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https://www.minterellison.com/articles/getting-the-characterisation-of-casual-employees-wrong-lessons-from-workpac-v-skene

Getting the characterisation of casual employees wrong: Lessons from WorkPac v Skene

6 mins  31.10.2018 Harriet Eager, Kathy Reid

With the widespread use of casuals in the higher education sector, a recent Full Federal Court decision is particularly relevant to your university.

In the decision of WorkPac Pty Ltd v Skene [2018] FCAFC 131, the Full Federal Court found that a casual labour hire worker was an employee entitled to annual leave payments under the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (Fair Work Act).

What's the case about?

The employee was employed as a dump truck operator on a seven day on, seven day off continuous roster arrangement of 12.5 hours per shift. His roster for each year was set in advance. After working from July 2010 to April 2012, the employee was stood down, and subsequently dismissed. Under his employment contract, the employee was characterised as a casual employee which meant he had no annual leave entitlements under the relevant enterprise agreement. Following the termination of his employment, he claimed he was improperly characterised as a casual employee – the way he had worked meant he was a permanent full-time employee and, relevantly, had an entitlement to annual leave. The key issue in the proceedings was whether the employee was a permanent full-time employee and consequently entitled to payment in lieu of annual leave on his employment coming to an end.

What happened at first instance?

In 2016, at first instance, Judge Jarrett held that the worker’s regular and predictable working arrangements meant he was an employee entitled to annual leave under the NES – even though the offer of employment gave the employee the status of 'Casual Field Team Member' with no annual leave entitlement under the employer's enterprise agreement. Judge Jarrett found the driver was entitled to payment for accrued annual leave under the NES on termination of his employment and ordered the employer to pay the worker compensation of $21,000 plus $6,700 interest.

What were the appeal grounds?

The employer appealed the decision on the basis that Judge Jarrett erred in failing to find that the employee was a casual employee for the purposes of the Fair Work Act.

At the heart of the appeal was whether, in circumstances where the Fair Work Act does not define casual employment, the definition of casual employment in the NES should come from:

  • the common law – as the employee argued; or
  • modern awards and enterprise agreements – as the employer argued.

The employer contended:

  • the enterprise agreement designated the employee to be a casual, and it followed ‘as a matter of statutory construction’ that he was also a casual employee under the Fair Work Act;
  • within the industrial relations system in Australia, it is ‘well recognised that an employee is regarded as a casual employee, for the purposes of identifying and calculating their paid minimum entitlements’ if they are defined or described as a casual under an applicable industrial instrument; and
  • the ‘common industrial meaning’ of casual employee is the ‘entrenched notion' of what has historically been understood to be a casual employee by industrial tribunals.

What did the Full Federal Court say?

The Full Court considered the main question posed in the appeal was: Did Parliament intend the words ‘casual employees’ in the NES to be used their in their ordinary, legal sense, or the specialised non-legal sense which the employer contended was common to federal industrial instruments?
The Full Court was not persuaded there is a uniformly understood specialised meaning of ‘casual employee’ referable to the use of that term in federal industrial instruments. Their Honours found:

  • the employer’s enterprise agreement did not designate the employee to be a casual;
  • although it was not clear the employee’s all up flat rate of $55 per hour included casual loading, assuming it did, this (in itself) was not a legitimate basis for construing the NES in the manner which the employer contended – ie, even if the employee received a casual loading under an industrial instrument, it will not be determinative about whether an employee is entitled to annual leave. This was because the entitlement to annual leave is not purely financial, it is also about rest and relaxation;
  • ‘casual employee’ is an expression that has acquired a legal meaning - the employer’s construction required the expression to have a specialised industrial meaning and a legal technical meaning, which was ‘unattractive’; and
  • the ‘absence of a firm advance commitment as to the duration of the employee’s employment or the days or hours the employee will work is the essence of casualness’.

The employer’s appeal was dismissed, and the matter remitted to the Federal Court for the re-determination of the compensation payable to the employee for the employer’s failure to meet his entitlements to annual leave and any pecuniary penalties to be imposed.

Employers have cited the outcome of this case as giving rise to employees potentially ‘double dipping’ on entitlements as permanent employees having already received a casual loading.

The employer is not appealing the decision.

What are the implications for universities?

Given the number of casuals your university is likely to engage, your university may bear a substantial unexpected annual leave liability if casuals are not appropriately classified and engaged. In addition, other NES entitlements such as personal leave and redundancy pay may also need to be considered.

Some risk mitigation steps to consider include:

  • Review your casual cohort: Regularly reviewing your workforce to consider whether any long term casuals are more appropriately classified as permanent employees. This may mean applying the casual conversion clauses already in many university enterprise agreements.
  • Educate stakeholders: Ensuring those responsible for hiring within your university are aware of the qualities of casual employment and when an employee is likely to shift from being a casual employee to more properly being considered a permanent employee. It may be useful to provide guidelines to relevant stakeholders.
  • Ensure enterprise agreements and contracts are clear about casuals: It is important to appreciate that an employee may be a casual for the purposes of an enterprise agreement – but not be a casual for the NES. To reduce the risk of employees claiming they are not casuals for the purpose of your enterprise agreement, ensure your enterprise agreements include an appropriately worded definition of 'casual employee' and that contracts for your casual employees adequately reflect the enterprise agreement definition.
  • Separately identify the casual loading: In the WorkPac v Skene decision, it was not immediately apparent that the employee had received a casual loading because he was paid an all up rate that was said to include his casual loading. To make it clear that a casual employee does receive a casual loading and that it is being paid in lieu of paid annual leave (among other things), the loading should be separately identified in your enterprise agreements and employment contracts and expressly stated that it is lieu of paid annual leave (among other things).
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https://www.minterellison.com/articles/getting-the-characterisation-of-casual-employees-wrong-lessons-from-workpac-v-skene

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