Employment – Are casual employees entitled to annual leave?

Recently, in the decision of WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene), the Full Court of the Federal Court of Australia (Court) found that an employee, who was deemed to be casual by its employer, was entitled to annual leave upon termination of his employment. The decision of Skene concerned the application of the Fair Work Act 2009 (Cth) (FW Act) and the WorkPac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007 (Agreement).

The main issue was whether Mr Skene is a casual employee or not and therefore whether he is entitled to annual leave. The Court found that Mr Skene was a permanent employee for the purposes of the FW Act and the Agreement and he was therefore entitled to annual leave.

Interestingly, the decision has not been appealed to the High Court of Australia within the requisite time period and therefore, the decision stands.

Facts

WorkPac Pty Ltd (WorkPac) operated a labour hire business and employed Mr Skene as a dump-truck operator from 17 April 2010 to 17 July 2010 and again from 20 July 2010 to 17 April 2014 at coal operations in central Queensland. On 16 April 2010 and 16 July 2010, Mr Skene was provided with a ‘Notice of Offer of Casual Employment’. Mr Skene executed a document entitled ‘Casual or Fixed Term Employee Terms & Conditions of Employment’ (T&C of Employment Document) on 16 April 2010.

Mr Skene claimed that he was a permanent full-time employee of WorkPac and that he was entitled to annual leave and consequential entitlements, or payment in lieu of annual leave upon the termination of his employment.

Mr Skene worked in accordance with his roster, being 12.5 hours per shift on ‘a 7 days on, 7 days off continuous arrangement’. He was paid a flat rate of $50 per hour, which increased to $55 per hour on 11 April 2012. There was no separately identifiable 25% casual loading.

Decision

The Court considered whether Parliament intended that the words ‘casual employees’ in section 86 of the FW Act be used in their ordinary sense, their legal sense or the specialised non-legal sense which WorkPac contended was common to federal industrial instruments.

The Court stated that in the hierarchy of terms and conditions of employment, the National Employment Standards within the FW Act are the pinnacle and have primacy over all other instruments, including an enterprise agreement, modern award or a contract of employment.

The term ‘casual employee’ in respect to section 86 of the FW Act is not a defined term. The Court also held that there is not a uniformly understood specialised meaning of the term and that ‘casual employee’ should be used in its legal sense, with laid down indicia by which the factual circumstances are to be assessed in the process of characterisation. For example, a separately identifiable casual loading may be a relevant indicator in the characterisation process. Each factor must be assessed on its merits.

The Court upheld the decision of the primary judge in that Mr Skene was entitled to be paid monies on termination in lieu of untaken annual leave under the FW Act. Further, the Court found that Mr Skene was a permanent employee pursuant to the Agreement and entitled to annual leave benefits under that Agreement.

Mr Skene also challenged the decision of the primary judge not to impose a pecuniary penalty on WorkPac for its contravention of the FW Act in failing to pay his untaken paid annual leave. The Court found that pecuniary penalties should be imposed on WorkPac, in addition to compensation payable to Mr Skene for WorkPac’s failure to meet his annual leave entitlements.

The Court made clear that an objective assessment of the nature of the employment relationship must be undertaken, notwithstanding the label given to a casual employee by the parties.

The ‘essence of casualness’ must be considered. The essence of casualness is an absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work.

Irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability are the usual manifestations of an absence of a firm advance commitment.

Take Home Message

Employers should clearly define casual employees and their entitlements and/or non-entitlements in their industrial instruments. However, this decision highlights that this does not mean a dispute might not arise. Nevertheless, the Court held that the payment by the employer and the acceptance by the employee of a casual loading is a factor which speaks to the intent of the parties to create and continue a casual employment relationship.

A separately identifiable casual loading may be taken into account in a potential underpayment claim, however, an employer may still be exposed to penalties under the FW Act.

We emphasise that an assessment of the entire employment relationship should be undertaken to determine whether a casual employee is in fact casual or not and this should be done on a case by case basis.

For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au.