Casu­al Employ­ment: The new rules of engagement

A recent deci­sion of the Full Court of the Fed­er­al Court of Aus­tralia, Work­Pac Pty Ltd v Skene [2018] FCAFC 131 (Skene), held that an employ­ee who had been cat­e­gorised as a ​“casu­al” by the employ­er, Work­Pac, was not in fact a casu­al but rather a per­ma­nent employ­ee and, as a result, enti­tled to the annu­al leave asso­ci­at­ed with such employment.

The deci­sion over­turns the con­ven­tion­al wis­dom that an employ­ee who is ​“paid and engaged” as a casu­al pur­suant to an indus­tri­al instru­ment (that is, described as a ​“casu­al” and paid the casu­al load­ing) can be treat­ed as a casu­al employ­ee even in cir­cum­stances where the pat­tern of days and hours worked by the employ­ee might, apply­ing com­mon law prin­ci­ples, sug­gest otherwise. 

Skene opens up the real prospect that many casu­al employ­ees are cur­rent­ly being mis­cat­e­gorised and, as a con­se­quence, might have valid claims for enti­tle­ments asso­ci­at­ed with per­ma­nen­cy (such as annu­al and per­son­al leave). It is a deci­sion with poten­tial­ly sig­nif­i­cant ram­i­fi­ca­tions for many employers. 

The Con­ven­tion­al Wisdom 

The con­ven­tion­al wis­dom was reflect­ed in the deci­sion of Telum Civ­il (Qld) Pty Lim­it­ed v Con­struc­tion, Forestry, Min­ing and Ener­gy Union [2013] FWCFB 2434 (Telum) in which the Full Bench of the Fair Work Com­mis­sion (FWC) held that employ­ees who were engaged and paid as casu­al pur­suant to an indus­tri­al instru­ment were ​“casu­al employ­ees” for the pur­pose of the redun­dan­cy pro­vi­sions of the Fair Work Act.

The rel­e­vant clause con­sid­ered in Telum was in the fol­low­ing terms:

“A casu­al employ­ee is one engaged and paid in accor­dance with the pro­vi­sions of this clause. A casu­al employ­ee shall be enti­tled to all of the applic­a­ble rates and con­di­tions of employ­ment pre­scribed by this Award except annu­al leave, per­son­al leave, parental leave, jury ser­vice, pub­lic hol­i­days and redundancy.” 

The approach adopt­ed by the FWC in Telum eschewed the com­mon law indi­cia of casu­al employ­ment (such as num­ber, reg­u­lar­i­ty and vari­a­tion of hours and direc­tion as to atten­dance) instead treat­ing the engage­ment and pay­ment of employ­ees as ​“casu­als” con­sis­tent with the terms of the applic­a­ble indus­tri­al instru­ment as determinative.

As such, con­sis­tent with Telum, many employ­ers oper­at­ed on the assump­tion that pro­vid­ed they ​“engaged and paid” an employ­ee as a casu­al then, irre­spec­tive of the pat­tern of hours worked or oth­er fac­tors, they would be con­sid­ered as a casu­al employ­ee for the pur­pose of enti­tle­ments under the Fair Work Act.

Things Have Changed

In Skene the Fed­er­al Court reject­ed the approach in Telum and had regard to the broad­er com­mon law tests of casu­al employ­ment to deter­mine whether an employ­ee was in fact a ​“casu­al” for the pur­pose of the applic­a­ble indus­tri­al instrument. 

In doing this, the Fed­er­al Court placed par­tic­u­lar sig­nif­i­cance on casu­al employ­ees not hav­ing a ​“firm advance com­mit­ment” from the employ­er for con­tin­u­ing and indef­i­nite work accord­ing to an agreed pattern.

The Fed­er­al Court devel­oped this fur­ther at para­graph 173: 

“The indi­cia of casu­al employ­ment referred to in the author­i­ties – irreg­u­lar work pat­terns, uncer­tain­ty, dis­con­ti­nu­ity, inter­mit­ten­cy of work and unpre­dictabil­i­ty – are the usu­al man­i­fes­ta­tions of an absence of a firm advance com­mit­ment of the kind just dis­cussed. An irreg­u­lar pat­tern of work may not always be appar­ent but will not nec­es­sar­i­ly mean that the under­ly­ing cause of the usu­al fea­tures of casu­al employ­ment, what Hamzy iden­ti­fied as the ​“essence of casu­al­ness”, will be absent.” 

It was held that the pay­ment of casu­al load­ing might reflect the inten­tion of the par­ties but is not deter­mi­na­tive. In this regard the Fed­er­al Court observed at para­graph 182:

“The pay­ment by the employ­er and the accep­tance by the employ­ee of a casu­al load­ing, like the descrip­tion of the type of employ­ment giv­en by the par­ties in their con­trac­tu­al doc­u­men­ta­tion, speaks to the intent of the par­ties to cre­ate and con­tin­ue a casu­al employ­ment. But the objec­tive assess­ment will need to con­sid­er whether that intent has been put into prac­tice and if achieved, has been main­tained. The objec­tive­ly demon­strat­ed exis­tence of a firm advance com­mit­ment to con­tin­u­ing and indef­i­nite work (sub­ject to rights of ter­mi­na­tion) 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. The key indi­ca­tors of an absence of the req­ui­site firm advance com­mit­ment will be irreg­u­lar­i­ty, uncer­tain­ty, unpre­dictabil­i­ty, inter­mit­ten­cy and dis­con­ti­nu­ity in the pat­tern of work of the employ­ee in ques­tion. 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.”

Apply­ing this analy­sis to the instant facts led the Fed­er­al Court to find that Mr Skene was not a casu­al employ­ee and there­fore Work­Pac was liable to pay both com­pen­sa­tion for its fail­ure to meet enti­tle­ments to annu­al leave and penal­ties in respect of that failure.

What should employ­ers do?

Under­stand­ably, this deci­sion has caused con­ster­na­tion among many employ­ers. The com­mon assump­tion that an employ­ee engaged and paid as a casu­al pur­suant to an indus­tri­al instru­ment (such as a mod­ern award or enter­prise agree­ment) can be safe­ly treat­ed as a casu­al (that is, paid a casu­al load­ing but then not paid enti­tle­ments such as annu­al leave and per­son­al leave asso­ci­at­ed with per­ma­nen­cy) has been proven false.

Com­pound­ing the prob­lem, an employ­ee may be able to ​“dou­ble dip” in cir­cum­stances where they are wrong­ly cat­e­gorised as a casu­al; they receive the load­ing but may still be enti­tled to the very enti­tle­ments for which the casu­al load­ing is intend­ed to com­pen­sate. Fur­ther, an employ­er who wrong­ly cat­e­goris­es an employ­ee as casu­al may also be liable for penal­ties under the Fair Work Act.

Employ­ers should care­ful­ly exam­ine the employ­ment pat­terns of employ­ees they have cat­e­gorised as casu­als (par­tic­u­lar­ly those so cat­e­gorised on the basis they are engaged and paid as casu­als pur­suant to an indus­tri­al instru­ment). Giv­en that the deci­sion in Skene also con­tem­plates the prop­er cat­e­go­ry of an employ­ee vary­ing over time as cir­cum­stances change, such reviews should be under­tak­en periodically. 

Where there are employ­ees who are cat­e­gorised as ​“casu­al” but don’t have irreg­u­lar­i­ty, uncer­tain­ty, unpre­dictabil­i­ty, inter­mit­ten­cy or dis­con­ti­nu­ity in the pat­tern of their work, then the employ­er may need to seri­ous­ly con­sid­er whether those employ­ees are actu­al­ly part-time rather than casu­al, and ulti­mate­ly imple­ment an order­ly tran­si­tion to give effect to the con­clu­sions reached.