On 16 August 2018, the Full Federal Court made a finding that will have significant ramifications for the employment of casual employees in all industries throughout Australia.
The Court upheld a decision finding that an employee – who was described as a casual but worked a regular roster set a year in advance – was a permanent employee. As a consequence, the employee was entitled to annual leave under both the National Employment Standards (the NES) and the enterprise agreement which applied to his employment.
The decision means that an employee that has been engaged as a casual on a regular and predictable pattern of work with an expectation of ongoing engagements is likely to be permanent as opposed to casual. This gives rise to significant liability for those organisations that employ casuals on a regular and systematic basis.
The Court also found that where an employee commences employment with irregular hours under a casual contract, the casual can convert into a permanent employee during the course of the employment relationship, notwithstanding that the parties continue to describe the relationship as casual.
Full Federal Court Decision – Workpac Pty Ltd v Skene
In last week’s decision1, the Full Federal Court determined that a casual employee engaged on a regular and systematic basis is considered a permanent employee entitled to annual leave and other entitlements provided by the NES.
The Court held that the determination of whether an employee is a casual must be conducted by assessing “the real substance, practical reality and true nature of the relationship” as opposed to adopting the description the parties have given to the relationship.
The Court affirmed that in order for an engagement to be considered casual there should be no certainty about the period over which the employment is offered and there should be an informality, uncertainty and irregularity about the engagement.
Further, the Federal Court stated that the payment of a casual loading does not necessarily confirm the status of a casual employment relationship. A true casual engagement will only exist if the characteristics of casual employment are present – informality, uncertainty and irregularity. The Federal Court stated that the existence of a commitment to continuing and indefinite work according to an agreed pattern of work will ordinarily be inconsistent with a casual engagement and is more likely to demonstrate the existence of ongoing and permanent employment.
Therefore, if an employment relationship has a level of certainty, regularity and predictability, it is inconsistent with being a casual engagement.
The Full Court found that Mr Skene (a labour hire employee who had been engaged as a casual to work a regular roster) was entitled to annual leave entitlements on termination of his employment, notwithstanding that he had signed a casual employment contract and was at all times treated as casual by his employer.
However, the decision left open the capacity of an employer to ‘set off’ the liability for leave or other benefits against the casual loading, where such loading is clearly expressed as an identifiable amount.
Implications for employers
The Workpac case is a landmark decision that will have significant implications for employers with a casual workforce. The Federal Court commented on the possibility that employment which commences as casual employment may convert to permanent status because its characteristics have come to reflect those of an ongoing and permanent relationship. This means that employees that have been engaged on a “regular and systematic basis” may be entitled to annual leave, personal leave, notice of termination, and redundancy pay, even though the casual employee may have been paid a casual loading.
We recommend that employers act quickly by reviewing their workforce to determine whether any casual employees may have converted to permanent status. Employers will need to consider the true nature of the employment relationship, beyond whatever may have been agreed in writing. This is important because employers can be found liable to pay substantial compensation for unpaid entitlements, as well as severe penalties under the Fair Work Act 2009 (Cth).
We suggest businesses review their casual contracts to ensure that casual loadings are attributed a clearly identifiable amount, and expressed to be able to be set off with an identifiable value for annual and personal leave that would otherwise accrue. The description of an employee as a casual in a contract, and the payment of casual loading, are not decisive factors. However, the payment of a casual loading may be able to be set off against annual leave entitlements where there is a specific amount or percentage of wages attributed to it.
If you would like us to review the arrangements you have with your employees, please feel free to contact us.
1Workpac Pty Ltd v Skene [2018] FCAFC 131
