On 16 August 2018, a Full Federal Court of Australia confirmed the importance of properly characterising the nature of a casual employment relationship. The decision in WorkPac Pty Ltd v Skene  FCAFC 131 (Workpac) also shone a searing light into the practice and common misunderstanding of the risks of using ‘permanent casuals’.
Paul Skene was employed by Workpac, working as a driver and transport operator from 2010 to 2012 at coal mine sites in central Queensland. He was described in his contract of employment as a ‘casual’ employee. He received a flat rate of pay, which was not described explicitly as including the 20% casual loading on the base rate under the applicable enterprise agreement – but the employer argued that it indeed included such a loading. In April 2012, Mr Skene’s employment was terminated and he claimed that he was entitled to payment in lieu of accrued annual leave entitlements both under the Fair Work Act 2009 (Cth) (FW Act) and the enterprise agreement.
Workpac argued that Mr Skene was not entitled to payment in lieu of annual leave because section 86 of the FW Act excludes casual employees from the entitlement to receive annual leave. Further, the enterprise agreement provided an entitlement to annual leave only for ‘permanent’ employees.
Although the contract of employment described Mr Skene as a ‘casual employee’, the Full Court found (applying Hamzy v Tricon International Restaurants  FCA 1589: 115 FCR 78 (Hamzy)) that casual employment has a legal meaning – so that whether employment is ongoing or casual must be determined on an objective basis, having regard to the totality of the relationship. This is much like assessing whether an individual is an employee or a contractor.
In this context, the Full Court reviewed the issue of what exactly is a ‘casual’. In doing so, the Court endorsed the principle expressed in Hamzy that the ‘essence of casualness‘ 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‘. This may still include engagements on a regular or systematic basis.
The critical factors in applying this test include:
- the way in which the parties regard their relationship;
- any commitment to ongoing employment;
- the regularity or otherwise of the worker’s hours or days of work;
- how the worker was notified of each period of work;
- the payment of an hourly rate for hours actually worked;
- any indication that the hourly rate was intended to encompass leave entitlements;
- the absence of payment of the benefits associated with ongoing employment, i.e. leave; and
- the employer’s and the worker’s right to refuse to offer or accept further work.
The Full Court also noted that the nature of the engagement may change over time: an employee may initially be engaged on a casual basis, but at some later point in time the nature of the engagement may change, and become an ongoing – often described as ‘permanent’ – full-time or part-time arrangement.
Critical factors in the Workpac matter included that, upon engagement, Mr Skene was advised of the set hours of work and given a FIFO roster which covered the next 12 months. Mr Skene worked in the same role with the same work crew and carried out the same duties each time he worked the roster. Workpac also did not expressly specify that the flat rate of $50.00 per hour included a casual loading.
Workpac argued that it was unfair to permit employees to double-dip, on the one hand receiving a casual loading and then claiming leave entitlements. However, while the Full Court held that ongoing employee entitlements may be off-set by a casual loading explicitly agreed to be offset against such entitlements, it was not clear in this case that such a loading had been paid.
Ultimately, Workpac was required to pay annual leave entitlements in addition to those payments made over the course of the employment, and the Full Court referred the matter back to the Federal Circuit Court to determine any penalties that should be imposed on Workpac.
This decision is not unsurprising, given the facts of the particular case. However, it does serve as an important reminder to employers to review their employment arrangements and ensure that employees are appropriately characterised as either full-time, part-time or casual and the correct entitlements are applied. A careful assessment and reassessment at regular intervals over the course of the engagement will minimise the risk of ‘double-dipping’ by employees who have otherwise been considered casual and paid as such over the course of their engagement. It is prudent to at least review employment arrangements after 12 months’ service. It may also be useful in some circumstances for employers to reserve the right to transfer employee status from casual to part-time/full-time if it is clear that the working arrangement has become ongoing, regular and systematic.
For casual employees, we also recommend clearly specifying the portion of their rate of pay which is the casual loading, to permit set-off in case of a dispute in future as to the nature of the engagement.
Finally, it is important to note that many awards require an employer to ‘convert’ a casual employee who is engaged on a regular and systematic basis for at least six months to ongoing employment. Employers have an obligation to notify casual employees of their right of conversion in accordance with the applicable award.
Please contact Thomson Geer’s Employment and Safety team if you require any advice or assistance in managing casual employment.