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In a major decision, the Full Bench of the Federal Court has held that a worker expressly engaged as a casual was entitled to annual leave and other entitlements upon termination.

In our view, in doing so the Court has cast doubt on decades of accepted industrial practices and the decision threatens to undermine casual employment relationships around the country.

The Facts

In WorkPac Pty Ltd v Skene:

  • the employee was employed by a labour-hire company in the mining industry as a dump-truck operator and the employment was governed by the WorkPac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007 (Agreement)
  • although the letter of employment stated he was a casual, he was subject to a continuous 7 day ‘fly-in, fly-out’ pre-set roster arrangement, worked regular and systematic shifts, stayed in accommodation at/near the mine and was expected to attend each shift
  • an ‘all-in flat rate’ of pay was payable for each hour of work although WorkPac did not specify what entitlements this flat rate of pay purported to absorb
  • the annual leave provision in the Agreement stated it only applied to permanent employees
  • although no annual leave was taken during employment and the employee was not paid any annual leave or notice upon termination, a claim seeking payment of same was filed

The Issues

Whilst the Fair Work Act states paid annual leave applies to all national system employees “other than casual employees”, it does not define a “casual employee” thus the issues for the Court were:

  • the meaning of “casual employees”
  • whether the employee was a casual employee for the purposes of the Fair Work Act and/or the Agreement
  • whether the employee was entitled to annual leave and other entitlements upon termination

The Decision

The Court found:

  • the employment conditions were not indicative of casual employment as there was no ‘informality, uncertainty or irregularity’
  • the Agreement and letter of appointment did not specify the all-in flat rate of pay included a casual loading
  • the Fair Work Act has supremacy over all other industrial instruments and cannot be excluded by any contract, award or enterprise agreement
  • calling the employee a casual did not change the true nature of his employment as ‘other than casual’ for the purposes of the Fair Work Act, meaning he was entitled to payment of his untaken annual leave upon termination pursuant to that legislation

Payment and Penalty

The Court determined:

  • the employee was awarded over $21,000 in untaken annual leave plus interest
  • a penalty was imposed on WorkPac for its failure to provide the employee with annual leave in accordance with the Fair Work Act
  • whilst the Court acknowledged that WorkPac was of the honest view that the employee was not entitled to such benefits, it reiterated that “ignorance of the law is not ordinarily excusatory” and that a penalty was necessary for deterrence purposes

The Sting

The decision:

  • has sent shockwaves through the business community with employer and recruitment organisations warning that the decision may create massive liabilities for businesses with a heavily casualised workforce and result in a flood of underpayment or back-pay claims
  • has led to suggestions that businesses may be more reticent to employ casuals or expand their casual workforce and that existing casual jobs may be put at risk

Going Forward

Employers must:

  • limit casual employment to those engagements that are truly informal, uncertain or irregular
  • consider inviting regular and systematic casual employees to transfer to permanent employment and fully documenting any rejections
  • ensure all contracts or agreements are professionally drafted so as to ensure that any loaded rate of pay expressly incorporates and absorbs all applicable loadings and allowances
  • seek legal advice on the proper characterisation of employees within their workforce

More Information

Please call the leading employment lawyers in Parramatta, the Matthews Folbigg Workplace Solutions employment law team on 9635 7966 to speak with one of our employment lawyers if you require any assistance or advice.