Don’t be too casual about employee entitlements

In the decision of Skene v Workpac Pty Ltd [2016] FCCA 3035, the Federal Circuit Court found that an employee, engaged as a casual worker and paid a casual loading, was also entitled to annual leave under the Fair Work Act 2009 (Cth) (Act).

Background

In this case, Mr Skene worked for Workpac Pty Ltd (Workpac), a labour hire business that supplied labour to various mining companies.  In early April 2010, Mr Skene responded to an advertisement by Workpac for a fly-in-fly-out dump truck operator at the Clermont Mine.

Mr Skene was subsequently successful in his application and in mid-April, he received a ‘Notice of Offer of Casual Employment’ and executed a document entitled ‘Casual or Fixed Term Employee Terms & Conditions of Employment.’  This contract provided that he was employed on a casual basis and paid an hourly rate.

For the duration of Mr Skene’s employment at the Clermont Mine, he worked a pattern of seven shifts of 12.5 hours, followed by seven days off, on a roster that was determined twelve months in advance.

In April 2012, Mr Skene’s employment was terminated.  Upon termination, Mr Skene claimed that he was continuously employed by Workpac and accordingly, was entitled to annual leave.

Decision             

The Federal Circuit Court observed that sections 89 and 90 of the Act only give rise to an entitlement to annual leave if the employee is “other than a casual employee.”

As “casual employee” is not defined under the Act, the Court adopted the common law test of casual employment described by the Full Federal Court in Hamzy v Tricon International Restaurants (2001) 115 FCR 79, and later applied in MacMahon Mining Services Pty Ltd v Williams [2010] FCA 1321.

This test provides that:

that the essence of casual employment is 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, but that is not inconsistent with the possibility of the employee’s work pattern turning out to be regular and systematic.

There is no one definitive test to distinguish between casual and permanent employees. There are several features characteristic of casual employment.”

The Court found the essence of casual employment was missing in this case.  There was no absence of a firm advance commitment as to the duration of Mr Skene’s employment or the days (or hours) he would work.  Those matters were all clear and predictable, and were set 12 months in advance.  On this basis, the Court was satisfied that the applicant was “other than a casual employee” and therefore had an entitlement to annual leave under the Act.

In effect, this meant the employee was allowed to “double dip” by seeking an entitlement the value of which had been compensated for in his casual loading.

Lessons

This case serves as a clear reminder that employers need to review their contractual arrangements to ensure they reflect the true nature of an employee’s engagement.  As there is no statutory definition of ‘casual’, the Courts will focus on the substance of an employment relationship, including:

  • the permanence and regularity of the employee’s roster patterns;
  • what an employee is told upon commencement of employment;
  • the documents signed upon commencement of employment; and
  • the terms of any relevant enterprise agreement or award.

It does not matter what description the parties assign to their relationship. An employee who works regular hours and has good reason to believe that he or she will stay on your books for some time yet may be a permanent employee.  A true casual is characterised by an uncertain employment relationship.

If you incorrectly characterise your casual employees, you may expose your business to a significant underpayment claim for:

  • annual leave;
  • personal carer’s leave;
  • notice of termination; and
  • redundancy pay.

Please contact a member of Lynch Meyer’s Workplace Relations team if you require advice about status and entitlements of your employees.