Unfortunately, the hype you will have seen since the handing down of the recent decision of the Full Court of the Federal Court in WorkPac Pty Ltd v Skene [2018] FCAFC 131 on Thursday is not misplaced. It is a decision that affects all employers who employ casuals, not just those in the labour-hire space.

SUMMARY: key actions to take now

Although this case is highly likely to go to the High Court, a decision will still be a long way away and the outcome is by no means certain. We think that you should:

  1. Consider now and then regularly thereafter whether to convert casual employees, who do not have the ‘essence of casualness’ that we discuss further below, to permanent part-time or full-time arrangements (including consistently with a modern award or enterprise agreement obligation where there is one). This now needs to be an ONGOING process; AND
  2. Implement where possible the payment of casual loading as a separately monetary amount rather than pay loaded rates (NB: We accept that many enterprise agreements require flat loaded rates so this is an understandable obstacle where those arrangements are already in place – although consider separating it on a payslip anyway).

Quick background facts

Mr Skene worked for WorkPac as a casual employee from 17 April 2010 to 17 July 2010 and again from 20 July 2010 until his employment was terminated on 24 April 2012. He was provided with a 12 month roster in advance in January 2011 and January 2012 and worked 7 days on, 7 days off rotating day and night shifts in accordance with that roster.

He was paid a loaded rate which was said to be inclusive of casual loading. WorkPac also provided Mr Skene with flights to and from the mine at which he worked and accommodation on site at no cost to Mr Skene.

The decision of the Full Court of the Federal Court

In summary, the Full Court held that Mr Skene was not a casual for the purposes of either his enterprise agreement or the National Employment Standards (NES). Accordingly, Mr Skene was entitled to have been paid out his accrued annual leave on the termination of his employment with WorkPac – but with the kicker that he was to be paid his annual leave at the loaded rate rather than a base rate exclusive of casual loading.

There were two issues in the case – those being whether Mr Skene was a casual employee for the purposes of:

  1. The NES – specifically whether he was exempted from the entitlement to annual leave under s86 of the Fair Work Act (ie does the word “casual” take the ordinary legal meaning from previous Court cases, or does it have a specialised industrial meaning commonly understood from its use in industrial awards and agreements); and
  2. The WorkPac Enterprise Agreement – specifically whether being informed he was a casual was sufficient to determine objectively his status as a casual under the Agreement (ie can an employer make someone a casual by declaring them to be a casual?).

Issue #1 – a casual under the NES?

The Full Court held that the term ‘casual employee’ was defined by its commonly understood legal meaning from decided legal cases. The Court reasoned that unless there was a clear expression by the Parliament to the contrary (which there was not), then Parliament is presumed to have had that intention.

As to the decided cases, the Court analysed the various lines of authority and determined that the consistent approach of the Courts was to find that the ‘essence of casualness’ was the “absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) an employee will work”. To that end, the indicative factors are whether the employee’s engagement is one of “irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work“.

In reaching this outcome, the Full Court rejected the correctness of the recent decisions of the Full Bench of the Fair Work Commission in Telum Civil (Qld) Pty Ltd v Construction, Forestry, Mining and Energy Union [2013] FWCFB 2434 and the Casual Conversion Case (Re 4 Yearly Review of Modern Awards – Casual Employment and Part-time Employment (2017) 269 IR 125; [2017] FWCFB 3541) which both held that a casual is an employee who is engaged and paid as such as per the Modern Awards. The Court reasoned that this could not be so because the NES prevails over Modern Awards and enterprise agreements and therefore those instruments could not have been intended by Parliament to have modified the definition of “casual employee” under the Act.

Issue #2 – a casual under the Agreement?

The Full Court held that an employer cannot, by its declaration of status to an employee, make that employee a casual at law. Put another way, whether a person is a casual is still objectively determined by reference to the “essence of casualness” referred to above.

To that end, the Court also emphasised that the act of complying with the requirement to “inform” an employee that they were engaged on a casual basis, did not mean that the agreement was defining them to be a casual.

The troubling aspects and implications of the Skene Case

What about the definition of “long term casual employee” in the Fair Work Act?

“Long term casual employee” is defined to be an employee who is a casual employed on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months.

The Court reasoned that its decision still conformed with this definition. Based on what was said to be analogous workers compensation authority, the Court decided that the regular and systematic element turned on the engagements, rather than the hours of work. While the Court gives examples in the decision to explain its reasoning, it would seem that those examples cover “regular” but a query arises as to whether they also explain how the examples were said to be conformably “systematic”.

The ‘double-dipping’ issue

Much of the shock echoing around employers in relation to the decision of the Full Court centres on the decision ‘passing the pub test’ and the view that if an employee is paid a casual loading but is also entitled to annual leave under the NES, then that employee is ‘double dipping’.

The Full Court rejected this notion on the basis that, if the hierarchy and interaction between the NES, modern awards and enterprise agreements is respected, and it is recognised that the NES holds precedence over modern awards and enterprise agreements, then the issue does not arise because nothing in the Fair Work Act requires payment of casual loading to employees who are not casual employees (and who are entitled to annual leave under the NES).

What is likely to play out in practice of course is that the casual loading will have been paid on the (perhaps erroneous) presumption of the employer that the employee is a casual and not entitled to annual leave. In this regard, the Full Court did recognise that in such a situation it may be said that the employee then provided with annual leave would be compensated twice for the same entitlement.

In Mr Skene’s case however, and in that of many casual employees paid ‘loaded rates’, the Court said that there was no identifiable casual loading paid to him by WorkPac. The Court also held that even if such a loading was paid was not a legitimate basis for construing that he was not entitled to annual leave under the NES.

What now?

As we say above, unless your casual employees are employed with that ‘essence of casualness’ determined by the ‘irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work’, you are at very serious risk of those employees being found to be permanent employees.

Although a High Court appeal or legislative change may be coming, at this time the decision reflects the law of the land and will almost certainly be the basis of only increasing numbers of claims from casual employees and their representatives.

A copy of the decision can be found here.