The government has said it is “carefully” reviewing a controversial court ruling over casual employee entitlements, as SMEs threaten to terminate workers unless the law is changed. But what did the court actually determine?
Business lobby groups the Australian Chamber of Commerce and Industry and AI Group claimed that the potential side effects of a ruling, which granted annual leave rights to a casual employee who regularly worked the same hours each week, had the potential to cost businesses – particularly SMEs – “billions” of dollars.
That cost, they said, would come from casuals “double-dipping” by claiming leave entitlements in line with a permanent employee, while still receiving the 25 per cent casual loading.
Employers left aghast, uncertain
Many employers vented their frustration at the situation, and questioned how they are supposed to run their business and pay their staff honestly when the requirements for doing so are left so opaque.
Such uncertainty is never a good thing when it comes to employment. And several readers suggested their own workforces would suffer as a direct result.
“I will be letting two casuals go as I will not be able to afford the loading + loading again… Staff will want to go on casual as they will be paid more than being full time. What a joke,” one My Business reader said.
“I run a recruitment agency and this leaves us in a terrible position. We of course have to pay all our casuals extra than permanent staff and they are indeed happier to accept the casual rate with the loading as per the awards. Now we have the fear that casuals will have the capacity to claim for further entitlements,” another replied.
A third lamented: “Maybe the way to go is to all become employees – oh wait, no businesses left to employ everyone.”
Others joined calls for the government to step in and remove the grey areas in existing industrial relations laws.
“Employers need to be backed by the [government] by having awards that are clear and precise with no room for a judge to determine otherwise,” said one.
“More and more, the Australian government is taking away from people their ability to negotiate and make their own decisions. Entrepreneurial spirit is being strangled in Australia. Small business is being suffocated by intrusive over-regulation,” another claimed.
Another questioned how, if their casual employees were deemed to be eligible for leave entitlements, they could claw back the casual loading already paid to them.
“As the casual loading is clearly marked for annual and sick leave, and as the ruling says business owners have to pay annual leave to the casuals - don't we just credit the leave against the employee loading already paid and ask for the difference back?” they said.
“I always thought the loading was excessive for the leave it was supposed to cover. That works for me as a business owner. Just off to ask all my casuals to repay me the excess that I have paid them on the casual loading rate.”
What did the judgement say?
The case in question was that of WorkPac Pty Ltd v Skene. Initially brought before the Federal Circuit Court of Australia in May 2014 but not given a preliminary hearing until November 2016, it examined whether the employee, Paul Alexander Skene, was a casual employee as his employer believed, or an “other than casual” employee.
That definition would define Mr Skene’s core claim that he should be entitled to claim annual leave payments and other entitlements from his employer, WorkPac.
He had been employed through the labour hire firm as a dump truck driver at coal mines in central Queensland for two stints, from 17 April to 17 July 2010, and then from 20 July 2010 to 17 April 2012. This was on a fly-in, fly-out arrangement at an initial flat rate of $50 per hour, with 12-hours shifts on a “seven days on, seven days off” roster.
Mr Skene contested that he was, in effect, a full-time employee and therefore entitled to have been paid out accrued annual and relevant “consequential” entitlements at the end of his employment.
WorkPak refuted the claim, and said that as a casual employee, he was not entitled to such benefits.
At the commencement of his employment, Mr Skene was given a “Notice of Offer of Casual Employment”, and then signed an agreement titled “Casual or Fixed Term Employee Terms & Conditions of Employment”.
Mr Skene attested that it was these terms and conditions, as well as Section 86 of the Fair Work Act, which determined his eligibility to paid leave entitlements.
The court found that, while there were loopholes and irregularities in the workplace agreement – including a failure to define what constituted a full-time employee under its remit – this did not make him eligible for leave benefits. But the Fair Work Act did.
“The Fair Work Act contains no definition of casual employee. A determination of whether an employee is a casual employee depends upon an application of the principles developed in a number of cases for the identification of such employees,” the court noted.
It ultimately sided with Mr Skene, finding that because of the nature of his employment – particularly that his days and hours were dictated by the company and not mutually agreed – that his employment “should be seen as other than a casual”.
“There is no evidence at all, that workers would choose which days of their roster periods they would work or not work. There was no element of choice in the daily working arrangements during the course of Mr Skene’s employment at Clermont Mine. There was no opportunity for him to choose not to work any particular shift or hours offered to him by the respondent. It was not suggested that he could choose to work for some periods of seven days performing work according to his roster, but not other weeks, without special arrangements.”
At a follow-up hearing in March 2017, WorkPac was ordered to pay Mr Skene a total of $27,789.72 in compensation, including interest.
WorkPac then appealed the decision, which was dismissed in August 2018. In dismissing the appeal, the court ruled that “Part 2–2 of the Fair Work Act 2009 (Cth) (“FW Act”) contains the National Employment Standards. As the guide to Pt 2–2 (s 59) describes, the National Employment Standards are minimum standards that apply to the employment of “national system employees” (a term defined by s 13). Those standards may not be excluded by a modern award or enterprise agreement made under the FW Act (s 55(1)).”
What does that really mean for casual employment more broadly?
It was reported that WorkPac would take the appeal to the High Court, but subsequently decided not to. That dashed the hopes of the business community that the ruling would be struck down.
The decision not to appeal effectively now means the decision is binding and acts as a legal precedent for future claims.
That is why business lobby groups and unions alike are calling on the federal government to urgently amend the Fair Work Act, to provide greater clarity on what does, and does not, constitute casual employment.
However, after the court verdict was handed down, advisory firm HR Assured moved to reassure worried business leaders that, while the case does throw up a huge amount of uncertainty, it does not automatically mean they face a huge cost onslaught.
“It is important to note that the decision does not require employers to begin backpaying current casual employees, nor does it mean that all casuals are now entitled to annual or personal leave,” it said in a note to clients.
“For casual employees who work a consistent number of hours each week, with little or no variation in the days worked or start and finish times, the risk is significant. At the other end of the scale, casuals who work irregular hours, with changes in the number of hours and times when those hours are worked, there is very little risk of deemed permanent employment.”
Government is reviewing the judgement: Minister
Minister for Jobs and Industrial Relations Kelly O’Dwyer suggested the government is taking a serious look at the judgement, but did not offer any insights into what, if any, action it may take.
“We need to carefully examine the extent to which the court’s ruling raises uncertainty in the industry around casual employment,” she said.
“Obviously there could be quite serious implications that flow from that.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
- ‘Don’t assume how employees will react to redundancy’
By Simon Rountree
- Customers behaving badly: ‘My time is worth more than yours’
By Adam Zuchetti
- What businesses can learn from Sir Roger Bannister
By Adam Zuchetti