In a previous article, I discussed the various traps and pitfalls for employers who are not fully aware of what exactly is a casual employee. A recent case in the Full Federal Court of Australia has further complicated the issue.
It is important to start at the common law to develop an understanding of casual employees. The common law test – set out clearly in a Federal Court 2001 case – was that the essence of ‘casualness’ is “the absence of a firm advance commitment as the duration of the employee’s employment or the days (or hours) the employee will work”. What this means essentially is there needs to be an absence of an agreed pattern of work. The key characteristics of being casual is that there are irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability. This manifests itself in short-term employment, shifts that change in timing and duration, and uncertainty as to whether or not an employee will be with work from one period to the next.
From that common law test there evolved an understanding that where an employer pays an employee in accordance with an applicable Award, as a casual employee, the assumption or inference arises that employee is casual regardless of the fact that employee in question may actually work in a regular or predictable pattern. This concept was reflected in the decision of the Full Bench of the Fair Work Commission in 2013 where the Commission found that employees who engaged and paid as casuals pursuant to an Award were “casual employees” for the purposes of redundancy provisions of the Fair Work Act.
Dial forward now to this year and the Full Federal Court of Australia decision in WorkPac Pty Ltd v Skene (WorkPac) in which the Full Federal Court effectively reverted back to the common law test stating that regardless of how an employee is treated pursuant to an applicable Award, the significance of a casual employee not having a “firm advance commitment” is not to be underestimated. The Court held that the payment of a casual loading under an Award might reflect the intention of the parties but is not determinative.
What’s that? I am paying these casual employees a 25 per cent loading, so how can they then turn around and claim unpaid annual leave and other entitlements that permanent or part-time employees are entitled to? This is true, WorkPac leaves the question unanswered and it may be the case that an employee may be able to double-dip if they are not really casual but have received the casual loading. Compounding the problem of course is that if an employee makes a claim for underpayment (of annual leave etc) on the basis that they were really a permanent employee and not a casual, the employer may be liable for fines under the Fair Work Act.
The take home here for employers is to closely review and analyse the patterns of employees who are employed as casuals. They need to have the necessary characterisation of casualness or otherwise the employers stand exposed to significant claim for back pay of statutory entitlements.
But wait, it gets a little worse for employers.
From 1 October 2018, included in approximately 80 modern Awards is a “casual conversion clause”. In simple terms, it requires the employer to tell employees they’re entitled as a casual employee to request conversion to permanent employment. These 80 odd Awards include the Fast Food Industry Award, the General Retail Industry Award and the Restaurant Industry Award.
Where a casual employee seeks to convert to permanent employment, the employer may only refuse such a request on reasonable grounds. “Reasonable grounds for refusal” may be many and varied, and the model clause now required to be inserted in the Awards contains a nonexhaustive list including:
• where conversion to permanent employment would require significant adjustment of hours;
• where it is foreseeable in the next 12 months there will be changes to the hours of work/days and/or times that an employee works; or
• where the employee’s position will cease to exist in 12 months.
There are requirements of consultation between employer and employee, and written reasons to be provided by an employer when refusing a casual conversion request. If an employee disagrees with the decision of his or her employer, that employee may then make an application for the dispute to be heard by the Fair Work Commission.
The decision in WorkPac and the changes to Awards commencing 1 October 2018, will have a lasting impact on industries reliant on casual employees. These changes may also restrict an employee’s freedom to work casually according to their financial position, needs and desires … is freedom of employment becoming less free?