For most employers, hiring casual employees has a number of advantages. Whether you are a small or large business, engaging casual employees can help increase flexibility in your workforce and afford you the ability to increase staffing levels during your busier months, whilst providing the ability to reduce headcount and/or wages during the quieter months.
However, in recent years there has been a significant focus on what casual employment actual means and it is now crucial that if businesses are engaging casual employees they are doing so on a genuine basis. To this end, employers that incorrectly classify an employee as a casual may leave themselves open to significant liability and potential risk.
In this week’s article we consider the proper legal definition of casual employment and also consider a recent landmark decision of the Full Bench of the Federal Court of Australia which considered whether a casual truck driver whose employment was terminated was entitled to accrued annual leave.
The Legal Landscape
The term ‘casual employee’ is not defined in the Fair Work Act 2009 (Cth) (“FWA”). However, the FWA does make it clear that casual employees do not receive the same benefits available to permanent employees. These benefits include statutory leave entitlements, paid public holidays, severance pay in circumstances of redundancy and the minimum amount of notice required to be given by an employer upon the termination of a permanent employee’s employment. To compensate casual employees for not having access to these entitlements and less job security, they are entitled to receive a casual loading to the minimum rates of pay for permanent staff.
The issue of whether an employee has been appropriately classified as a casual has, however, arisen when casual employees are working regular and predictable hours for an extended period of time. In these circumstances, it raises the question of whether the employment relationship, in reality, is one of a casual nature. The common law test for casual employment usually starts from the premise that casual employment has no continuity of engagement and is required on an as-needs basis. However, the Court will usually consider a number of factors to ascertain whether the employment relationship is genuinely casual. These factors may include:
- the regularity and certainty of work and hours of work including the existence of an organised roster;
- the existence of consistent start and finishing times for shifts;
- whether the employee follows a particular pattern of work, and the predictability of those hours;
- the mutual expectation of continuity of employment;
- how wages are paid – casual employees are generally paid by the hour rather by salary;
- whether the employee was notified of the casual nature of the employment; and
- an employee’s length of service with the organisation.
Where the work is regular and systematic, and the employee has a reasonable expectation of ongoing work, the engagement will not be considered casual. There can be significant ramifications for employers if an employee is found to be a permanent employee despite being classified as a casual. This can be highlighted by the below landmark decision recently handed down by the Full Court of the Federal Court of Australia.
Landmark Decision
In WorkPac Pty Ltd v Skene [2018] FCAFC 131 (“WorkPac”), Mr Skene was employed on a casual basis by WorkPac, a labour hire company, performing duties as a dump truck operator at a coal mine from 17 April 2010 to 17 July 2010 and then again at a various other coal mines from 20 July 2010 to 17 April 2014. Mr Skene worked a roster of 12.5 hours per shift on a 7 day on, 7 day off, continuous roster arrangement. As such, Mr Skene argued that he was a permanent full-time employee of WorkPac and entitled to annual leave in accordance with their applicable workplace agreement and the FWA. WorkPac argued that Mr Skene was a casual employee and thus not entitled to annual leave under either their workplace agreement or the FWA.
Mr Skene was successful at first instance and the matter was appealed. On appeal, the Full Bench stated that the relevant test to be applied when assessing if an engagement was a genuine casual relationship was that 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. It was further held that determination of whether an employee is truly a casual employee must be assessed by looking at “the conduct of the parties to the relationship and the real substance, practical reality and true nature of that relationship”.
Importantly, the Full Bench also held that an employee who commences their relationship as a casual can later become part-time or full-time “because its characteristics have come to reflect those of an ongoing part-time or full-time employment”. It was stated that although a casual employee is paid casual loading, this will not be a determinative factor of whether the employment is casual but speaks of the intent. Instead, consideration is required to look at whether the casual relationship has been put into practice and if achieved, has been maintained.
It became evident that Mr Skene’s pattern of work was regular and predictable, continuous and not subject to significant fluctuation in circumstances where there was plainly an expectation that Mr Skene would be available, on an ongoing basis, to perform the duties required in accordance with the 12 months roster set in advance. In conclusion, the Full Bench found that Mr Skene was entitled to annual leave and this entitlement should have been accrued by WorkPac and paid upon termination of his employment notwithstanding the fact he had signed a casual employment contract and had received the casual loading.
It is notable that in adopting this approach, the Full Bench has effectively overturned previous decisions in this area which had indicated that if an employee was engaged as a casual in accordance with the terms of the applicable industrial instrument and paid a casual loading, they could generally be considered a casual employee, notwithstanding their actual working arrangements or pattern of work.
The key takeaway from this decision as it stands is that if an employee has a regular and predictable pattern of work with an expectation of ongoing engagement, they may well (and it now appears likely) be considered a permanent employee as opposed to a casual employee.
In light of this decision, a number of employer groups have voiced their concerns in relation to casual workers “double dipping” by claiming annual leave on top of their casual loading. As a result, employer groups are pressing the government to provide a legislative fix to the precedent this decision has now created. Many expected WorkPac to appeal the decision, however, the deadline to appeal has now passed and it seems WorkPac did not file an application to apply for special leave to the High Court in order to appeal the decision.
Other Risks
In addition to the significant risk the decision in Workpac has now created for employers who have long term casual employees, it should also be noted that long term casual employees with reasonably predictable hours and an ongoing expectation of work, have the right to bring an unfair dismissal claim in the same was as permanent employees.
Lessons for Employers
As a result of the above decision, a large number of employees currently described by employers as ‘casuals’ could in fact be permanent. This may have far reaching consequences leaving Australian businesses facing the potential of significant liabilities for the back payment of entitlements arising from the engagement of casual employees.
If your business currently employs a casual workforce, we recommend you consider the following:
- Review the definition of ‘casual’ in any modern award or enterprise agreement applicable to your business;
- Review your current casual workforce to ensure those employees are genuinely casuals;
- Continue on an ongoing basis to review your casual engagements to ensure they do not develop into a part-time or full-time relationship;
- Consider whether it may be appropriate to offer permanent employment to long-term casual employees;
- Review your current rostering system and ensure casual employees are not working regular systematic hours over an extended period of time; and
- Ensure you have well-drafted casual employment contracts in place which clearly outline the nature of the work and that the casual employee will be paid a casual loading in lieu of the ordinary employment entitlements and benefits enjoyed by permanent staff.
If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.
This alert is not intended to constitute, and should not be treated as, legal advice.