A full bench of the Fair Work Commission has found that that a period of “regular and systematic” casual service with an employer, followed by a transition to permanent employment with the same employer, will be included in the total service period used to calculate the employee’s entitlement to notice of dismissal and redundancy pay.

In the case of AMWU v Donau [2016] FWCFB 3075 (15 August 2016), the Fair Work Commission has adopted a broad interpretation of the term “continuous service” that results in a better entitlement to notice of dismissal and redundancy pay for some employees.

The decision seems to turn on its head most traditional understandings of “service” and “continuous service”; is counter to the default statutory position that casual employees have no entitlement to notice of dismissal and redundancy pay in redundancy situations, and; may well have broader implications.

How a casual employee’s service can count towards redundancy pay

Usually casual employees are not entitled to redundancy pay or notice of dismissal because section 123 of the Fair Work Act specifically excludes them from those entitlements. The Donau decision does not change this. However, the exclusion only applies if the employee in question is a casual employee as at the date of their dismissal.

Until the Donau decision it was unclear whether employees who had worked casually for a period, intermingled with part-time or full-time employment with the same employer, will be entitled to include their period of casual service as relevant to the calculation of an entitlement to notice or redundancy pay.

In Donau the Commission found that the definition of “continuous service” in section 22 of the Fair Work Act “includes [any] period of regular and systematic casual employment” – although section 22 doesn’t expressly say that. Nor does section 22 expressly exclude casual service from the concept of “continuous service” and the full bench (in a majority decision – one Commissioner dissented from it) was not prepared to read that limitation into it.

The result is that, for the time being, when calculating a permanent employee’s period of continuous service for notice and redundancy pay purposes, any intermingled period of systematic and regular casual service has to be included. In other words, the entitlements to notice of dismissal and to receive redundancy pay will not depend only on the period in which the employee was permanently employed.

A fair and just result?

Not if you are an employer counting the cost. Casual employees receive a loading – 25% under most awards and the national minimum wage order – to compensate them for things that, as casual employees, they do not get – including redundancy pay. As the Commission observed in the original decision in Donau (overturned by the full bench on appeal):

“it would not seem fair or logical for an employee who has been paid a loading, which ……contain[s] compensation for notice and redundancy pay, to then be able to use that same period of service in the calculation of notice and redundancy pay as a permanent employee.”

What does it all mean?

The decision is potentially significant across a range of fronts.

For employers who are accustomed to converting casual employees to permanent employees – whether at enterprise level or under casual conversion provisions in an award or collective agreement – their potential liability to give notice of dismissal and pay redundancy pay in redundancy situations could now be much higher than might otherwise have been previously understood.

There could also be practical difficulties in working out how much, if any, of related casual service has to be accounted for. Casual service is one thing. Casual service that is “regular and systematic” is another and might not be easy to identify in many cases.

Employers are now left to wonder whether the decision feeds into other service-based entitlements for employees with a history of both casual and permanent service, to such things as annual and personal leave.

And business acquisitions based on prior assumptions about the entitlements of transferring employees associated with mixed periods of casual and permanent employment might have unforeseen and unidentified liabilities associated with them – for both vendors and purchasers – depending on the terms of sale and purchase; adjustments for entitlements between the parties, and; liabilities for service based entitlements taken on by the purchaser.

Employers whose workers are covered by awards or other instruments (including contracts) with casual conversion clauses will be particularly affected. Awards containing casual conversion clauses include these:

  • Building and Construction General On-site Award 2010
  • Electrical, Electronic and Communications Contracting Award 2010
  • Food, Beverage and Tobacco Manufacturing Award 2010
  • Graphic Arts, Printing and Publishing Award 2010
  • Hospitality Industry (General) Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Mobile Crane Hiring Award 2010
  • Registered and Licensed Clubs Award 2010
  • Textile, Clothing, Footwear and Associated Industries Award 2010
  • Timber Industry Award 2010
  • Vehicle Manufacturing, Repair, Services and Retail Award 2010

Key Takeaways

  • Casual service pre-dating or mixed with permanent employment might now count toward notice entitlements and entitlements to redundancy pay in a redundancy situation.
  • This potential entitlement will need to be investigated in any redundancy situation involving workers with mixed periods of casual and permanent employment.
  • Current payroll records of service and service- based entitlements for employees in that situation may be inaccurate.
  • Buyers and sellers of businesses will have to be alert to the potential additional liability for service-based entitlements involved in the dismissal or transfer of employees in connection with the sale.
  • While there is no need to boil the ocean, we would suggest that employers review their industrial environment and practices (contracts, collective agreements, other applicable instruments and policies) to the extent that they relate to service and service based entitlements – particularly for notice and redundancy pay – just to check for, and then deal with, any impacts that Donau might have on your business operations.