Federal Court Finds “Casual” Employee Wasn’t Casual: What Does This Mean for Employers?

The Federal Court recently handed down an appeal decision that is likely to impact businesses that utilise casual employee arrangements.

In WorkPac Pty Ltd v Skene [2018] FCAFC 131, the Full Federal Court ruled that a mine truck driver (Mr Skene) was entitled to the same paid leave entitlements as a permanent employee, despite the fact that he was engaged as a “casual”. The court also ruled that the employer (WorkPac) was liable for pecuniary penalties.

Facts

From 2010 to 2012, Mr Skene worked as a casual employee for WorkPac, a labour hire company. Mr Skene’s job was to operate a truck at a mine in central Queensland. He was a fly-in-fly-out worker, operating on a roster that was 7 days on and 7 days off. The roster was provided to him in January for the entire year.

Mr Skene’s employment was continuous over the two years, save for seven days of unpaid leave, which was pre-arranged with the mine. His contract stated that he was casual and provided for a “loading in lieu of leave entitlements”. The agreement stipulated that the employment relationship could be terminated by either party with one-hours’ notice.

In 2012, Mr Skene’s employment with WorkPac was terminated due to workplace misconduct. As WorkPac considered Mr Skene to be a casual employee, they didn’t pay him in lieu of untaken annual leave upon termination.

Mr Skene brought action in the Federal Circuit Court to claim unpaid annual leave under the National Employment Standards outlined in the Fair Work Act 2009 (Cth) (FWA) and under the relevant Enterprise Agreement.

The original decision

At first instance, the primary judge looked to common law to interpret the term “casual employee” in section 86 of the FWA. The court ultimately found that Mr Skene was not a casual employee. The reason for this decision was because Mr Skene’s hours were predictable and were set a year in advance and because WorkPac had made a reliable commitment to the duration and regularity of Mr Skene’s employment.

However, the primary judge found that Mr Skene was a casual employee within the meaning of the agreement between the parties. As a result, the primary judge found that Mr Skene was entitled to compensation for unpaid leave under the FWA, however, it was ruled that WorkPac wouldn’t be liable for any pecuniary penalties.

Both parties appealed the decision to the Full Federal Court.

On appeal

On appeal, the Full Court found that, while Mr Skene’s contract clearly stated that he was “casual”, he was not a casual employee at law under the FWA or the workplace agreement. In coming to this decision, the Full Court considered the objective characterisation of Mr Skene’s work. His hours were pre-set and were regular. The fact that Mr Skene was paid by the hour and that his employment could be terminated with one-hours’ notice were considered to be factors that indicated casual employment. Despite this, these features were ultimately held not to be determinative of the employment relationship.

Accordingly, the Full Court upheld the primary judge’s decision that Mr Skene was eligible for compensation for unpaid leave. In addition to this, the primary judge’s decision that WorkPac wasn’t liable for penalties was set aside and the matter was remitted to the Federal Circuit Court for determination of pecuniary penalties.

What does this mean for employers with casual employee arrangements?

While it’s likely that this decision will be appealed to the High Court, it’s a good reminder for employers to examine their arrangements with casual employees.

It may be that some casual staff, especially students, wish to stay casual in order to receive a loading and to be able to accept and decline shifts. Despite this, at the end of the day, a court will look behind the “label” to the nature of the relationship. Therefore, there is a risk that casual employees may not be found to be casual after all. This could expose businesses to claims for compensation and even penalties.

In order to avoid legal issues, we recommend the following:

1. Examine the nature of your casual employment relationships. Do your casual employees work regular shifts? Are these shifts the same each week or do they vary? It’s important to keep in mind that the defining features of casual employment arrangements are irregular shifts, unpredictability and intermittency.
2. If you find that your casual employees do work regular, pre-arranged shifts, you may want to consider putting them on as part-time or permanent. While many employers like the flexibility that comes with casual staff, there are downfalls. Casual staff tent to have a much higher turnover, meaning more recruitment and training costs. On top of this, permanent employees tend to build better relationships with clients, which boost the goodwill in your business. At the end of the day, casual employees don’t always turn out to be cheaper, and there is security in knowing staff won’t walk out at the drop of a hat or decline a shift and leave you in a bind.
3. Lastly, if you wish to continue with your casual staff, ensure that any casual loadings are clearly definable and identifiable. This will make it clear to casual employees that they are being compensated for the lack of paid leave and other entitlements and may be able to be used to set-off annual leave entitlements.

Want to know more about Employment Law? Looking for an experienced solicitor in Newcastle, Sydney or the Hunter to assist you with your Employment Law matter? Call us on (02) 4929 7002, email us or complete an enquiry form.