As featured in previous issues of Workplace Insights, 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 – see WorkPac Pty Ltd v Skene  FCAFC131.
Employers are 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, including in circumstances where:
- the casual employees are engaged as such under the terms of an Enterprise Agreement or Modern Award; or
- the employees are paid a flat rate per hour inclusive of casual loading.
What you need to know
The Senate has recently affirmed a new Fair Work Regulation to overcome the implications of the Full Federal Court decision in WorkPac Pty Ltd v Skene, providing for the back payment of annual leave for casuals who work regular patterns and should have been classified as permanent employees.
Fair Work Regulation 2.03A applies if all the following criteria are met:
- the employees are employed by their employer on a casual basis;
- the employees are paid a casual loading that is clearly identifiable as being an amount paid to compensate the person in lieu of entitlements that casual employees are not entitled to, such as annual leave or personal leave;
- despite being classified by the employer as a casual, the employee was in fact a full-time or part-time employee for some or all of their employment;
- the employees made a claim to be paid for one or more of annual leave or personal leave or redundancy pay or notice of termination of employment (that casual employees do not have under the National Employment Standards) that they didn’t receive for some or all of the time that they were incorrectly classified as casuals.
If all of these points are satisfied, the employer can make a claim for the casual loading payments made to the employees to be taken into account when working out the entitlements owing to the employee for the relevant employee entitlements.
The new Regulation applies to employment periods that have occurred before or after 18 December 2018. In other words, it has retrospective effect for the benefit of employers.
The Senate’s affirmation of the new Fair Work Regulation is welcome news to employers seeking to alleviate the impact of the Full Federal Court decision in WorkPac Pty Ltd v Skene by providing a form of statutory setoff where the conditions above are met.
However, in the absence of a definition of “casual” employment in the Fair Work Act, it is recommended that employers ensure casual employees are engaged in a manner that is regular, intermittent or variable and without a firm advance commitment.
If that is not possible, employers are recommended to mitigate the risk by clearly identifying the 25% casual loading payable in pay slips, contracts and relevant industrial instruments.
Please discuss any concerns or queries you have with a member of our Workplace Relations Team.