We handle various types of commercial matters and disputes at Wilson Lawyers. Although employment law is not one of our practice areas, this case regarding casual employment struck our team as a topic that can and does effect many of our clients and colleagues, no matter their business.
On 16 August 2018, in the decision of WorkPac Pty Ltd v Skene  FCAFC 131, the Full Court of the Federal Court of Australia determined that employers cannot simply classify employees as ‘casual’ to avoid paying other entitlements. Where the work is set and there is a commitment to the work continuing indefinitely, employers are potentially liable to claims for unpaid annual leave and other penalties, due to incorrectly classifying employees as ‘casual’.
History of the matter
Mr Skene was hired on a casual basis by labour-hire business, WorkPac Pty Ltd (“WorkPac”). During 20 July 2010 to 17 April 2012, Mr Skene worked as a dump-truck operator at a coal mine in central Queensland. The nature of the employment was as follows:
- A 7 day on, 7 day off roster was set 12 months in advance;
- Each shift was 12.5 hours and the tasks did not fluctuate;
- The employment was continuous, besides the 7 days of unpaid leave; and
- WorkPac would pay for accommodation and flights, as this was a fly in, fly out arrangement.
On 17 April 2012, Mr Skene’s employment was terminated with no payment for accrued annual leave, as he was classified as a ‘casual employee’. Mr Skene lodged an application to the Federal Circuit Court, claiming that he was a full-time employee of WorkPac and was therefore entitled to untaken annual leave and other benefits established under the National Employment Standards (“NES”). The Federal Circuit Court initially found that under the NES, Mr Skene was not a casual employee, given that both parties made a “firm advanced commitment” for the hours and days that would be worked 12 months in advance. However, it was also determined that Mr Skene was a casual employee under the Registered Collective Agreement. This was on the basis that WorkPac could deem an employee as ‘casual’ under the agreement. Both parties subsequently appealed this decision.
Key findings from the decision
Can the employer define who is casual?
As there is no definition of ‘casual employee’ under the Fair Work Act, WorkPac argued that this is someone who is described as ‘casual’ under federal industrial instruments. Whereas, Mr Skene argued that ‘casual’ should be defined by its common law meaning. In order to resolve this contention, the Court considered the relationship between the NES, modern awards and employment agreements.
The Court determined that as the NES sets out the “minimum standards applying to employment of employees”, the NES is the ‘pinnacle’ of the terms and conditions of employment. This is on the basis that Parliament had the intention that the NES has primacy over modern awards and enterprise agreements. In doing so, the Court rejected earlier cases where it had been determined that a ‘casual employee’ is someone who is engaged and paid under the modern awards. Put simply, the Court found that informing an employee that they are ‘casual’ and paying them as such, does not deem them to be ‘casual’ at law. This carries significant importance as it clarifies that industrial instruments are not appropriate to determine who is a ‘casual employee’ and that the ordinary, legal definition must be applied.
Does the employee have the ‘essence of casualness’?
The Court stated that ‘casual employment’ must be determined applying the ‘essence of casualness’ test under the common law. This confirmed an earlier case where it was found that the ‘essence of casualness’ requires “irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work”. Essentially, to be considered ‘casual’, there must be a level of flexibility and lack of commitment from both employer and employee. Applying this test, Mr Skene was considered a full time employee and subsequently entitled to accrued annual leave upon termination.
Additional issues highlighted in this decision
Whilst this decision has provided clarity as to the appropriate mechanism to define and determine ‘casual employees’, the following additional questions arise.
Can you double dip?
This decision has presented the major issue of employees, who are already paid casual loading, ‘double dipping’ through payment of accrued relevant NES entitlements for part time and full time employees, after successfully arguing that they are not ‘casual’. The Court noted that the employer may apply for a set-off to avoid double payment, where casual loading is paid, followed by a successful claim for annual leave. However, WorkPac was unable to set-off the casual loading against the entitlement to accrued annual leave, as it was not expressly stated that casual loading was paid to Mr Skene. This appears to leave open the ability to ‘double dip’ where the Court is unable to identify casual loading paid, due to it not being specified in an employee’s wage.
Following this decision, on 18 December 2018, the Fair Work Act Regulations 2009 (Cth) was amended to protect employers from employees ‘double dipping’ in similar circumstances. This new law acts retrospectively, meaning that the amendment will apply to previous employment periods. To prevent the ability to ‘double dip’ under the new regulation by offsetting casual loading payments against relevant NES entitlements, the following criteria must be met:
- The employee is employed on a casual basis;
- The employer pays the employee a casual loading amount that is clearly identifiable as an amount paid to compensate the person for not having one or more relevant NES entitlements during the employment period. Relevant NES entitlements include entitlements such as redundancy pay, annual leave and personal leave;
- Whilst classified as a casual employee, the employee worked on a part time or full time basis; and
- A claim is made by the employee for one or more relevant NES entitlements.
Failure to comply with the requirement to pay ‘clearly identifiable’ amounts of casual loading will prevent employers from relying upon this new offsetting regulation.
Does the definition of long-term casual employees conflict?
The Court considered the possible conflict of its decision with the definition of ‘long term casual employees’ under Fair Work Act, which states “the employee has been employed by the employer on a regular and systematic basis… during a period of at least 12 months”. Through use of examples, it was determined that the decision of the ‘essence of casualness’ conformed with this definition, as ‘regular and systematic’ was concerned with the engagement of employment, rather than the hours of work. While the examples illustrate that the ‘essence of casualness’ is not lost where there are ‘regular’ patterns of work, there is a lack of explanation for how the examples provided are conformably ‘systematic’.
Future legal issues and how they can be resolved
It remains unclear whether this decision opens the floodgates in the area of employment law to claims from employees in any profession who are classified as ‘casual’, but do not meet the requirements of the ‘essence of casualness’. Whilst an appeal to the High Court may clarify this uncertainty, introducing a definition of ‘casual’ in the fair work laws may effectively resolve this issue. For now, employers who have classified their employees as ‘casual’ and are paying them accordingly, but do not meet the ‘essence of casualness’ test, may be exposed to similar claims by employees. Employers should consider the nature of the relationship with casual staff beyond the current agreements and if necessary, convert employees to part time or full time.
Additionally, to prevent ‘double dipping’ occurring under the new offsetting regulation, it is necessary to ensure that there are clearly ‘identifiable’ amounts attributable to casual loading and that those amounts are to compensate an employee for not receiving relevant NES entitlements. This should be clearly set out in pay slips, contracts, correspondence and relevant industrial instruments.
If you have a similar issue or need some advice around this space, as we do not practice in this area, we would recommend you contact the Queensland Law Society for an employment lawyer via their helpful Find a Solicitor web page.
Written by Sam Rose, Law Clerk, Wilson Lawyers
Important Notice: This publication is provided as general information only and should not be considered or relied upon as legal advice. The law is complex and you should always obtain specific legal advice about your circumstances from a qualified legal practitioner. If you require legal advice, please contact our office to see how we can help.