The Federal Circuit Court has shattered the notion that engaging casual employees is the most cost-effective solution to meeting spikes in workloads, which could impact on workforce structuring and the employer's bottom line.

Like a department store during the Christmas period, a research institute collating data after a clinical trial, or a pub on weekends, employers may experience increases in customers or workload which require additional staff. But to engage someone on a permanent basis is a significant commitment, particularly where at other times of the year the employer won't always have work for them to do.

The answer, of course, has traditionally been to engage some casual employees. While they cost more per hour than a permanent employee, that's because they are paid a loading (usually 25%) to compensate for the fact they don't have an entitlement to take paid annual leave (and other forms of paid leave). But unlike a permanent employee, they can work on an ad hoc or on-call basis, by the hour if needs be, and the employer doesn't have to be too concerned about staff shortages at busy times nor about the legal ramifications when the employer no longer requires their services (especially where the casual employment is not regular and systematic extending beyond six months). It's the perfect "no commitment" solution to all your employment needs…. at least it was.

In a decision handed down in late 2016 in Skene v Workpac Pty Ltd [2016] FCCA 3035, the Federal Court determined thatMr Skene, who was defined as a "casual" under the relevant enterprise agreement, was nevertheless a permanent employee for the purposes of the Fair Work Act. As a result, notwithstanding that Mr Skene already received a casual loading under the enterprise agreement, he was entitled to take paid annual leave under the National Employment Standards (NES).

The common law characteristics of a casual employee

In reaching this decision, Justice Jarrett relied on common law characteristics of a casual employee for the purpose of determining whether Mr Skene was a casual employee and therefore excluded from annual leave entitlements under NES. These include:

  • that the employer can elect to offer employment on a particular day;
  • when offered, the employee can elect to work;
  • there is no certainty about the period over which employment will be offered;
  • informality, uncertainty and irregularity of engagement; and
  • absence of any firm advance commitment as to the duration of the employee's employment or the days or hours the employee will work.

In this case Mr Skene's employment, which was regular and systematic, did not bear the common law characteristics of a "casual" and he was therefore deemed by the Court to be a "permanent" employee and entitled to annual leave under the NES.

The decision appears to be at odds with established case law. There are authoritative decisions of the Full Bench of the Fair Work Commission and of the Federal Court which endorse a contrary view, which is that regard must be had to the definition of casual employee in an instrument made under the Fair Work Act (such as an award or enterprise agreement) for the purposes of determining entitlements under the Fair Work Act. Those decisions hold that if an employee meets the definition of casual employee under the award or enterprise agreement then they are to be regarded as a casual employee for the purposes of the NES, and are not entitled to paid annual leave.

Where to now?

The Workpac decision is currently subject to an application for leave to appeal to the Federal Court.

If it is allowed to stand it will perpetuate an artificial notion that the NES confers entitlements that are in addition to more beneficial entitlements conferred by an enterprise agreement, and sanction double-dipping into paid leave entitlements.

This would make regular and systematic engagement of casual employees an uneconomical and impractical option for employers in many circumstances and there will be a need to radically rethink the way in which employers address demands for more staff over busy periods. The appeal is due to be heard on 22 March 2017 and Clayton Utz will keep you updated once a decision is published. For the time being though, watch this space!