In this article, Charles Power – Partner Holding Redlich, explains the importance of understanding employer obligations when it comes to casual labour.
Casuals are excluded from accessing the entitlements to paid annual leave, personal/carer’s leave and comp: assionate leave provided by the National Employment Standards (NES) in the Fair Work Act 2009 (Cth).
In Workpac Pty Ltd v Skene ( FCAFC 131) (Skene ruling) the Full Federal Court ruled that, for the purposes of the NES exclusion of casuals, a person is a casual when there 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.
Where these promises are given, this usually means the contract between the parties is not for casual employment. It doesn’t matter that those commitments are subject to the rights of either party to terminate employment or adjust the agreed pattern of work.
Following the Skene ruling, an employment relationship will not be casual, at least for the purposes of the exclusion from paid leave entitlements under the NES, if the following are satisfied:
- where the employer gives the employee a firm advance commitment to continuing and indefinite work, according to an agreed pattern of work, and the employee reciprocates by committing to be available on a continuing and indefinite basis, to perform work according to that agreed pattern.
- If neither the employer nor the employee gives this commitment, the employee is likely to be entitled to NES paid leave entitlements.
The Federal Government responded to the Skene ruling by introducing into the Fair Work Regulations with effect 18 December 2018, Regulation 2.03A. This will assist an employer who employed a person “on the basis that the person is a casual employee” and paid that person a clearly identifiable loading amount to compensate the person for not having one or more relevant NES entitlements. If in fact, that person was found not to be a casual employee for the purposes of the NES, and makes a claim to be paid “an amount in lieu of one or more of the relevant NES entitlements”, the employer may make a claim to have the loading amount taken into account in determining any amount payable in response to that claim. In other words, an employer can argue the amount payable to the employee may be offset by the casual loading payments already made.
In a sequel to the Skene ruling, the Full Federal Court in Workpac Pty Ltd v Rossato ( FCAFC 84) (Rossato decision) has issued a decision that has substantially undermined the capacity of employers to rely on this Regulation. The Rossato decision reaffirmed the ‘firm advance commitment’ test in the Skene ruling, in determining that a putative casual employee was entitled to NES paid personal/carer’s leave and compassionate leave. In the Rossato decision, the employment contract stated that the employee had the ability to “refuse and cancel” shifts or terminate the assignment at any time. However, the Court ruled there was still a firm advance commitment to work, given by both parties. This was because it was in fact extremely difficult for the employee to actually cancel or refuse to work shifts, and it would expose him to disciplinary sanctions if he did so.
In the Rossato decision, the Court regarded the following factors as inconsistent with casual employment:
- the contract was for ongoing or indefinite employment (subject to termination on the giving of notice), not short-term temporary employment
- the employee worked the same hours as full-time employees at the workplace
- the work was not to be performed on demand but was pre-programmed long in advance and fixed by a roster
- the employer had the right to stand down the employee without pay in circumstances of a strike, breakdown of machinery, or any stoppage of work for any cause for which the employer cannot be held reasonably responsible
- there were no mechanisms or arrangements that would be required to facilitate the allocation of irregular or intermittent work to the employee, e.g. notification of proposed rosters and system for acceptance. Rosters were not presented to the employee for him to pick and choose which shifts he would work.
The Court did not regard as significant the following factors that pointed to casual employment:
- the hourly pay rate
- the employee’s requirement to submit timesheets – the Court saw this as a means to the employer’s labour hire agency calculating pay, not as an indicator of irregular working hours
- the employment being terminable on one hour’s notice – the Court considered that where the employer was in the business of labour hire, it was likely to have greater capacity to replace departing employees quickly because of a readily available source of spare employees on its books.
The Court ruled that Rossato had not claimed an amount in lieu of NES entitlements to paid leave. Rather, he had claimed the payment due pursuant to those entitlements. As such, Fair Work Regulation 2.03A did not assist the employer in this instance.
For many years the Mobile Crane Hiring Award 2010 (Award) has entitled regular casual employees with a right to request to convert to full-time employment after a sequence of periods of employment of only six months, and only if their employment was to continue beyond the conversion process. The clause required employers to provide written notice to eligible casuals of this right within four weeks of the employee having attained such period of six months.
The Fair Work Commission decided in 2018 to extend this right more broadly to other award-covered employees but imposed a qualifying period of 12 months.
The Federal Government indicated support for amending the NES to extend this model award provision so as to enable casuals to request conversion to permanent employment after 12 months of regular casual employment. The Government indicated it would include a definition of casual employment in the NES. This most likely will adopt the test developed by the Federal Court in the Workpac rulings. The Government is also likely to address the defect identified in Fair Work Regulation 2.03A by the Rossato decision, so that an employer who paid a casual loading to a putative casual can rely on that payment to offset claims for paid leave, should the employee be found to be entitled to that benefit.
To minimise risk of claims for paid NES annual leave from casuals, employers should consider the following options:
- roster the “casuals” to preclude the “firm advance commitment” referred to in the Workpac cases
- enable casuals to convert to permanent employment, using the model casual conversion clause in modern awards as a guide
- make contingency for unpaid leave claims from casuals. In this respect, employers should make it expressly clear (in new contracts, pay slips or by other means) that the casual loading is paid to compensate for the absence of NES paid leave entitlements. This will improve an employer’s capacity to offset the loading against claimed leave payments relying on Fair Work Regulation 2.03A.
Author: Charles Power – Partner Holding Redlich