A recent Full Federal Court decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 will have a significant impact on casual employment.

The Court decided that a worker who was supplied through a labour hire company as a casual truck driver to a mine in Queensland was not in fact a casual employee under the Fair Work Act. As a result, the employee was held to be a permanent full-time employee entitled to annual leave and a payment in lieu of notice when his employment ended.

The decision makes it important to revisit and consider the way in which employers classify and treat employees as “casual” when the employee works set, fixed hours, and there is a significant degree of certainty about their ongoing work.

A further important outcome of the decision that could have a significant effect on employers is that despite the Court affirming that employees are not entitled to double dip (that is, to be paid casual loading and be entitled to paid leave) just because an employer has paid casual loading (because they mistakenly classified the employment as casual) that will not mean the employee will not be entitled to paid leave if later, the relationship is declared to be part-time or fulltime permanent.

The employer argued that the Fair Work Act entitles employees to minimum periods of paid leave, or money in lieu (as casual loading). Therefore, an employee who receives money in lieu (casual loading) is excluded from an entitlement to paid leave. Further, the basis for designating an employee as a “casual employee” comes from the relevant industrial instrument (Award or Enterprise Agreement) that

covers that employee. This is a position adopted by the Full Bench of the Fair Work Commission in some earlier decided cases in the Commission.

Of course, the Federal Court is not bound by Fair Work Commission decisions, so what the Federal Court decided it was to determine; was: did Parliament intend the expression “casual employee” as used in the legislation to take on its ordinary, legal sense, or; was it intended to be used in a specialised non-legal sense common in federal industrial instruments?

The Court decided that the legislation adopted the ordinary legal sense of a “casual employee”. In doing so, the Court held that:
 
The National Employment Standards (NES) in the Fair Work Act sets out the “minimum standards” for employees and these standards cannot be displaced.
 
The NES overrides terms and conditions of employment provided in other instruments, including enterprise agreements, modern awards, or contracts of employment.

The essence of casual employment from the NES is:

1.1 an absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work;
1.2 an absence of any advance commitment from the employer or employee to continuing work on an indefinite basis; and
1.3 irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.

This means if the employment relationship includes a firm commitment to ongoing work for particular hours on a regular and certain basis the employment cannot be said to be casual employment (irrespective of what the parties may elect to call the employment relationship). Whether an employee is a casual employee will be determined on the nature of the relationship itself and not what the parties elect to call it.

Having decided that the employee was not a casual employee (even though the parties called it casual and the employer paid casual loading) the Court had to decide if the employee was entitled to paid annual leave even though the employee was paid casual loading.

To do this, the Court reiterated the fact that the NES overrides the parties’ designation of the employment. This meant that if an employee meets the definition of a full or part time employee, they are not required to be paid a casual loading. Yet, if despite the employee not being entitled to casual loading, the employer paid casual loading (even as a mistake) it does not override the obligation for paid leave and other full-time / part-time employee entitlements.

So, in this case, despite having paid casual loading throughout the term of the employment, the employee was also entitled to be paid the value of his accrued but untaken annual leave entitlement and also a payment in lieu of notice upon termination of employment. You are at risk of your “casual employees” who are paid leave loading nevertheless potentially being entitled to be paid untaken annual leave and receive payment in lieu of notice upon termination of employment, if they -

  1. Have been given a firm commitment to ongoing employment
  2. Work regular, certain and predictable work patterns; and
  3. The reason you call them “casual employees” is because of an award or an employment contract, rather than because of the nature of the employment relationship you have with them.

It is strongly recommended that you ask yourself those questions in relation to each “casual employee”. This will help you determine whether you are at risk of paying leave loading and later, ending up having to pay out untaken annual leave and pay lieu in notice upon termination of employment. If you conclude you are at such risk, you should seriously consider taking steps to formalise the employment as part-time or full-time.

Contact one of McKays employment lawyers to ensure your business is meeting its obligations to your casual workforce.