A recent decision by the Full Federal Court has found that an employee who was employed by a labour hire business as a casual and paid as a casual, was in fact “other than a casual employee” for the purposes of:
- section 86 of the Fair Work Act 2009 (Cth) (FW Act) – dealing with entitlements to annual leave;
- section 95 of the FW Act – dealing with entitlements to personal/carer’s leave; and
- section 106 of the FW Act – dealing with entitlements to compassionate leave.
This meant that the employee was entitled to annual leave, personal/carer’s leave, compassionate leave and public holidays.
The decision has confirmed that the Court will look at the “totality of the relationship” to determine the nature of the relationship. This involves having regard to:
- the overall relationship;
- the conduct of the parties; and
- the real substance, practical reality and true nature of the relationship.
Importantly, it does not mean that “true” casual employees are entitled to accrue and be paid leave entitlements like a part-time or full-time employee does. What it does mean, is that employers must appropriately manage employee classifications and an employee can challenge a classification.
The employee was a qualified and experienced production employee in the open cut black coal mining industry who commenced employment with the employer (a labour-hire company) in 2014. The employee retired in April 2018. Throughout his employment, the employee worked under six consecutive contracts of employment which described the employment as casual.
Following the decision in WorkPac Pty Ltd v Skene  FCAFC 131, the employee claimed that he was entitled to payments in respect of annual leave not taken by him before April 2018 and for payment for public holidays and for periods of compassionate and personal leave taken by him during his employment.
What is casual employment?
Based on this decision, a casual employee is an employee who has no firm advance commitment from her or his employer to continuing and indefinite work according to an agreed pattern of work.
The indicia of casual employment, where there is no firm advance commitment typically includes:
- irregular work patterns;
- intermittency of work;
- the opportunity to provide service in response to a specific demand that a specific period of working time be worked; and
- the capacity to choose whether or not to work a period of working time demanded or requested by the employer
In contrast, in this case,
- the employee was offered continuing or on-going indefinite employment;
- the employee was utilised to work an agreed pattern of full-time hours of work;
- the work to be performed was pre-programmed long in advance and fixed by a roster;
- the employee did not have the capacity to make an election to perform work, rather the employee was required and obliged to perform work in accordance with the roster; and
- despite the use of the word “casual” in the contract, the employee’s service was utilised for the performance of continuing work in accordance with an agreed pattern of work.
The employer argued that it was only the contract of employment that was relevant in determining whether the employee was a casual employee.
The Court said that while this is a relevant factor, the conduct of the parties during the employment is an important consideration. The Court found that, given the characteristics above, there was a “firm advance commitment”. It looked beyond the words of the contract (and what the parties had agreed “on paper”) to the “totality of the relationship” to determine that the employee was permanent.
Additionally, the Court commented that the words of the FW Act require consideration of the type of employment at the time the entitlements accrue, rather than what type of contract was agreed upon the commencement of employment.
In this case, the employee was paid a casual loading to compensate the employee for not accruing paid leave entitlements (this is typical with a casual employment arrangement).
The employer argued that, if the employee was found to be a permanent employee, the casual loading had been paid in error and the employer was able to “set off” any entitlements against the loading that had been paid.
The Court said that the contract was not appropriately worded to allow a set off, because the hourly rate was expressed as a flat rate which was inclusive of any loadings, penalties and allowances.
Additionally, there were amendments to the Fair Work Regulations 2009 (Regulations) to avoid casual employees “double dipping” on entitlements. This issue is that the Regulations allow a set off against a claim for unpaid leave entitlements where the employee is seeking to be paid in lieu of entitlements. In this case, the Court said the employee was seeking payment of his entitlements and not claiming to be paid in lieu.
This meant that the employee received both the higher hourly rate and the leave entitlements.
Moving forward, with respect to casual employees, employers should ensure that:
- contracts of employment are carefully drafted with no promise of a guaranteed number of hours;
- employees have the ability to refuse shifts;
- casual loading is listed separately and not combined in a flat hourly rate;
- the contract describes the relationship as a casual employment relationship;
- there is not a fixed or repeated roster or pattern of work;
- if possible, shifts are irregular and unpredictable; and
- any off-set clause is carefully drafted.
We note that the government may move to make further legislative amendments in response to this decision, which may provide some relief for employers.
If you would like to discuss this further and the implications for your business please contact our Employment + Workplace Relations Partner, Erin Lynch.
Erin Lynch, Partner
M +61 477 330 202