30 Jun 2011

When will a casual employee be entitled to annual leave?

by Dr Graham Smith, Jim Simmonds

Courts will look at substance, not form, when it comes to determining who is a casual employee - and what entitlements are due.

It has generally been understood that an employee who is paid a casual loading and classified as a casual employee is not entitled to personal/carer's leave and annual leave. Long-term casuals have in some cases been granted a statutory right to long service leave, but this has been regarded as an exception to the general rule.

A series of decisions involving an employee of McMahon Mining Services Pty Limited has called into question the received wisdom that a casual employee is not entitled to annual leave.

What was the employee doing?

An employee of McMahon, Adrian Williams, was engaged as a miner at the Argyle Diamond mine site in the Northern Territory between 9 November 2006 and 16 December 2007.

Mr Williams' letter of appointment specified that he was to be paid at the rate of $40 per hour and that the rate of pay was "all inclusive" and took account that he was a casual employee and was inclusive of a loading in lieu of paid leave entitlements.

The letter of employment also specified the hours of work and that they involved 12 hour shifts on a two week on duty and then one week off duty roster. Apart from the first three months of his employment where he only worked day shift, Mr Williams worked one week on days and one week on nights.

For most of the time he was employed by McMahon he worked on mobile equipment as part of a crew that worked on a roster. The roster set out his night and day shifts and the times when he was to fly in and out of the mine. Mr Williams' accommodation at the mine was provided by his employer.

Was Mr Williams a casual employee?

The decision related to work periods when the former Workplace Relations Act 1996 (WR Act) was in operation. The provisions relating to the Australian Fair Pay and Conditions Standards provided that employees were entitled to minimum periods of annual leave. The WR Act and the decision in the Federal Magistrates Court also specified that a casual employee was not entitled to annual leave (section 227).

But the issue was whether Mr Williams was a casual employee within the meaning of the WR Act. The WR Act did not define who was or was not a casual employee. In the Federal Magistrates Court, FM Lucev ruled that the Court could look behind the label "casual" assigned by the parties to the employment relationship. He said that the judgment as to whether Mr Williams was a casual and entitled to annual leave should be made first by looking at court decisions on who is and is not a casual employee, and secondly by reference to the statutory provisions in the WR Act itself.

FM Lucev first determined that Mr Williams was not a casual employee having regard to the existing case law. McMahon expected Mr Williams to be available on an ongoing basis to perform the duties required of him, in accordance with the roster, until such time as the employment came to an end. The work was performed in accordance with a stable, organised and certain roster, which was published in advance. FM Lucev formed the view that there was a mutual expectation of continuity of employment. Mr Williams was not regularly contacted and asked to work. Rather this was a contractual relationship where the work was organised in advance.

Consequently FM Lucev determined that section 227 of the WR Act which stated that a casual employee is not entitled to annual leave did not apply. Mr Williams was not a casual employee for the purposes of section 227.

FM Lucev found nothing in other parts of the WR Act that could be taken to exclude Mr Williams' status as an ongoing employee or that he was otherwise disentitled to annual leave. However, he found that McMahon might be able to set off against Mr Williams' entitlement to be paid accrued annual leave any sums of money identifiably paid to him in lieu of annual leave.

The appeal to Federal Court

Mr Williams appealed the decision and the appeal was heard by Justice Barker of the Federal Court. Justice Barker upheld FM Lucev's decision that Mr Williams was not a casual employee and confirmed that Mr Williams had an entitlement under the WR Act to be paid to annual leave or payment in lieu.

Justice Barker cast doubt upon whether there could be any set-off in relation to the entitlements to annual leave. This is because section 173 of the WR Act provided that:

"A term of a workplace agreement or a contract has no effect to the extent to which it purports to exclude the Australian Fair Pay and Standard or any part of it. "

However Justice Barker ultimately left it to FM Lucev to determine the question of set-off when the matter was remitted back to the Federal Magistrates Court following the appeal.

FM Lucev determined that there could not be a set-off, because of the express language in section 173.

How does the Fair Work Act 2009 deal with casual employees' leave entitlements?

Under the National Employment Standards (NES) employees, other than casual employees, are entitled to annual leave (section 86). However, as with the WR Act there is no definition of casual employee.

Furthermore, section 61(1) of the FW Act provides that the Part of the FW Act that contains the NES "sets minimum standards that apply to the employment of employees which cannot be displaced, even if an enterprise agreement includes terms of the kind referred to in subsection 55(5)" (section 55(5) allows awards and enterprise agreements include provisions that operate as parts of the NES.)

Section 61(1) of the FW Act and section 173 of the WR Act are in similar terms. Consequently, even if an employee is employed as a casual employee under terms of an enterprise agreement that permit the engagement of casuals (and where the enterprise agreement specifies that casual employees are not entitled to annual leave), if the employee is not truly a casual employee, he or she may be entitled to annual leave, even if paid a casual loading.

In McMahon Mining Services the Court did not need to rule on the effect of specific enterprise agreement provisions entitling an employer to classify an employee as a casual employee and to pay a casual loading in lieu of annual leave etc, and whether in such circumstances a regular long-term casual would be nevertheless entitled to annual leave. At some time in the near future a court is likely to have to confront this issue.


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