The Full Federal Court has, controversially, decided that employees classified as casuals under an industrial instrument may still be permanent employees at law for the purpose of entitlements under the Fair Work Act 2009 (Cth).

Key impacts

  • The Court decided that, despite being classified by the employer as a casual, the worker was in fact a permanent employee entitled to annual leave. The Court formed this view in relation to the annual leave entitlement under the National Employment Standards (NES) and also the annual leave entitlement under the applicable industrial instrument as it did not contain a specific definition of casual employee and did not indicate an intention to depart from the ordinary legal meaning.
  • Characterising an employee as a casual in reliance on an industrial instrument such as an enterprise agreement may not be enough. A casual employee for NES purposes is confined to a narrow class of “come and go” arrangements.
  • It will be harder to classify employees as casual for NES purposes where they work inflexible hours and there is certainty and regularity as to their ongoing work (contrary to the “regular and systematic” language used in the Fair Work Act to distinguish some casual employees from others).
  • Notwithstanding the risk of an employee “double dipping”, i.e. receiving the benefits of a casual loading and the benefits of being a permanent employee, payments made to a “casual” employee may later need to be supplemented by entitlements which are deemed to be owing (if they are in fact deemed to be permanent for NES purposes). So it’s crucial to correctly characterise employees.

Background

The decision involved an employee (Skene) who was a fly in, fly out dump-truck operator for Workpac Pty Ltd (Workpac). In proceedings before the primary judge, Skene claimed he was a permanent full-time employee of Workpac and therefore entitled to annual leave and consequential entitlements. Workpac contended that Skene was a casual employee without such entitlements.

Outcome

Two definitions of “casual employee” for the purposes of the NES were put forward:

  • Workpac argued that how an employee should be characterised depended on any definition of “casual employee” applied to the employee in a relevant industrial instrument covering such an employee (an approach which has been endorsed in the past by the Fair Work Commission) (i.e. a casual employee is an employee classified and paid as a casual employee in accordance with an industrial instrument) (Industrial Meaning).
  • Skene argued that the meaning of “casual employee” was confined to the ordinary, legal sense as demonstrated by the relevant authorities that had been applied in previous court decisions. This meaning applied universally and was not dependent on if the employee was EBA-covered or not (Legal Meaning).

The Court found that since the standards supplied by the NES apply equally to award/EBA-free employees and award/EBA-covered employees, inconsistent outcomes could arise if the Industrial Meaning of “casual employee” applied to one group and not the other.

This would delegate to the Fair Work Commission and to the makers of enterprise agreements the power to define who is a casual employee for the purposes of the NES, and would likely result in a substantial differentiation in the accessibility of the NES to some employees as opposed to others (even when the true nature of the employments of all is the same).

So, for the purposes of the NES, the Court decided that the Legal Meaning should be preferred over the Industrial Meaning.

The Court – drawing from key court authorities – identified some key characteristics of a casual employment relationship under the Legal Meaning, including:

  • a lack of a defined, set outline of the duration of the individual’s employment or the particular days or hours he or she will work;
  • a lack of firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work; and
  • irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.

The Court determined that where employees were “double dipping” (in the sense of being paid a casual loading and receiving annual leave entitlements), the hierarchy of the NES again prevails. In other words, if an employee meets the definition of a permanent employee, they are not required to be paid a casual loading. If an employer pays an employee a casual loading, this alone will not make that employee a casual employee.

As a consequence, if an employer mistakenly characterises an employee as a casual and pays them a casual loading rate, they may still have to pay annual leave and other entitlements under the NES further down the track (should that employee be retrospectively deemed to be permanent).

Recommendations

Employers should carefully review their current casual workforce to assess whether there is a risk they may be considered to be permanent employees. Relevant criteria to consider include:

  • is there a defined, set outline of the duration of the individual’s employment or the particular days or hours he or she will work?
  • is there a firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work?
  • are there regular work patterns, as well as certainty, predictability and continuity of work?

If the answer to these questions is “no”, the relationship is likely to be one of casual employment, but if the answer is “yes”, on the basis of this decision and for the purposes of the NES and possibly industrial instruments where these do not contain a specific definition of casual employee, there is a real risk that the relationship will be permanent, with applicable entitlements from the NES flowing (essentially annual leave).