"Permanent Casuals" could end up costing you more than you think

Australian businesses have, for many years, operated on the assumption that an employee who is engaged and paid as a casual is also a casual for the purposes of the Fair Work Act.  Such employees receive a loading (usually 25%) as compensation for missing out on benefits that permanent employees receive, such as annual leave, notice of termination and the like.

On 16 August 2018, a Full Court of the Federal Court of Australia challenged this assumption in WorkPac Pty Ltd v Skene.  This decision called into question the finding of a Full Bench of the Fair Work Commission in Appeal by Telum Civil (Qld) Pty Limited [2013] FWFCB 2434 that the definitions of casuals contained in modern awards determine a casual employee’s status for the purposes of calculating entitlements under the National Employment Standards (NES).  In the Workpac decision, the general (common) law definition of a casual as someone who is engaged to undertake irregular or non-ongoing work was preferred.

The WorkPac decision may yet be appealed to the High Court and Parliament may intervene with an amendment to the Fair Work Act.  It is hoped that legislative intervention will occur in the near future to address anticipated double-dipping by employees who have been paid as casuals yet claim to be “legally permanent”. 

The facts of the case

Mr Skene was a dump-truck operator employed as a casual employee of a labour hire provider.  When his employment was terminated, he claimed a payment in lieu of annual leave.  He had been paid a flat rate of $50 per hour but this rate was not clearly nominated as a base rate plus casual loading.  He worked regular and predictable hours week-on, week-off.  His employment was terminable on one hour’s notice.  He received a roster twelve months in advance.  He took one week of unpaid leave in 2011 but when he was stood down for a day he was paid for it. 

The NES does not contain a definition of “casual employee”.  Workpac argued that the definition contained in its Workplace Agreement should be applied but the Court found that a definition of casual employee contained in an industrial instrument could not simply be “copied and pasted” into the NES for the purpose of determining whether a worker has an entitlement to annual leave.

To oversimplify the Court’s reasoning, that would leave the NES silent regarding annual leave entitlements for award and agreement free employees. The Court felt that this was not what Parliament would have intended when drafting the legislation.

The Court decided that Mr Skene was not a casual employee for the purposes of the NES because the purpose of the annual leave provisions in the NES includes providing a guaranteed paid break from work and is therefore directed at employees in continuous employment, rather than irregular employment.  Since Mr Skene had worked continuously, he was not a casual employee for the purposes of the NES. 

The implications of the case

The Full Court defined “the essence of casualness” as there being no ongoing obligation to provide services by either party.  According to the ordinary meaning of “casual employment” Mr Skene was not a casual and was therefore entitled to annual leave. 

If this decision is upheld by the High Court or not adequately addressed by legislative intervention, employers who engage “permanent casuals” will be exposed to the risk of having to pay annual leave, personal leave, notice, redundancy pay and public holiday pay to casual employees, despite those employees receiving a casual loading.

Reconsider the use of casual labour

Now is a good time to revisit the use of casual labour anyway, as a full bench of the Fair Work Commission has finalised a model casual conversion clause that will make its way into modern awards on 1 October 2018. 

As a result of the insertion of the model casual conversion clause, there will be an obligation on employers to provide casuals with a copy of the casual conversion clause within their first twelve months of service, and with respect to the current workforce, by 1 January 2019. 

Regular casuals will be able to request to have their employment converted to full-time or part-time.  The employer may only refuse such a request on reasonable business grounds.  Disputes about refusals may be referred to the Fair Work Commission.  Penalties may be imposed on employers that do not allow conversion.

What to do?

All employers that engage casuals for ongoing or regular work should review their terms of engagement as a matter of urgency.  Please call a member of our employment law team for assistance, or to arrange attendance at a seminar on this topic. 

Also, have you been calculating annual leave wrong?

The Federal Court will next month address the question of how the entitlement to ten days’ annual leave is to be calculated in the case of Mondelez.  If an employee works a typical 12 hour day, are they entitled to 120 hours annual leave per year?  That’s not how most employers calculate the entitlement.  We will provide updates on these developments as they occur.

This article was written by Senior Associate, Thea Birss

Practice Area: Employment

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