Nothing ‘casual’ about Full Federal Court Decision for Employers

A recent decision of the Full Court of the Federal Court (Federal Court) has highlighted the cost associated with misclassifying employees as casual.

On 16 August 2018, the Federal Court found that a labour hire employee was entitled to annual leave benefits despite being ostensibly engaged as a casual by WorkPac Pty Ltd (WorkPac). The decision found in favour of the employee, Paul Skene, affirming his entitlements to annual leave benefits despite being hired as a casual.

Mr Skene worked as a driver at a coal mine in Queensland and was rostered for seven days on, seven days off, working 12-hour shifts. Mr Skene’s contract of employment classified him as a casual and he was paid a flat hourly rate (expressed as including a loading in lieu of paid leave entitlements) in accordance with the WorkPac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007 (the Agreement).

At First Instance

Like many workers in the industry, Mr Skene was often placed on rosters distributed 12 months in advance. In April 2012, Mr Skene’s employment was terminated, and he was not paid any untaken annual leave. Mr Skene commenced proceedings and argued in the Federal Circuit Court of Australia (FCCA) that he was a permanent employee entitled to the benefit of annual leave. In the first instance the FCCA held that Mr Skene’s employment was not of a casual nature for the purposes of the National Employment Standards (NES) because of:

• “The regular and predictable nature of the working arrangements with shifts set in advance;
• the continuous nature of the employment;
• the “fly in, fly out” arrangement indicating that Mr Skene did not have flexibility to refuse shifts.; and
• the evidence that the work undertaken by Mr Skene was not subject to significant fluctuation from one day, or week, or month.”

The Court ordered WorkPac to pay compensation for monies in lieu of annual leave in accordance with the NES and s 90(2) of the Fair Work Act 2009 (the Act).

On Appeal

On appeal, WorkPac argued that pursuant to the NES, Mr Skene was a casual employee and not entitled the benefits associated with permanent employees.

The Federal Court held that Mr Skene was a permanent employee under the Agreement as well as the NES and the appeal was dismissed. This determination was underpinned by application of the “traditional” definition of a casual at common law, which is characterised by, amongst other things:

• “absence of firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work;
• 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); and
• discontinuous, intermittent and/or irregular work patterns.”

With respect to the question of whether Mr Skene was ostensibly “double dipping” the Federal Court noted that:

1. It was not clear that Mr Skene was paid casual loading; and
2. There is no entitlement for employees who are not casual and receive annual leave to also receive casual loading. If the employer decides to pay the loading regardless, this does not legitimately imply that the employee is classified as a casual worker by law.

As a result, if an employer misclassifies an employee as casual and pays a casual loading, this will not necessarily undermine their entitlement to annual leave.

What this means for employers

The decision confirms that the label an employee is given when commencing work with an employer will not necessarily define their employment status. The decision has yet again shed light on the importance of examining the features not the title of an engagement, when considering how to pay an employee and whether certain entitlements accrue.

The full reach of the decision is not yet known, but it acts as a timely reminder for employers to re-examine their workforce and consider whether their casuals are just that.

If you have concerns about how the decision may affect your business please do not hesitate to contact Nick Stevens, Jane Murray or Angharad Owens-Strauss.