A recent decision of the Full Bench of the Fair Work Commission has wide reaching implications for certain casual employees.

As a result of the Full Bench’s decision in AMWU v Donau Pty Ltd [2016] FWCFB 3075 (15 August 2016), Donau Pty Limited (known as Forgacs), which is making a large proportion of its workforce redundant due to the completion of a ship building contract, has been required to recognise certain periods of prior casual service when calculating the redundancy pay due to permanent employees with prior casual service.

The matter came before the Full Bench after a dispute arose between AMWU and Forgacs regarding the correct way to calculate redundancy payments under the applicable enterprise agreement. Forgacs recognised prior ‘contiguous’ periods of casual service for the purpose of calculating long service leave payments under long service leave legislation, but did not do so when calculating notice or redundancy payments under the Forgacs enterprise agreement (Forgacs EBA). AMWU challenged this position and argued the Forgacs EBA, which incorporates the National Employment Standards and applicable modern award, required prior ‘contiguous’ periods of casual service to be counted towards ‘continuous service’ for the purposes of the clauses addressing notice of termination and redundancy payments under the Forgacs EBA.

To resolve the dispute, it was necessary for the Full Bench to determine how section 22 of the Fair Work Act 2009 (FW Act) (which sets out the definitions of ‘a period of service’ and ‘continuous service’ as they are used throughout the FW Act) is to be interpreted. The interpretation is relevant to, among other things, the calculation of statutory notice of termination and redundancy pay.

Prior to being referred to the Full Bench, the matter had been heard by a single Commissioner of the Fair Work Commission. The Commissioner found the periods of casual employment prior to permanent employment did not count as service for the purposes of calculating notice on termination or redundancy payments under the Forgacs EBA (the Commissioner noted that the 25 per cent loading for casual employees in the Forgacs’ EBA compensated the employees for notice and redundancy pay entitlements).

However, on appeal, the majority of the Full Bench found ‘continuous service’ (as defined in section 22 of the FW Act) includes any period of regular and systematic casual employment. The Full Bench reached this conclusion because that employment was not expressly excluded from the ‘continuous service’ definition (as other periods are, such as unauthorised absences from work). The consequences of potential ‘double dipping’ for service-based entitlements such as annual leave will now doubtlessly be the subject of considerable debate.

Lessons for employers

For Forgacs, and employers generally, this means employees who are entitled to redundancy pay under the FW Act will be entitled to have that payment calculated by reference to their service, taking into account any period of regular and systematic casual service that occurred immediately prior to their permanent employment.

For employees who have the benefit of a redundancy policy that provides for redundancy pay that is more generous than the statutory minimum, whether an employee is entitled to have prior casual service taken into account will depend on the terms of the relevant policy and the affected employee’s employment contract. For example, if an employer’s redundancy policy is incorporated into an employee’s contract of employment and refers to an employee’s continuous service as being calculated in accordance with the FW Act, then the employee will be entitled to have their prior regular and systematic casual service counted when calculating any redundancy payment to be made to them.

It is important to note, however, that a permanent employee’s prior casual service that is not regular and systematic will not count towards the employee’s ‘continuous service’ (i.e. not all casual service is ‘equal’).

Further, the decision does not result in casual employees who are employed on a regular and systematic basis now being entitled to redundancy pay. Casual employees are expressly excluded from the FW Act redundancy pay entitlement (see section 123(1)(c)), and the fact that they may have systematic and continuous casual service does not change this. As such, the impact is limited to current employees who are eligible for statutory redundancy pay (such as permanent employees or maximum term contract employees who are retrenched within the term of their contracts) who have a combination of permanent and prior regular and systematic casual service. However, pending any appeal, advice should be sought upon ‘conversion’ of employees from casual to permanent or maximum term contract status. Transfer of business liabilities may also be affected.