There has been a lot said and written about the recent Full Court of the Federal Court decision, WorkPac v Skene, regarding casual employment and the entitlement to annual leave. It has left us all wondering what just happened and where to from here with casual employment. There are some interesting elements of this decision that will be ringing alarm bells for those of us who engage casual employees.
The Court’s decision on the definition of ‘casual employment’
Interestingly, there is no definition of casual employment in the Fair Work Act.
The Court considered whether the definition of ‘casual employment comes from:
- Common law (as argued by the employee); or
- Modern awards in accordance with the historical view of ‘casual employment’ over the past 70 or so years (as argued by the employer).
The Court determined that the meaning of ‘casual employment’ comes from common law on the basis that:
- Parliament is presumed to give words their legal meaning;
- The NES sits above modern awards;
- The purpose of annual leave (which is for employees to have some rest and recreation) would be defeated by removing employees’ access to it, even where it is offset by casual loading, as the Fair Work Act makes it clear that money cannot completely compensate for the inability to take annual leave;
- The NES applies to all employees;
- There is no definition of ‘casual employment’ in modern awards; and
- Awards were developed after the Fair Work Act commenced and so therefore cannot define the meaning of ‘casual employment’.
So, what is ‘casual employment’?
The Court determined that ‘casual employment’ is characterised by ‘no firm advance (mutual) commitment to continuing and indefinite work according to an agreed pattern of work’. This lack of commitment is reciprocal, with the employee similarly not providing a commitment to ongoing employment.
‘Casual employment’ is indicated by:
- Irregular work patterns;
- Uncertainty as to the period over which employment is offered;
- Discontinuity; and
- Intermittency of work and unpredictability.
Importantly, casual employment involves flexibility in the employment after the employee has been engaged.
The Court distinguished this from the definition of a ‘long term casual employee ‘ in Section 12 of the Fair Work Act, which includes ‘the employee has been employed by the employer on a regular and systematic basis for a sequence of periods of employment during a period of 12 months’. This is different to a ‘casual employee’ in that there is no long-term, firm, advance and mutual commitment to continuing to work on an agreed pattern. An example is a relief teacher who works in different jobs in a school for a year, but who does not know if they will be needed from week to week, nor whether they will be needed in the following year.
Having a clear contract of employment that includes payment of casual loading and the ability to terminate with an hour’s notice is relevant, but the Court noted that the reality of the employment arrangement over time may not reflect the original intent prescribed in the original letter of appointment.
What about ‘double dipping’?
The Court considered the concept of ‘double dipping’ by casual employees who are paid the casual loading and then may gain access to annual leave as well. However, it took the view that in this case, the employee ‘was paid a casual loading when he need not have been’.
Importantly, the Court noted that an employer may be able to claim that a casual loading should be off-set against an employee who later successfully argues that they are entitled to annual leave on the basis that they are not a casual.
In this particular case, the employer failed with their claim that the casual loading should off-set the need for annual leave as there was no designated amount or percentage of the wages expressly attributed to the casual loading.
Where to from here?
Casual employment in the labour market is between 20 and 25 percent of the total workforce, and this figure has changed little in the past twenty or so years. Apart from men working in full-time casual jobs, surveys suggest the level of job satisfaction amount casual workers is the same as for permanent workers. Where casual workers can control the hours they work, their level of job satisfaction is even higher. It can even be said that many employees prefer to be classified as a casual, with the additional 25% loading being an immediate benefit.
Taking this into consideration, we could believe that this will reduce the likelihood of challenge, but it will not override the question as to whether the employee is in fact a true casual, or may be considered to be eligible for benefits such as annual leave provided under the NES.
There are some points to be taken from this Court decision that are recommended for business using casual employment arrangements:
- Review how your casual employees are engaged, and your work practices. How far in advance is there a commitment to work agreed days or hours? If you have a roster, can you say that any employment beyond that roster period is not fixed and is variable? Remember that the key features of casual employment include irregular work patterns, unpredictability and intermittency.
- Consider offering permanent employment, part-time or full-time, and/or changing your work arrangements.
- Review your letters of employment to ensure that casual loadings are a clearly identified amount. Identify the value to offset annual leave and personal leave that you have included in the loading amount. Just calling an employee a casual in a letter of employment, and then paying a casual loading, does not clearly define the employment relationship. However, paying a casual loading may offset against leave entitlements where there is a specific amount or percentage of wages attributed to it.
In very round figures, you can dissect 25% casual loading to about 10% compensation for annual leave, 5% compensation for personal leave and the other 10% as compensation for the unpredictable nature of the employment.