The Full Federal Court has held that an employee employed as a casual and ostensibly paid casual loading, was nonetheless entitled to payment of accrued annual leave upon termination of his employment. The facts of the case involved labour hire arrangements and were somewhat unusual, but the reasoning of the Full Federal Court rings alarm bells for any employer using casual labour on a regular or systematic basis.
What you need to know
- Under the National Employment Standards of the Fair Work Act, annual leave applies to employees, other than casual employees.
- The meaning of casual employees is not defined under the Fair Work Act.
The salient facts of WorkPac Pty Ltd v Skene  FCCA 3035 were –
- The employer WorkPac was a labour hire company operating in the resources boom.
- The employee, Mr Skene, was a fly-in fly-out driver who worked for two years in a Central Queensland coalmine.
- Mr Skene was paid a composite rate of $50 per hour for seven consecutive days on a 12.5 hour shift with seven days off on a continuous roster sequence fixed 12 months in advance.
- Mr Skene accepted an offer of casual employment with a flat pay rate of $50 per hour for an assignment of three months duration.
- Mr Skene worked for approximately two years prior to termination in April 2012 and was not paid out annual leave.
- CFMEU brought a claim on behalf of Mr Skene for payment of accrued annual leave.
- The Full Federal Court held that Mr Skene was entitled to payment of annual leave because whilst he had been employed ostensibly on the basis of casual employment, his employment was regular and predictable over a two year period.
- The National Employment Standards for annual leave incorporates the common law definition of a “casual” which can be summarised as being “… the absence of a firm advance commitment as to the duration of the employment or the days or hours the employee will work …”
- On the facts, there was plainly an expectation that Mr Skene would be available, on an ongoing basis to perform the duties required of him in accordance with his roster, which had been determined 12 months in advance.
- WorkPac had a collective agreement which entitled it to inform prospective employees of the status and terms of their engagement, and it had engaged Mr Skene as a casual. However, the Full Federal Court held that Mr Skene was not properly classified as a casual under WorkPac’s collective agreement and could not be deemed a casual employee by the employer acting unilaterally.
Employers can be exposed to claims for annual leave and other accrued entitlements (such as redundancy pay and personal leave) for casual employees engaged on a regular and systematic basis, even if:
- the casual employees are engaged as such under the terms of an enterprise agreement or modern award; and
- the employee is paid a flat rate per hour inclusive of casual leave loading.
Employers will be exposed where the relationship is not regarded as “casual” employment at common law, irrespective of how the employment relationship is described by the parties.
At common law, the hallmark of casual employment is “… the absence of a firm advance commitment as to the duration of the employment or the days or hours the employee will work …”
A breach of the National Employment Standards is a breach of the civil penalty provisions under the Fair Work Act and in these circumstances, ignorance of the law without closely considering the legal implications of its conduct, was held not to be an excuse.
The current situation (which may yet be affected by appeal to the High Court) would best be resolved by the introduction of a statutory definition of “casual” for the purposes of the National Employment Standards under the Fair Work Act. This is the stated policy of the Federal Opposition Labour Party.
In the meantime, employers using casuals on a regular and systematic basis are exposed to claims for accrued annual leave (and redundancy pay and personal leave) and civil penalties, even having paid a casual loading.
If you have questions about how to best manage this risk, please contact our Workplace Relations team.