The Federal Circuit Court of Australia in Skene v Worpac Ptd Ltd has found that an employee, engaged as a casual worker and paid casual rates under an enterprise agreement, was entitled to annual leave as if they were a permanent employee. The decision confirms the approach that a court will examine a number of indicia to ascertain the true substance of the employment arrangement, and not just the terms of the industrial instrument, to determine whether or not the employment is casual.

Implications for employers

The practice of adopting flexible, casual labour hire arrangements is becoming more common in the workplace as a result of a shift away from permanent ongoing employment relationships. The decision in Skene confirms that the nature of an employee’s legal status will not be determined simply by reference to the manner in which the employer and employee characterise or label the relationship. Rather, the courts will consider the substance of the employment relationship to determine whether the arrangement is actually on of casual employment, including:

  • permanence and regularity of roster patterns;
  • what an employee is told at the commencement of employment;
  • the terms of documents signed upon commencement of employment; and
  • terms of the relevant enterprise agreement/award.

Employers must ensure that contractual arrangements reflect the true nature of an employee’s employment, otherwise an employer may be liable for payment and/or back payment of employee entitlements associated with permanent employment, including annual leave, personal leave, notice of termination, and redundancy.

Background

The applicant, Paul Skene, was employed by the respondent, Workpac Pty Ltd, as a dump truck operator at coal mining operations in central Queensland from 17 April 2010.

Prior to commencing employment, the applicant signed a document entitled "Casual or Fixed Term Employee – Terms and Conditions of Employment" which provided that he was employed on a casual basis on an hourly rate of pay.

In July 2010, the applicant accepted employment as a fly-in-fly-out dump truck operator and was provided with a "Notice of Offer of Casual Employment". The applicant worked 12.5 hour shifts on a seven day roster which was determined 12 months in advance.

In April 2012, the applicant’s employment was terminated as a result of allegations about his conduct and behaviour. On termination, the applicant argued that he was continuously employed by the respondent and was entitled to six weeks of annual leave and annual leave loading.

The respondent argued that the applicant was not entitled to accrue annual leave or receive a payment of accrued annual leave on termination as he was not continuously employed, but was employed on a series of separate casual engagements.

The principal issues for determination were:

  1. whether the applicant was entitled to annual leave pursuant to clause 19.1.1 of the Workpac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007 (Agreement) when he worked for the respondent;
  2. whether the applicant was "other than a casual employee" for the purposes of section 86 of the Fair Work Act.

Decision

Clause 19.1.1 of the Agreement entitled permanent on-hire employees to annual leave. Clause 5.5.6 of the Agreement provided that at the time of engagement, Workpac would inform each employee of the status and terms of their engagement. Judge Jarrett found that the respondent offered employment to the applicant as a casual employee in accordance with the Agreement, which indicated that the applicant was engaged as a casual employee and that clause 19.1.1 of the Agreement did not apply him.

His Honour noted that section 86 of the Fair Work Act provides an entitlement to annual leave for employees "other than casual employees". "Casual employee" is not separately defined under the Fair Work Act. Therefore, the common law test of casual employment applied.

Although his Honour found that the applicant was a casual within the meaning of the Agreement, as he was engaged and paid as a casual, his Honour found that the applicant was not a casual for the purposes of the Fair Work Act.

The common law test of casual employment, as set out in MacMahon Mining Services Pty Ltd v Williams [2010] FCA 1321, states that the determination of whether an employee is a casual is a question of fact and the substance of the relationship between the parties should be examined, not just the label agreed by the parties.

Applying the test in MacMahon, his Honour found that the applicant’s employment did not have the usual features of casual employment but instead more closely resembled permanent employment. The applicant’s employment was regular, predictable and continuous with an ongoing expectation he would be available to perform the rostered shifts. His Honour was satisfied that the applicant was "other than a casual employee", and that he therefore had an entitlement to annual leave under section 86 of the Fair Work Act.