Your casual workers are not actually casual, says Full Federal Court – so review all casual engagements now!

17 Aug 2018

Yesterday's Full Federal Court decision that a fly in, fly out worker was not a casual employee for the purposes of the Fair Work Act, and was entitled to annual leave, will send shockwaves through many businesses who rely on a casualised workforce, as it makes it much harder to classify and treat employees as "casual" where they work set, inflexible hours, and there is a degree of certainty about their ongoing work (WorkPac Pty Ltd v Skene [2018] FCAFC 131). It's also likely to impact an employer's ability to systematically rely on labour hire, or engage large groups of employees on a casual basis.

We have always known that the systematic and regular engagement of casual employees could be scrutinised but this decision brings the issue front and centre and enhances the odds that casual engagement will be questioned by employees, regulators and courts. The decision means you need to constantly monitor your own workforce.

Further, while the decision also notes that employees are not entitled to double dip (they will either be classed as casual, and therefore entitled to casual loading, or permanent/full time), payment made on the understanding that the relationship is casual may not effectively offset other entitlements later deemed to be owing!

Can the employer define who is a casual employee?

Before the Full Court, the employer, WorkPac, argued that Parliament intended that employees should either be entitled to a minimum period of leave, or moneys in lieu thereof. Therefore, an employee who receives moneys in lieu must have been excluded from their entitlement to take leave.

WorkPac's principal argument was that a "casual employee" is an employee designated as casual by the relevant industrial instrument that covers that employee, in this case the WorkPac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007:

"within the industrial relations system in Australia, it is well recognised that an employee is regarded as a casual employee, for the purposes of identifying and calculating their paid minimum entitlements, if he or she is described or defined as a casual employee under an applicable federal industrial instrument”.

The question for the court was: did Parliament intend for the phrase "casual employee" to be used in its ordinary, legal sense, or a specialised non-legal sense apparently common in federal industrial instruments, as contended by WorkPac? If WorkPac's contention were accepted, employers, through the use of an industrial instrument, would be entitled to define or describe an employee as casual.

To answer this, the Full Court clarified the relationship between modern awards, employment agreements and the National Employment Standards (NES).

Modern awards, employment agreements and the National Employment Standards: a matter of hierarchy

The NES set out the "minimum standards that apply to the employment of employees which cannot be displaced". The Court found that the NES is at the "pinnacle" of the hierarchy of terms and conditions of employment, and have primacy over terms and conditions of employment provided by all other instruments, including enterprise agreements, modern awards, or contracts of employment.

Absent clear language, the Court was unwilling to reverse the order of priority between the NES and awards and enterprise agreements.

So why is this relevant? By concluding that industrial instruments are not the appropriate mechanism to define or describe whether an employee is, in reality, "casual", it meant the Court should turn to the ordinary, legal definition.

This required an assessment of what is the essence of casual employment.

What is the essence of casual?

The Court acknowledged the difficulty characterising casual employment, but ultimately reiterated the idea of identifying the "essence of casualness" first referred to in Hamzy v Tricon International Restaurants trading as KFC (2001) 115 FCR 78. This will consist of, amongst other things:

  • the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work;
  • ·no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work (and the casual employee will also not provide a reciprocal commitment to the employer);
  • irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.

What about double dipping?

The Court made two findings about "double dipping". Where employees are entitled to both the benefits of paid annual leave and a casual loading rate:

  1. first, that there was no evidence that Mr Skene was actually paid a casual loading at all; and
  2. the Court reiterated the hierarchy of the NES – meaning if a worker meets the definition of a full or part time employee, they are not required to be paid a casual loading. If an employer nevertheless elects to pay them loading, that does not reflect on their status of employment, and is not a legitimate basis to make a determination that they are in fact casual.

So, if you make a mistake in the characterisation of an employee and pay casual loading, this does not necessarily get you off the hook for payment of leave and other full-time / part-time employee entitlements.

So ask yourself…

  • Is there a firm advance mutual commitment to ongoing employment?
  • Does the employee work irregular work patterns, with uncertainty, discontinuity, intermittency of work and unpredictability?
  • Do you or your employee know/think they are casual?
  • Does the award or agreement define your employee as a casual employee and is this all you are relying upon to confirm the casual nature of the engagement?
  • Is there certainty over the period over which employment will be offered?

If you are concerned about the basis of casual engagement or whether benefits have been appropriately provided, you should seek advice now and put yourself in the best position to:

  • understand who in your workforce is truly casual;
  • draft contracts to avoid double dipping where uncertainty exists; and
  • establish a system of monitoring and, where necessary, conversion from casual to permanent.
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.