Has The Casual Employee Relationship Gone The Way of the Dinosaur?

Many employers, their representatives and of course politicians, have expressed deep horror and outrage at the Full Federal Court’s decision in Workpac Pty Limited v Skene [2018] FCAFC 131 (Skene) to uphold a decision that an employee, who was classified as a casual but worked a regular roster for over a year, was in fact a permanent employee.  Meaning that, in spite of being paid a loading he was now entitled to all the entitlements that come with permanent employment, namely annual leave, sick leave and the like.

In response to the decision, we note that one business leader said that the decision could result in “back pay claims for annual leave of at least $8 billion”.  That same business leader went further saying that “the costs involved could drive many businesses, small and large into insolvency”[1].

So the question is, did the full court get it so badly wrong and should employers and most importantly their IR and legal advisers have foreseen such an outcome and if not why not ?

The Facts

Mr Skene’s employment arrangements were entirely unremarkable.  He was employed by labour hire company Workpac in the Bowen Basin coal fields of Queensland, where he drove a dump truck on a one week on, one week off FIFO roster.  Of importance was that he worked on the same roster, with the same crew all year round.

As a ‘casual’ he was paid a flat hourly rate plus a casual loading in lieu of annual leave and sick leave.

In April 2012 he was terminated and as per his casual status, was not paid any annual leave on severance.  He subsequently lodged an application with the Federal Circuit Court (FCC) seeking compensation for unpaid annual leave under the National Employment Standards (NES) and the Workpac enterprise agreement (Agreement).

At first instance the FCC found that he was not a casual for the purposes of the NES because he worked regular systemic hours and shifts and there was a commitment from both parties that his employment would be ongoing.

The Court however held that Workpac was entitled to classify him as a casual in accordance with the Agreement, the outcome being that Skene was only awarded annual leave entitlements in accordance with the NES.

Full Federal Court Appeal

In finding for Skene the Court fell back to the often lost common law meaning of the construct namely that casual employment involves:

  • Irregular, unpredictable work patterns;
  • Uncertainty as to the length of the employment; and
  • Unpredictable and insecure nature of the employment.

In doing so, it importantly distinguished the statutory definition of long-term casual outlined in clause 12 of the Act with the common law definition, noting, that the common law definition contained no long-term, firm and advanced mutual commitment to the relationship.

The Court was also less than sympathetic to Workpac on the question of penalties, in remitting the determination of compensation and penalties payable to the primary judge, essentially saying that this was a serious matter and ignorance was no excuse.

Is the reaction from industry justified and how should employers deal with the impacts of the decision?

In a word no, the decision in fact was entirely foreseeable. So much so that Workpac and various Industry Associations (AiG, AMMA) chose not to appeal to the High Court, preferring to rely on the Commonwealth to introduce legislative change, for example by inserting a definition of Casual into the Act.  So far from going the way of the dinosaur, the casual relationship, having spent years on a frolic of its own and being wrongly applied by so many for so long, courtesy of this decision has now returned to type.

Employers for their part clearly must seek advice about their casual arrangements and the first port of call, may be to thoroughly vet their permanent casual arrangements.

In light of this decision, any long-term casual arrangements are likely to be unsustainable, if so, offer all affected employees the option of permanency on a part-time or full-time basis.  History shows that more often than not, most casuals rely on the loading and are likely to remain as casuals.  They must however be given the option.

A further step must be to examine all their contracts of employment, with a view to being able to set-off with an identifiable value the annual and personal leave that would otherwise accrue.

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

[1] AiG Chief Executive Innes Willox 13 September 2018.