14 September 2018

In a hotly contested appeal decision three weeks ago, the Full Federal Court held that the determination of whether an employee is a casual must consider ‘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 decision of the Full Federal Court (WorkPac Pty Ltd v Skene [2018] FCAFC 131) has rejected the commonly applied position that an employee described as a casual under an award or enterprise agreement is a casual for all purposes. The Court found that a casual employee was entitled to annual leave under the National Employment Standards in the Fair Work Act 2009 (Cth) (FW Act).

This has implications for many employers who have operated on the basis that, for award or agreement-based employees, the fact that they describe an employee as a casual and pay them a casual loading is sufficient to make them a casual at law.

It was generally expected that WorkPac would file for special leave to appeal the decision to the High Court. However, the date for a High Court special leave application expired on Thursday 13 September 2018 and no special leave application has been lodged.

Employers are urged to watch this space as, according to the Australian Industry Group, the decision could leave between 1.6 million and 2.2 million casuals across the economy entitled to annual leave. The decision could lead to a significant bill for back pay of annual leave to casual employees. You are urged to seek advice if you think this decision could affect your casual employees.

So, what did the decision say?

Decision at first instance

In 2016, Judge Jarrett determined that a dump truck driver working at a mine and engaged as a casual under a labour hire arrangement was an employee who was entitled to annual leave payments under the FW Act.

The driver argued he was:

  • a permanent full-time employee of Workpac Pty Ltd, a labour hire company that supplies labour to mining companies across Queensland
  • not a casual because his employment was continuous, predictable, and determined in advance by rosters.

The driver was employed in 2010 as a fly-in, fly-out worker at Clermont. His employment at the mine in central Queensland ended in 2012 amid allegations of misconduct. He claimed he was entitled to payment in lieu of annual leave.

Workpac submitted that it had engaged the driver as a ’casual or fixed term employee term employee’ under the Workpac Pty Ltd Mining (Coal) Industry Workplace Agreement, and this made him ineligible for annual leave, other entitlements, claims or payments in lieu of annual leave.

The driver, however, submitted that his claim was supported by the following factors:

  • He worked 12.5 hours each shift on ’a 7-days-on, 7-days-off continuous roster arrangement’, rotating between day and night shifts.
  • Workpac assigned him permanent camp-style accommodation, which he shared with another employee working the opposite roster.
  • He had regular and predictable working arrangements, as his shifts were set 12 months in advance and followed a stable and organised rotating roster.
  • His employment was continuous, apart from taking seven days unpaid leave, arranged with approval from Clermont.
  • The fly-in, fly-out arrangement with Clermont, which included flights and accommodation, facilitated his employment.
  • He did not elect the days he worked, nor did he work for any other employer.
  • He could not choose when and where to work because there was an expectation that he was available, on a continuing basis, to perform his duties in accordance with the roster.

Judge Jarrett held that award or agreement designation was insufficient to determine an employee’s entitlements under the FW Act. It did not matter how Workpac or the driver described their relationship: ‘it is their mutual intention that must be objectively ascertained from the words of their agreement and the other matters’.

In finding that the driver was entitled to annual leave payments under the FW Act, Judge Jarrett found the essence of a casual relationship to be missing. He said:

There is no absence of a firm advance commitment as to the duration of [the driver’s] employment or the days (or hours) he would work. Those matters were all clear and predictable. They were set 12 months in advance.

Decision on appeal

In the recent decision, the Full Federal Court upheld Judge Jarrett’s decision and endorsed the notion that, 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 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.

The Court also noted that, although Mr Skene was paid an all in flat rate under his contract of employment, it was not clear that this was a casual loading at all. Mr Skene’s contract did not allocate any part of the rate of pay to a casual loading or as monies in lieu of paid annual leave.

Further, even if Mr Skene was paid a casual loading, the Full Court found that Mr Skene would not be paid twice for the same entitlement because the fact that he was paid a casual loading when he need not have been was not a legitimate basis for excluding Mr Skene from the construction of section 86 of the FW Act.

The Full Court also found that employees can be genuinely engaged as casuals to begin with, but ‘may become full-time or part-time because its characteristics have come to reflect those of an ongoing part-time or full-time employment’.

The case is set to return to court on 12 December 2018 to determine penalties.

Conclusion

Employers should review their casual workforce and exercise caution in relation to purported casual arrangements. Although parties may intend to create a casual relationship, a court or tribunal asked to consider a purported casual employment arrangement will look beyond the label and objectively assess the employment and surrounding circumstances to determine the true nature of the relationship. Please contact a member of our team to review your casual employment relationships if you are engaging casuals systematically.

Join our partner Belinda Winter for a webinar on this decision and other recent important decisions affecting casual employment by registering here.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.