“Just because you say it, doesn’t make it true”
All Australian employers who engage casual employees need to take notice of a significant decision from the Full Court of the Federal Court in Workpac Pty Limited v Skene [2018] FCAFC 131.
In simple terms, the court found that Mr Skene, a Truck Driver, engaged as a casual by Workpac, was in fact a permanent employee. The real kicker was that as a consequence, Skene was entitled to annual leave under the National Employment Standards and the enterprise agreement which applied to his employment.
Employers who believe engaging an employee as a casual (e.g. by stipulating it in their employment contract) and paying a casual loading protects them from claims for permanent employment entitlements may be sorely mistaken due to this recent decision.
Permanent employment entitlements such as annual leave, notice pay, redundancy, compassionate and personal leave can all add up to be significant costs over years of employment, particularly in addition to the casual loading that has already been paid to “casual” employees.
The main take away from the decision is that employees categorised and paid as casuals by the employer may not indeed be viewed as casuals by common law. The common law’s view of a casual employee takes precedent over how a casual is defined in awards and enterprise agreements, whilst there is no definition of a casual in the Fair Work Act 2009.
Unless your casual employees are employed in the following manner:
irregular work patterns;
uncertainty as to the period over which employment is offered;
discontinuity; and
intermittency of work and unpredictability.
your business may be at risk from this classic case of “double dipping”.
Of note, is that the court found that ignorance of the common law was no excuse for the company and the compensation payable to Skene and penalties imposed on Workpac will be determined at a later date.
All is not lost as businesses can take proactive steps to mitigate or deal with the risk to their bottom line caused by this decision including:
Reviewing how casual employees are engaged in your business including longevity of employment and advance commitments to set and regular rostered shifts
Consider other employment options including full time/part time arrangements or changing the manner and process in which casual employees are engaged and rostered on to work
Review casual employment contracts to ensure that casual loadings are identified as a clearly separate and indentifiable amount compensating for permanent entitlements such as annual leave that would otherwise accrue. This may even require a business to detail the separate % of permanent employment entitlements that are contained and offset in the casual loading payment.
Whilst this decision has caused shockwaves for Australian employers, a test case has been instituted by Workpac in October 2018 to essentially challenge the ruling. The Australian federal government is also intervening as a concerned party to the proceedings.
At the same time, other companies with similar casual arrangements to Workpac are being targeted in a $325M class action case.
In the meantime, the decision stands and it is important for all employers with casuals who are employed with a degree of regularity, continuity and predictability to review or audit your potential exposure and risk.
This is an issue all HR/ER practitioners and CEOs and MDs need to be fully aware of given the potential risk it poses to a company’s reputation and bottom line.
If your company views implications of this decision as a risk to your business and requires assistance, I can be contacted at benmatthews@ersolutionsperth.com.au
Ben Matthews