A Full Bench of the Fair Work Commission (FWC) has found that a group of employees who were engaged as casual employees and paid on that basis (including payment of a casual loading) in accordance with the enterprise agreement (Agreement) they were employed under, did not upon termination of their employment have an entitlement to redundancy pay under the National Employment Standards (NES).

This was despite the casual employees working regular, systematic and full-time hours with consistent start and finish times and no need for direction by their employer as to their attendance over a period of more than 12 months. The Full Bench held that in considering entitlements under the NES for casual employees, the legislation was to be construed having regard to the objects and purpose of the statute, rather than the common law meaning of casual employment.

Implications for employers

Following this decision, it appears that the FWC is likely to focus on form, not substance, when considering issues relating to whether or not an employee is employed on a casual basis. Accordingly, the common law definition of casual employment is likely to assume less importance in future. Employers should be aware that this may affect enterprise agreement negotiations, in that it is possible unions may respond by attempting to negotiate more complex enterprise agreement provisions around the nature of casual employment.

To ensure that casual employees (under an enterprise agreement or who are covered by an award) are not entitled to certain entitlements typically reserved for permanent employees (in particular, redundancy pay), employers should generally be careful to engage such casual employees, in writing, on terms which specify that the employment is on a casual basis and that the employee will receive a casual loading to compensate them for benefits which are otherwise provided to permanent employees only. Employers should then ensure that casual employees are, in practice, paid as casuals and receive the casual loading. Further, if there are any special terms of the particular award or agreement as to what features characterise casual employment in a particular case, steps should be taken to ensure these are satisfied.

Background: facts

Telum Civil (QLD) Pty Limited (Telum) was the operator of a construction business. A group of Telum’s employees (Employees) were engaged as casuals to work on a specific project. When the project concluded, the Employees were no longer needed and their employment came to an end. Telum did not pay the Employees any redundancy pay because the Employees were engaged as casual employees under the Agreement (the Agreement was an “agreement based transitional instrument” made under the Workplace Relations Act 1996 (Cth) (WR Act)). The FW Act makes it clear that casual employees are not entitled to redundancy pay under the NES.

The Construction, Forestry, Mining and Energy Union (CFMEU) disagreed with Telum, arguing that the Employees were not truly casuals and were entitled to redundancy payments under the NES. They made application to the FWC under 739 of the Fair Work Act 2009 (Cth) (FW Act) to resolve the dispute with Telum under the dispute settlement procedure of the Agreement.

Decision at first instance

At first instance, Commissioner Booth took a general, or common law, approach to the question of whether the Employees were truly casual employees within the meaning of the FW Act and considered several authorities on casual employment. This type of approach has historically been commonly taken to the issue of determining whether an employee is truly “casual” or not.

Commissioner Booth concluded that despite Telum’s description of the Employees’ engagement, under the common law test they were not in fact casual employees. The Commission found that the Employees’ status was determined by the regularity of their hours, their full-time hours, the lack of variation of hours, regular and consistent start and finish times, and the lack of need for direction as to attendance (all the Employees attended at work at the same time each working day).

Commissioner Booth ordered Telum to make redundancy payments to the Employees in accordance with the NES and each Employee’s own circumstances (ie length of service etc). Telum appealed to a Full Bench of the FWC.

Decision on appeal

On appeal, the Full Bench (comprised of Vice President Lawler, Senior Deputy President Richards and Commissioner Lewin) found that the Employees were “casual employees” within the meaning of the FW Act. The Full Bench quashed Commissioner Booth’s first instance decision and dismissed the application made by the CFMEU for redundancy payments for the Employees.

The Full Bench concluded that Commissioner Booth had erred in adopting a common law approach to the definition of casual employment. On the contrary, the Full Bench determined that there was no rule of construction which requires an expression such as “casual employee” to have its general, or common, law, meaning. The proper approach was instead to construe the provisions of the NES by considering the FW Act as a whole. In considering the FW Act as a whole, the Full Bench had regard to the objects and purpose of the legislation, relevantly, to create an interrelated industrial system of minimum terms and conditions for employees comprising the NES, modern awards and enterprise agreements (“it is obvious that the legislature intended that those components should interact consistently and harmoniously” [58]).

The Full Bench considered that:

  • there was a long history of regulating casual employees in Federal awards;
  • the FW Act (and the WR Act before it) provides for what can be included in the terms of an award, specifically, that terms about the type of employment, for example, casual employment, could be included;
  • the legislature contemplated that casual employment might itself be defined in awards and in fact, all modern awards contain a definition of casual employment - all with the same core criteria: that an employee is engaged and paid as a casual and, specifically, is paid a casual loading to compensate for a range of entitlements not provided to casual employees. The Full Bench noted that there were no modern awards which adopted the general law approach to the identification of who was a casual employee and who was not;
  • the provisions of the FW Act support the exclusion of the common law approach to defining casual employment. The Full Bench found that there were several sections which distinguished between casual employees and “long term casual employees” who had worked on a regular and systematic basis. Such employees, under the FW Act, are entitled to some (limited) benefits typically reserved for permanent employees. The Full Bench noted that redundancy pay was not one of these benefits and again concluded that in referring separately to “long term casual employees” for some entitlements but not others presupposes that the general law approach to the definition of casual employment does not apply; and
  • modern awards (and pre-reform awards) contain “casual conversion” provisions whereby after a certain period of time working regular hours, casual employees could seek “conversion” to permanent employment. The Full Bench again concluded that the inclusion of conversion clauses presupposed that the general law approach to defining casual employment does not apply in the federal award system as there would be no need for a conversion clause if it did.

Because awards underpin the terms of enterprise agreements, the Full Bench found also that a reference in the FW Act to a casual employee (such as the provision excluding casuals from the entitlement to redundancy pay) is a reference to an employee who is a casual employee for the purpose of the Federal industrial instrument that applies to them.

The Agreement applying to the Telum Employees provided that in order to be a casual employee, Telum was required to inform each employee that their employment was on a casual basis. Further, the Employees would then be paid by the hour and would also receive a loading to be paid in lieu of and to compensate for all benefits (including redundancy). The Full Bench noted that if Commissioner Booth’s focus on the common law approach was correct and the casual Employees were held entitled to redundancy pay (and other benefits) under the NES, then this would effectively have allowed the Employees to “double dip”. The payment of a casual loading of, typically, 25%, is intended to compensate casual employees for not having the same entitlements as permanent employees (such as, for example, redundancy pay).

The Full Bench therefore held that because the Employees were engaged and paid as casuals in accordance with the Agreement, then they satisfied the meaning of “casual employee” under the FW Act. As such, the Employees were excluded from an entitlement to redundancy pay under the NES.

*Duck means a casual employee engaged and paid as such

This article was written by Neil Cuthbert