Landmark Decision Affecting Casual Employment in all Industries

Late yesterday, the Full Federal Court delivered a judgment which will have wide-ranging implications for the employment of casual employees across Australia. The primary consequences arising from the decision are that: 

  1. Regardless of the provisions that apply to a workforce under awards or enterprise agreements, if an employee has a regular and predictable pattern of work with an expectation of ongoing engagements, they are likely to be permanent as opposed to casual.
  2. Where an employee commences employment with irregular hours under a casual contract, the casual can morph into a permanent employee during the course of the employment relationship, notwithstanding that the parties continue to describe the relationship as casual. 

As a result of the decision, a large number of employees currently described by employers as ‘casuals’ could in fact be permanent.
 
The treatment of casuals under the Fair Work Act
 
Since the introduction of the Fair Work Act 2009, a growing body of Fair Work Commission (FWC) cases had started to recognise the prevalence of casual employees being engaged on regular working patterns or on a long term basis.
 
In the Full Bench decision of Telum Civil (Qld) Pty Ltd v CFMEU, the FWC determined that, where an employer engaged a casual employee under an award or enterprise agreement, then, provided that the engagement was consistent with the terms of the relevant industrial instrument, the relationship could be treated as casual.
 
Most awards and Enterprise Agreements simply describe a casual as an employee “paid and engaged as such”. Accordingly, the FWC held that, provided an employee was called a casual and paid a casual loading, they could legitimately be considered casual – notwithstanding their actual pattern of work.
 
This approach was only recently endorsed in the FWC Full Bench Casual Conversion Case of 2017 (in which Australian Business Lawyers & Advisors took a leading role acting for the Australian Chamber) (see below).
 
Workpac Pty Ltd v Skene
 
In yesterday’s decision of Workpac Pty Ltd v Skene, the Full Federal Court has dismissed the recent approach to casual employment as being simply wrong.
 
The Full Court held that the determination of whether an employee is a casual must be conducted by assessing “the real substance, practical reality and true nature of the relationship” as opposed to adopting the description the parties have given to the relationship.
 
The Full Court endorsed the notion that, in order for an engagement to be considered casual:        

  • there should be no certainty about the period over which the employment is offered; and
  • there should be an informality, uncertainty and irregularity about the engagement.

So, if an employment relationship has a level of certainty, regularity and predictability about the hours to be worked, then it is inconsistent with being a casual engagement.
 
Adopting this approach, the Full Court found that Mr Skene – a labour hire employee who had been engaged as a casual to work a regular roster of 7 days on, 7 days off – was entitled to annual leave entitlements on termination of his employment, notwithstanding that he had signed a casual employment contract and was at all times treated as a casual by his employer.
 
Casual loading not determinative
 
The Full Court held that, although an employee may be paid a casual loading, this is not determinative of whether the employment is casual. Instead, the Court will look at whether the intent of the parties to make the relationship casual “has been put into practice” by assessing the actual pattern of work.
 
Morphing into permanency
 
To add more concern for employers, the Full Court also found that employees can be genuinely engaged as casuals to begin with, but can morph into permanent status if the characteristics of the relationship change.
 
The Court found that:
 
“an employment which commences as casual employment may become full-time or part-time because its characteristics have come to reflect those of an ongoing part-time or full-time employment”
 

What next for employers?
 
The impact of the decision could be substantial for a number of employers. Regular or long term casuals who are indeed permanent will automatically become entitled to:           

  • paid annual and personal leave (accumulating for each year of their service);
  • notice of termination; and
  • redundancy entitlements.

Employers should review their casual workforce to determine whether any of their existing casuals are at risk of being considered permanent.
 
If a risk arises, employers need to consider whether a measured and staggered conversion process can be implemented to minimise ongoing exposure to liability for permanent employment entitlements.
 
To view the decision please click here.
 
4 Yearly Review Of Modern Awards – Part-Time Employment And Casual Employment
 
On 9 August 2018 the FWC handed down a decision finalising a number of matters concerning part-time and casual employment.
 
Model casual conversion clause
 
From 1 October 2018 all regular casual employees covered by Modern Awards will have the right to request that their employment be converted to full-time or part-time employment. The decision follows the 5 July 2017 decision to insert a standard casual conversion clause into 85 awards, which do not contain such a provision.
 
A casual will be regular where they have in the preceding 12 months worked the requisite pattern of hours. The decision clarifies that the right to request conversion does not arise as a “one off” event but is a right which is continually exercisable while ever an employee meets the definition of a “regular casual employee.” The request may only be refused in writing on reasonable grounds, after consultation with the employee. For any ground to be reasonable, it must be based on facts which are known and reasonably foreseeable.
 
Where the employer refuses a regular casual employee’s request to convert, the employee does not accept that refusal, and the matter cannot be resolved at the workplace level, then it may be referred to the FWC subject to the Award’s dispute resolution procedures.
 
Importantly, an employer must provide a casual employee, whether a regular casual employee or not, with a copy of the provisions of this subclause within the first 12 months of the employee’s first engagement to perform work. In respect of casual employees already employed as at 1 October 2018, an employer must provide such employees with a copy of the provisions contained within the relevant Modern Award by 1 January 2019.
 
The FWC has proposed not to vary any existing modern awards already containing a casual conversion provision.
 
Under the Meat Industry Award 2010, the right to request casual conversion will only apply to meat processing establishments.
 
In the Local Government Industry Award 2010, a request for conversion may be refused on the ground that acceptance of the request by a local government would contravene a merit selection employment requirement contained in State or Territory legislation applicable to local governments.
 
Minimum engagement for casual employees
 
From 1 October 2018 the minimum engagement will be two consecutive hours, so that where there is more than one engagement in a day, each engagement would have to consist of at least two hours’ work and pay.
 
Minimum daily engagement period for casual employees – Higher Education (Academic Staff) Award 2010
 
From 1 October 2018 a casual employee must be engaged and paid for at least two hours of work on each occasion they are required to attend work, inclusive of any allowance for preparation or associated working time provided for in clause 18.2
 
Part-time and casual minimum engagement and facilitative provisions
 
From 1 October 2018 the Manufacturing and Associated Industries and Occupations Award 2010, the Vehicle Manufacturing, Repair, Services and Retail Award 2010, the Graphic Arts, Printing and Publishing Award 2010 and the Food, Beverage and Tobacco Manufacturing Award 2010 will be varied to provide that a part-time employee will be engaged and paid for a minimum of four hours.
 
Other outstanding matters
 
From 1 October 2018, the Social, Community, Home Care and Disability Services Award 2010 and the Aged Care Award 2010 will be varied to clarify that rostering arrangements and changes may be communicated by any electronic means of communication.
 
To view the determination please click here.

Please call the Workplace Advice Unit on 13 29 59 if you wish to discuss this circular or require further information.