Federal court decision converts casuals into permanent employees

Cases

Federal court decision converts casuals into permanent employees

Yesterday the Federal Court of Australia gave a judgment that could see a mass conversion of casual workers into full time employees. And those workers would automatically be entitled to annual leave and sick pay for each year of service, along with various other benefits.

The Federal Court of Australia has released a judgment that could see a mass conversion of casual workers into permanent employees. And those workers would automatically be entitled to annual leave and sick pay for each year of service, along with various other benefits. 

Background


WorkPac is a labour-hire company that supplied a worker, Mr Skene, as a casual truck driver to a mine in Queensland. Mr Skene's employment was terminated with an hour's notice in line with the casual employment term in his contract. Mr Skene sued Workpac. In the subsequent case of WorkPac v Skene, the truck driver claimed that he was in fact a permanent full-time employee of WorkPac, and, as such, he was entitled to annual leave or payment in lieu when his employment ended. WorkPac denied the claim. It argued that he was a casual worker, who was treated as such under the appropriate enterprise agreement, and was therefore not entitled to annual leave and other employment benefits. 

The court found in favour of Mr Skene. 

From casual to permanent


“The decision has just rendered a number of casual workers into permanent employees,” said employment lawyer Joe Murphy, managing director – national workplace at Australian Business Lawyers and Advisors

Employers could face claims from workers for entitlements reserved for permanent employees, such as claims for annual leave and personal leave. Workers who were employed under a casual status and who were sick may have a claim for back-paid sick leave, Mr Murphy says. Casual workers whose employment may have been terminated may also have a claim for notice too. 

Just to put that into some context, there was a case earlier this year in the Federal Circuit Court (Apostolides v Mantina Earthmovers & Constructions [2018] FCCA 279) in which a worker won 15 years of annual leave. That was a case in which the dispute was whether or not the worker was employed as a casual or a permanent employee.

Casuals have six years to make a claim from the end of their employment. 

“There’s certainly likely to be an increase in lawsuits,” Mr Murphy says. 

And, as Australian Business Lawyers & Advisors pointed out in a client circular, the court also held that workers can genuinely be employed as casuals to begin with but could become permanent employees over time. 

"It is also necessary to bear in mind that employment arrangements may change during the course of an employment. What is agreed to at the commencement of an employment is relevant to the characterisation process, but an employment which commences as casual employment may become full-time or part-time because its characteristics have come to reflect those of an on-going part-time or full-time employment," the court said.

The case is likely to have widespread implications right across the Australian workforce as casual workers account for about 20% of the working population over the last 18 years. Some sectors that are particularly dependent on casual workers, according to Mr Murphy, include retail, hospitality, care and construction.

And, employers should note, the decision could also see organisations targeted for punitive fines for being in breach of the Fair Work Act. That’s exactly what is happening in WorkPac v Skene. The Federal Court has ordered a hearing to decide what pecuniary penalties should be imposed on the company for failure to meet its Fair Work obligations.

Consensus


The situation has its origins in the consensus that came into being following the introduction of the Fair Work Act. 

Previously, the legal consensus was that where an employer engaged a worker as a casual under an award or enterprise agreement then, provided that the engagement was consistent with the award or agreement, the relationship could be casual.

According to ABLA, most awards and enterprise agreements simply describe a casual as “an employee paid and engaged as such”. And so the Fair Work Commission held that there was casual status if the worker was called casual and was paid a casual loading. 

A new approach


But the Federal Court overturned that consensus in WorkPac v Skene.

“A casual employee has no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work. Nor does a casual employee provide a reciprocal commitment to the employer. That characteristic… captures well what typifies casual employment and distinguishes it from either full-time or part-time employment… the conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship will need to be assessed. This is now the settled approach to the question of whether a person is an employee,” the court said. 

The court gave some guidance as to what should be in that assessment. It referred to the actual way in which the work is carried out; it referred to the circumstances created by the contractual terms and regulatory regime (including the Fair Work Act, the modern awards and enterprise agreements). Payment and acceptance of a casual loading along with the description of the status of the work will also “speak to the intent” of the parties.

However, the court was then firm that “the objective assessment will need to consider whether the intent has been put into practice and, if achieved, maintained. The objectively demonstrated existence of a firm advance commitment to continuing and indefinite work… according to an agreed pattern of work will ordinarily demonstrate a contrary intent and the existence of on-going full-time or part-time employment rather than casual employment.”  

In the absence of that firm advance commitment, the factors in determining whether a worker is casual or permanent will be the irregularity, uncertainty, unpredictability, intermittency and discontinuity of the work. 

“Those features will commonly reflect the fact that, whilst employed, the availability of work for the employee is short-term and not-ongoing and that the employer’s need for further work to be performed by the employee in the future is not reasonably predictable,” the Court said. 

Industry Reaction 


The NSW Business Chamber, has called for immediate steps to clarify the status of entitlements for casual employees. 

“The decision of the Federal Court to award a casual employee all of the entitlements of a permanent employee opens up a Pandora’s Box of complexity and uncertainty for employers and will cripple employment opportunities for thousands of Australians,” said NSW Business Chamber Chief Executive Officer, Stephen Cartwright.

“The Federal Court’s decision shows that the Fair Work Act flies in the face of common sense in relation to the general understanding that loadings paid to casuals are in lieu of other entitlements. The decision suggests that, in many cases, not only will these loadings be paid to workers employed as casuals, but so should all other entitlements provided to permanent employees.  

“If this situation is left to stand, businesses will be forced to take a huge risk on being hit with a double dip when engaging casual employees, or alternatively simply stop employing them altogether,” Mr Cartwright said.

However, the union movement welcomed the decision.

The Australian Council of Trade Unions said that the Federal Court had delivered a major blow against the misclassification of workers as casuals by employers under current Australian workplace law. The case opens the door for other people who’ve been employed as casuals to make claims for unpaid leave entitlements, the ACTU argued.

ACTU President Michele O’Neil commented: “this is a major blow for employers who want to use casualisation to avoid their responsibility to their employees. This decision makes clear that employers seeking to avoid paying people’s entitlements can’t simply rely on classifying workers as casuals. We need to change the rules around casual employment so that employers aren’t able to deny people their rights for years on end.”

What do employers and HR managers do now? 


ABLA’s Joe Murphy suggested that employers should do a review of their existing casual workforce and see if any workers fall into the “Skene” category. Employers may then want to consider if those workers should be made permanent and this process should be thoroughly documented. 

In the future, Mr Murphy argues that employers may want to consider taking the time to really consider why they are employing casuals. Typically, he argues, employing a casual on a long-term basis is far more expensive than employing a permanent employee. And, he points out, casuals often have more rights and entitlements than employers may typically realise, for instance, casuals are protected from unfair dismissal. 

“You have to ask yourself, is there a really a benefit of a casual workforce?” Mr Murphy says. 

Editor's note: owing to the importance of this case, WorkplaceInfo will be following up with a case report, analysis and reaction.

Disclosure: Australian Business Lawyers and WorkplaceInfo are both owned by the NSW Business Chamber
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