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Federal Court throws casual employment into a tailspin

August 28, 2018

By Alex Millman and Lindsay Carroll, NRA Legal

In a decision handed down on 16 August 2018, the Full Court of the Federal Court of Australia has thrown casual employment, and the efficacy of its use, into a tailspin.

In a case which is likely to be appealed to the High Court by the employer, the Full Court held that an employee who was described by his employer as a “casual” was, in fact, not a casual employee at all, and therefore entitled to annual leave payments.

WorkPac Pty Ltd v Skene [2018] FCAFC 131

The facts

Mr Paul Skene was employed by WorkPac Pty Ltd (WorkPac) as a dump truck operator at a coal mine in central Queensland operated by Anglo Coal from 19 April 2010 to 17 July 2010. Prior to commencing this engagement, he was given a “Notice of Offer of Casual Employment”, and he executed a document titled “Casual or Fixed Term Employee Terms & Conditions of Employment”.

Around June 2010, Mr Skene sought a ‘fly in, fly out’ position at a suitable mine site, and located a position for a dump truck operator at a mine operated by Rio Tinto in Clermont, central Queensland advertised by WorkPac.

Mr Skene applied for this position, and was informed that if he was successful in obtaining the position, he would after a probationary period of three months be made a permanent employee.

Mr Skene was successful in obtaining the position and was provided with a Notice of Offer. The Notice of Offer provided for a 38 hour week plus reasonable additional hours, and made no reference to this engagement being casual in nature.

On 20 July 2010 Mr Skene commenced work at the Rio Tinto site.

Mr Skene continued to work for WorkPac at the Rio Tinto mine for the rest of 2010. In January 2011 WorkPac provided him with a 12-month roster, and did so again in January 2012. In April 2012, following allegations of misconduct, Mr Skene was removed from the Rio Tinto site and thereafter did not work for WorkPac again.

On the termination of his employment, Mr Skene was not paid any money as accrued but unused annual leave. He subsequently brought proceedings against WorkPac to recover this amount.

The decision at first instance

At trial before Judge Jarrett of the Federal Circuit Court, His Honour concluded that Mr Skene was a permanent employee for the purposes of the annual leave provisions in the Fair Work Act 2009 (Cth) by virtue of the nature of his pattern of work.

Although Mr Skene’s contract for the Rio Tinto site did not expressly state that he was a permanent employee, the provision for 38 hours per week, the absence of any reference to the engagement being casual, and the regularity of the engagement all pointed towards Mr Skene being a permanent employee.

However, His Honour also concluded that Mr Skene was a casual employee for the purposes of the relevant enterprise agreement, as he had been informed at the commencement of his employment with WorkPac in April 2010 that he was a casual employee.

This therefore meant that whilst Mr Skene was entitled to annual leave under the terms of the Fair Work Act 2009 (Cth), he was not entitled to the 20% annual leave loading provided for in the relevant enterprise agreement.

His Honour ordered that WorkPac pay Mr Skene annual leave, but not annual leave loading, that he would have accrued in his employment with WorkPac, but declined to impose pecuniary penalties for the consequential breach of the Act.

The appeal

Both WorkPac and Mr Skene appealed the original decision.

WorkPac appealed on the basis that Judge Jarrett was wrong to classify Mr Skene as a permanent employee, and therefore wrong to order the payment of annual leave.

Mr Skene appealed on the basis that Judge Jarrett was wrong to classify him as a casual employee under the relevant enterprise agreement, and consequently wrong in the amount of annual leave ordered to be paid to him. He also argued that Judge Jarrett was wrong to not impose pecuniary penalties on WorkPac.

The approach of the Full Court

The Full Court conducted an exhaustive review of the case law and substantially agreed with Judge Jarrett’s decision.

However, the Full Court held that Judge Jarrett was wrong when he classed Mr Skene as a casual employee for the purposes of the enterprise agreement.

The enterprise agreement, like the Fair Work Act 2009 (Cth), did not define casual employment, but simply provided for the existence of casual employees and required the employer to inform the employee of their status (full-time, part-time or casual) at the commencement of their employment.

WorkPac contended that, because the enterprise agreement required it to tell Mr Skene whether he was full-time, part-time or casual, the fact that they had told him he was a casual employee when he commenced work with them in April 2010 should be the end of the matter.

However, Mr Skene argued that this clause in the enterprise agreement simply required the employer to tell him his correct employment status, as determined by an objective assessment of the facts. It did not grant WorkPac the right to elect the status of a worker.

The Full Court ultimately held in favour of Mr Skene. The enterprise agreement did not define what constituted casual employment, and therefore determined that it must necessarily be the same as that within the Fair Work Act 2009 (Cth).

Moreover, the enterprise agreement merely required WorkPac to ‘inform’ the Mr Skene as to whether he was a casual employee; it did not give WorkPac the express right to elect whether he was a casual employee.

In addition, the Full Court considered it wrong to suggest that just because WorkPac had, in April 2010, told Mr Skene that he was a casual employee forever prevented him from being anything other than a casual employee. Such a position failed to take into account the prospect of any changes in the nature of the employment relationship, and potentially allowed for an employer to dictate terms of employment that did not reflect the reality of the situation.

The ‘essence of casualness’

The Full Court went to great lengths to try and extract a concrete meaning of ‘casual employment’ from the Fair Work Act 2009 (Cth). This required a great deal of case analysis as, alarmingly, the Fair Work Act 2009 (Cth) does not define casual employment.

The Full Court determined that, in the absence of a definition, the nature of a particular individual’s employment needs to be assessed according to objective indicia, not simply the say-so of any party to the employment relationship.

The “essence of casualness”, the Full Court determined from the case law, was the absence of a firm advance commitment as to the duration of the employee’s employment.

Factors indicating the absence of a firm advance commitment as to the duration of the employee’s employment included irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.

The Full Court emphasised that these factors did not need to be present in all circumstances in order for a person to be a casual employee, so long as there was no firm advance commitment by the employer to the engagement of the employee.

The Full Court noted that a stipulation in a contract, enterprise agreement or modern award that an employee is engaged on a casual basis, or the payment of a casual loading, may be a factor to be taken into account when making this assessment, but ultimately the question was a balancing exercise for the courts.

Applying these principles, the Full Court determined that Mr Skene was a permanent employee under both the Fair Work Act 2009 (Cth) and the relevant enterprise agreement. The question of additional compensation payable to Mr Skene, and the imposition of pecuniary penalties, we remitted back to the Federal Circuit Court.

The fallout

This case may have significant consequences across all industries, but most significantly in retail, fast food and hospitality where the rate of casual employment is above average.

Whilst to a degree the case necessarily turns on its own facts, the rationale of the Full Court in its decision means that if a casual employee has some kind of firm advance commitment to ongoing employment, then that employee may not be a ‘casual’ employee for the purposes of the National Employment Standards.

This would mean that such an employee is entitled to notice of termination or pay in lieu, redundancy pay, annual leave, sick leave, and other entitlements typically reserved only for non-casual employees.

Administrative convenience means that, in many businesses in the retail and fast food sectors, casual employees are engaged with a reasonable degree of regularity from week to week, and generally with a reasonable assurance that, barring any valid reason for dismissal, they will continue to be employed.

The law around unfair dismissals also means that casual employees are generally assured of roughly the same number and pattern of hours each week, lest the employer end up in the Fair Work Commission in a case of ‘constructive’ dismissal.

The fast food industry, in particular, is likely to be particularly vulnerable to fallout of this decision, as the severe restrictions around the rostering of part-time employees in the Fast Food Industry Award 2010 means that part-time employment is simply not practical, even if it may be the employer’s preferred practice.

NRA is working with other industry groups to determine an effective means forward from this decision, including lobbying government for changes to the Fair Work Act 2009 (Cth) to clarify the position of casual employees. However, with a Federal election looming in the not-too-distant future, it is unlikely that any such amendment will occur in the near future.

In the immediate term, employers should review their employment arrangements and identify any casual employees whose working arrangements may present a particular risk to claims under the National Employment Standards.

NRA’s team of dedicated employment law specialists can help you to understand more about this case and how it may affect your business. We can also help you review your current employment practices to identify areas of risk and advise on strategies to minimise any potential damage. To find out more, call 1800 RETAIL (1800 738 245) or email law@nra.net.au.

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