for almost two years, working a seven day on - seven day off roster. He was a Fly In Fly Out (FIFO) worker. His roster was set 12 months in advance and the mine paid for his flights and provided accommodation.
In his employment contract, Mr Skene was described as casual and it stated that he would be paid a flat rate per hour that included a “loading in lieu of leave entitlements”. The precise amount (or percentage) he was paid in lieu of entitlements was not identified in the contract. He did not receive any paid leave during his employment. His contract allowed for termination with one hour’s notice. In April 2012, Mr Skene’s employment was terminated. He then made an application to the Court for compensation for unpaid annual leave.
The Federal Circuit Court held that as Mr Skene’s hours of work were clear, predictable and set 12 months in advance, and as both Mr Skene and his employer made a firm advance mutual commitment as to the duration of employment and his days and hours of work, he was not a casual employee for the purposes of the Fair Work Act and the National Employment Standards (NES), and was therefore entitled to compensation for unpaid annual leave.
On appeal this decision was upheld, and the Full Court affirmed the position identified in earlier cases that, in respect of casual employment, the “essence of casualness” includes:
The Court confirmed that the NES has primacy over Awards and Agreements in respect of employment terms and conditions and it sets out the minimum standards which cannot be ignored.
If you engage casual employees, it is critical to review their terms of engagement and work practice.
Some questions you should consider are:
The correct classification of employees is very important to ensure there can be no “double dipping” later, as occurred in Skene’s case. We also recommend establishing systems which allow for ongoing monitoring and review of the employment relationship, and ensuring you have a structure which allows for employees to convert from casual to permanent when and as appropriate.
This article was written by Senior Associate, Adam Crichton
Practice Area: Employment