Landmark decision affecting casual employment in all industries

By Luis Izzo, Australian Business Lawyers & Advisors

Late yesterday, the Full Federal Court delivered a judgment which will have wide-ranging implications for the employment of casual employees across Australia.

The primary consequences arising from the decision are that:

1. Regardless of the provisions that apply to a workforce under awards or enterprise agreements, if an employee has a regular and predictable pattern of work with an expectation of ongoing engagements, they are likely to be permanent as opposed to casual.
2. Where an employee commences employment with irregular hours under a casual contract, the casual can morph into a permanent employee during the course of the employment relationship, notwithstanding that the parties continue to describe the relationship as casual.

As a result of the decision, a large number of employees currently described by employers as ‘casuals’ could in fact be permanent.

The treatment of casuals under the Fair Work Act
Since the introduction of the Fair Work Act in 2009, a growing body of Fair Work Commission cases had started to recognise the prevalence of casual employees being engaged on regular working patterns or on a long term basis.

In the Full Bench decision of Telum Civil (Qld) Pty Ltd v CFMEU, the Fair Work Commission determined that, where an employer engaged a casual employee under an award or enterprise agreement, then, provided that the engagement was consistent with the terms of the relevant industrial instrument, the relationship could be treated as casual.

Most awards and EAs simply describe a casual as an employee “paid and engaged as such”. Accordingly, the Fair Work Commission held that, provided an employee was called a casual and paid a casual loading, they could legitimately be considered casual - notwithstanding their actual pattern of work.

This approach was only recently endorsed in the Fair Work Commission Full Bench Casual Conversion Case of 2017 (in which ABLA took a leading role acting for the Australian Chamber).

Workpac Pty Ltd v Skene
In yesterday’s decision of Workpac Pty Ltd v Skene, the Full Federal Court has dismissed the recent approach to casual employment as being simply wrong.

The Full Court held that the determination of whether an employee is a casual must be conducted by assessing “the real substance, practical reality and true nature of the relationship” as opposed to adopting the description the parties have given to the relationship.

The Full Court endorsed the notion that, in order for an engagement to be considered casual:

• there should be no certainty about the period over which the employment is offered; and
• there should be an informality, uncertainty and irregularity about the engagement.

So, if an employment relationship has a level of certainty, regularity and predictability about the hours to be worked, then it is inconsistent with being a casual engagement.

Adopting this approach, the Full Court found that Mr Skene - a labour hire employee who had been engaged as a casual to work a regular roster of 7 days on, 7 days off - was entitled to annual leave entitlements on termination of his employment, notwithstanding that he had signed a casual employment contract and was at all times treated as a casual by his employer.

Casual loading not determinative
The Full Court held that, although an employee may be paid a casual loading, this is not determinative of whether the employment is casual. Instead, the Court will look at whether the intent of the parties to make the relationship casual “has been put into practice” by assessing the actual pattern of work.

Morphing into permanency
To add more concern for employers, the Full Court also found that employees can be genuinely engaged as casuals to begin with, but can morph into permanent status if the characteristics of the relationship change.

The Court found that:

“an employment which commences as casual employment may become full-time or part-time because its characteristics have come to reflect those of an ongoing part-time or full-time employment”

What next for employers?

The impact of the decision could be substantial for a number of employers. Regular or long term casuals who are indeed permanent will automatically become entitled to:

• paid annual and personal leave (accumulating for each year of their service);
• notice of termination; and
• redundancy entitlements.

Employers should review their casual workforce to determine whether any of their existing casuals are at risk of being considered permanent.

If a risk arises, employers need to consider whether a measured and staggered conversion process can be implemented to minimise ongoing exposure to liability for permanent employment entitlements.

For further comments, please contact Australian Business Lawyers and Advisors - ABLA:

Luis Izzo                                                                  Joe Murphy
Director – Sydney Workplace                               Managing Director – National Workplace
0408 109 622                                                           0407 045 189