Case: WorkPac Pty Ltd v Skene [2018] FCAFC 131

The entitlement to annual, sick and other paid leave depends on whether an employee is employed on a permanent (full-time or part-time) or casual basis. Although the Court's discussion in this case of who will be considered a casual employee was not novel, this decision is a timely reminder for employers to review their employment contracts and relationships, including employment arrangements that operate under a Labour Hire Regime. See our article on the new labour hire regime, included in the May edition of Frontline.

WorkPac operated a labour-hire business. Mr Skene was employed by WorkPac as a dump-truck operator in coal mining operations in central Queensland. The key document governing his employment was an industrial instrument made under the Fair Work Act 2009 (Cth) (FW Act) – "WorkPac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007" (Agreement). The Agreement designated him to be casual employee and provided he be paid a flat hourly rate ($50, later $55) which was expressed to include a 'loading in lieu of leave entitlements'. He was required to submit timesheets.

Upon termination of his employment, Mr Skene claimed that his work arrangements in fact established him as a permanent, full-time employee of WorkPac and thus he was entitled to accrue annual leave (or payment in lieu thereof). Between 20 July 2010 and 17 April 2012, these arrangements involved a pattern of "7 days on, 7 days off" comprising 12.5 hour shifts. In January of 2011 and 2012, he was provided with a 12 -month roster that detailed in advance his schedule for the year. Throughout, he worked in the same crew and the mine provided accommodation and flights in accordance with the fly-in, fly-out nature of the work.

The Full Court of the Federal Court:

WorkPac argued that Mr Skene was a casual employee for the purpose of s 86 of the FW Act, and therefore not entitled to the annual leave entitlements under s 86 which 'apply to employees, other than casual employees.'

WorkPac's principle contention was that "the Agreement designated Mr Skene to be a casual employee and it followed, as a matter of statutory construction, that Mr Skene was also a casual employee under s 86 of the FW Act." This was predicated on the argument that a 'casual employee' for the purposes of s 86 is an employee designated as such by the industrial instrument which covers their employment.

The Full Court rejected this argument, instead finding that the definition of 'casual employees' in s 86 is to be drawn from the common law. This is because the FW Act and the National Employment Standards (NES) which require the payment of leave entitlements are the "pinnacle" of the hierarchy of terms and conditions of employment. They "have primacy over terms and conditions of employment provided by all other instruments including an enterprise agreement, modern award or a contract of employment." Thus, the content of the Agreement could only inform, rather than decide Mr Skene's employment status under the FW Act.

How to determine casual employment:

This case reaffirms that the relevant inquiry for determining the nature of employment is into "the real substance, practical reality and true nature of that relationship" between employer and employee.

Critically, a casual employment relationship must have the "essence of casualness" said to be required in Hamzy v Tricon International Restaurants.[1] Principally, this "essence of casualness" is characterised by an absence of any firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work. This can be contrasted with irregular work patterns, uncertainty and discontinuity, intermittency of work and unpredictability of working hours.

Factors supporting WorkPac's claim that Mr Skene was a casual employee included:

  • the Agreement's designation of Mr Skene that he was a casual;
  • the requirement that he complete timesheets; and
  • Mr Skene's payment according to an hourly flat rate with an alleged 'casual loading'.

Factors supporting Mr Skene's claim that he was a permanent employee included:

  • Regular work pattern and regularity of hours; and
  • Certainty and advance commitments of work in the form of the 12-month rosters.

Ultimately the court concluded that the real nature of Mr Skene's employment with WorkPac was permanent.

1. Are your employees actually casual employees?

If an employee works regular and predictable hours with a reasonable expectation of ongoing work, they may be a permanent employee regardless of how they are described in the relevant contract or industrial instrument. As such, they are entitled to sick, annual and other paid leave. Further, if an employee started out working irregular hours, but now has more regular and predictable shifts, they may become a permanent employee.

2. Do not allow employees to double-dip:

The Court reiterated that if a worker meets the definition of a fulltime or part-time worker, they are not required to be paid a casual loading. However, if the employer elects to pay that loading, this is not a definitive reflection of their employment status.

In WorkPac, the Court found that an employer may be able to 'set-off' the casual loading that has been paid against an employee who later successfully claims that they were entitled to paid leave. However, WorkPac's attempt to set-off was denied because it was not clear what proportion of Mr Skene's hourly rate was paid as the 'casual loading'.

As such, make sure you clarify what percentage of income you are applying as a casual loading to any casual employees. You may be able to set-off that amount against any paid leave if they subsequently establish this entitlement.