Keeping it casual? Think again!

You have no doubt heard about the landmark decision in WorkPac Pty Ltd v Skene[1], where the Full Court of the Federal Court (Full Court) found that a casual employee was a permanent employee entitled to annual leave payments. In this article we have summarised the decision and outlined the important practical implications for many employers.

Background

WorkPac Pty Ltd (WorkPac) operated a labour-hire business and employed Mr Skene as a fly-in, fly-out dump-truck operator, from 2010 to 2014, at a coal mine operated by Rio Tinto Coal Australia Pty Ltd in Central Queensland. Mr Skene worked a 7 days on, 7 days off, continuous roster, which was regular and predictable work, set by rosters 12 months in advance.

Upon the cessation of his employment, Mr Skene claimed that despite that arrangement, he was a permanent full-time employee of WorkPac and as such, he was entitled to annual leave pursuant to sections 87 and 90 of the Fair Work Act 2009 (Cth) (FW Act).

WorkPac argued that Mr Skene was a casual employee (as defined in his employment agreement and the relevant transitional industrial agreement), and as a result, was not entitled to the related entitlements he claimed.

Was Mr Skene a casual employee?

Mr Skene’s claim turned on whether he was appropriately classified as a casual employee under the FW Act.

The Full Court was required to determine whether the definition of causal employment came from the common law (i.e. cases before the Courts) or from the meaning imported by a modern award or enterprise agreement (which was the traditional position).

The Full Court found that casual employment is a term given meaning by the common law on the basis that:

• Federal parliament is presumed to have intended words to have their legal meaning;

• the National Employment Standards (NES) prevails over modern awards and enterprise agreements;

• the NES applies to award/agreements-free employees, as well as those covered by awards and agreements;

• modern awards and many enterprise agreements do not contain a common definition of casual employment and, arguably, do not define this concept at all; and

• modern awards and enterprise agreements were developed after the commencement of the FW Act and so cannot inform its meaning.

In particular, the Full Court agreed with a previous authority in this space, reaffirming “that the essence of casual employment is the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work”. [2]

Relying on previous common law authorities, the Full Court outlined that the usual manifestations of casual employment will include:

• irregular work patterns;

• uncertainty (about ongoing employment);

• discontinuity;

• intermittency of work; and

• unpredictability.

Despite the fact that Mr Skene’s employment contract stated that the employment relationship was casual (and leave loading was built into his wages), the Full Court found that he was not a casual employee for the purposes of the FW Act.

In particular, the Full Court found that Mr Skene’s work was regular, predictable, and continuous and was not subject to significant fluctuation. WorkPac was therefore liable to pay both compensation for its failure to meet Mr Skene’s entitlements to annual leave, and in turn, penalties in respect of that failure.

The term “casual employee” has been the subject of considerable scrutiny by the courts, absent an express definition in the FW Act. Over recent years, decisions have steered clear of setting common law indicia of casual employment (such as payment of casual loading), favouring the notion that employees who were engaged and paid as casuals pursuant to an industrial instrument were “casual employees” for the purpose of the FW Act.[3] The Full Court’s decision in WorkPac Pty Ltd v Skene departs from this notion, with significant consequences.

Practical implications

In WorkPac Pty Ltd v Skene, the Full Court looked at ‘substance over form’ to ascertain the true nature of the relationship with Mr Skene. As a result of the decision, employers need to:

• remember that an employee may commence employment as a casual, however, this relationship may become permanent employment down the track because the characteristics of the employment have come to reflect those of an ongoing part-time or full-time employment;
• where possible, re-think the classification of employees from the outset and ensure employment contracts reflect the appropriate type of employment (i.e. permanent part time/full time or casual);
• constantly monitor their casual workforce, particularly any long term casuals employed on a “regular and systematic basis”; and
• if necessary, convert long term casuals to permanent employment in order to mitigate the risks of a claim for entitlements associated with permanent employee (particularly where a casual employee is covered by a modern award containing a casual conversation clause).

The “smell test” is often a good starting point in determining whether a casual employee should be appropriately classified as a permanent employee. Like with independent contractors, “…the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck.” [4] In other words, in circumstances where a permanent rooster is dressed up as casual duck, an employer will not be immune from claims for entitlements under the FW Act, even if the outcome results in the employee “double-dipping” with respect to entitlements.

If your business requires assistance with properly classifying any long term casuals, please contact our Employment Advisory team.

[1] [2018] FCAFC 131.

[2] Ibid, at [48], see Hamzy v Tricon International Restaurants [2001]FCA 1589: 115 FCR 78.

[3] This notion was endorsed by the Full Bench of the Fair Work Commission in Telum Civil (Qld) Pty Limited v Construction, Forestry, Mining and Energy Union [2013] FWCFB 2434, and subsequently applied by other FWC cases.

[4] Re Porter; Re Transport Workers Union of Australia [1989] FCA 226; (1989) 34 IR 179 at 184.

Authored by:
Natasha Horvat, Senior Associate
Stacey Devitsakis, Lawyer