A recent Federal Court decision found casual employment needs to retain the “essence of casualness”. What does that mean, and what do HR and businesses need to do?
A casual engagement. A few hours here, a day or two there. No commitments, no annual leave entitlements, no worries. The Parliament of Australia estimates that there were around 2.5 million casuals in 2016, making up around one quarter of the overall workforce. And, given the flexibility that casual arrangements can provide to both businesses and employees, it’s not hard to see why.
A recent Full Court of the Federal Court decision has, however, set off alarm bells for employers who engage casual workers. The Court found that a ‘fly-in, fly-out’ worker was not a casual employee despite being employed as one. Accordingly, the employee was entitled to annual leave; a benefit not otherwise available to casuals. This decision raises many significant questions and issues, going to the very nature of what makes casual employment relationships, ‘casual’.
What is a casual employee?
In a famous judgment Associate Justice Potter Stewart of the U.S. Supreme Court answered the question of how you define pornography by writing, “I know it when I see it”. A similar approach has been historically used in defining ‘casual employment’.
The law is not explicit on the meaning of ‘casual employee’. For example, the Fair Work Act does not precisely define what a casual employee is. What the law does clarify, is this:
- employers can engage long term casual employees which is defined as an employee who has been employed on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months (from the Fair Work Act); and
- each occasion that a casual employee works is viewed as a separate engagement; casual employees may be engaged from week to week, day to day, shift to shift, hour to hour or for any other agreed short period (from the common law).
Clear as mud? To add another layer of complexity, the Full Court of the Federal Court has considered this issue on appeal in WorkPac Pty Ltd v Skene, and found that casual employees will only be those whose employment retains the “essence of casualness”, often identified by:
- irregular work patterns;
- discontinuity; and
- intermittency of work and unpredictability.
Skene claimed he was a permanent employee under the applicable enterprise agreement and the Fair Work Act. He claimed he was entitled to annual leave under the enterprise agreement, annual leave loading and penalties.
Skene was a ‘fly-in, fly-out’ employee employed by labour hire company WorkPac. Skene was given a 12 month roster in advance, worked 7 days on and 7 days off (rotating night and day shifts), and his contract provided that he had a one hour termination period, that his employment was on an “assignment by assignment” basis, that he was engaged for each “discrete period of employment being for… a Casual or Fixed Term hourly basis” and was paid a loaded rate which was said to include casual loading (although this was not clearly shown or articulated on payslips).
Considering the nature of Skene’s position, the Court held that he was not a casual employee. Not only was WorkPac stung by having to pay Skene his accrued annual leave entitlements (despite already paying Skene a casual rate), the Court also imposed a further civil penalty (the amount yet to be determined). It is understood that WorkPac is not going to appeal the decision.
So where to from here?
The decision raises several practical issues for employers who engage casual workers. For example, there is exposure for employers where casual employees do not fit the “essence of casualness” and are therefore at risk of being found to be permanent employees who are entitled to permanent employee benefits and should be paid (or back paid) as such.
While the government could change the law to provide clarification, or address the practical issues arising from the decision, the current political climate doesn’t lend itself to change anytime soon. On this basis, employers and HR managers will need to be aware of the implications of the decision. We recommend that employers:
- review existing casual agreements to limit the risk of repaying casual employees certain entitlements; for example, by checking if the agreements have appropriate set off clauses;
- be more diligent in classifying casuals, as employees who work set, inflexible hours with a degree of certainty about ongoing work are unlikely to be ‘casual’;
- review and monitor your casual workforce: employment arrangements may change during employment and if a casual is no longer a casual, consider converting their employment status to permanent to mitigate any potential exposure (particularly where a casual employee is covered by a modern award containing a casual conversation clause); and
- determine whether casual employees are required: employing a “long-term” casual can be significantly more expensive than a permanent employee, and they do still have rights (e.g. they may have rights to protections from an unfair dismissal).