Federal  Court converts casual to Permanent status!

Late last week Federal Court of Australia bought down a judgment that could see many Australian casual workers converted into permanent employees. This possibility has been around for some time.  Many employers do not understand the concept of casual employment and often misuse the term unknowingly. However, ignorance is not a defence.

It is now critical for all employers, no matter their size understand the implications of this case and what costs they will incur. Employers in retail, construction, hospitality and other high casual usage workers need to reassess the operation of the contract as quickly as possible.  This decision is seeking to enforce the true nature of casual employment.

If your casual employees are deemed to be permanent workers, then you will need to provide their required benefits and pay (and backpay) annual leave and sick pay for each year of service.  Their service will also be recognised, meaning unfair dismissal laws could also be triggered.

WorkPac a large labour-hire company, supplied a casual truck driver to a mine in Queensland.  In the subsequent case of WorkPac v Skene, the truck driver claimed that he was in fact, a permanent full-time employee of WorkPac, and, as such, he was entitled to annual leave or payment in lieu when his employment ended. WorkPac denied the claim arguing that he was a casual worker and was treated as such under the appropriate enterprise agreement.

The court found in favour of Mr Skene.  Workpac now also faces an investigation to determine penalties in relation to failure to meet Fair Work laws.

What constitutes casual employment?

The court stated: “A casual employee has no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work. Nor does a casual employee provide a reciprocal commitment to the employer. That characteristic… captures well what typifies casual employment and distinguishes it from either full-time or part-time employment… the conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship will need to be assessed. This is now the settled approach to the question of whether a person is an employee:”

The Court gave some guidance for assessment.

Firstly, to consider how the work is carried out.  Payment and acceptance of a casual loading can “speak to the intent” of the parties. However, “the objective assessment will need to consider whether the intent has been put into practice and, if achieved, maintained. The objectively demonstrated existence of a firm advance commitment to continuing and indefinite work… according to an agreed pattern of work will ordinarily demonstrate a contrary intent and the existence of on-going full-time or part-time employment rather than casual employment.”

Further, in the absence of that firm advance commitment, other factors for determining whether a worker is casual or permanent will be the irregularity, uncertainty, unpredictability, intermittency and discontinuity of the work.  In particular, “the availability of work for the employee is short-term and not-ongoing and that the employer’s need for further work to be performed by the employee in the future is not reasonably predictable,” the Court said.

Implications for employers

These cases are likely to spur numerous claims against employers.  Further, there is also now potential for double dipping.   It is important to remember that a casual worker has six years to make a claim from the end of their employment.  With about 20% of workers in Australia classed as a casual, this could turn out to be a significant shift.

Employers could now face claims from their current or ex-casual workers for permanent worker entitlements, such as claims for annual leave and personal leave and may be able to claim for back-paid sick leave.

All employers should review their casual arrangements.  Whilst the arrangement may have been casual in the first place, often the way the employment operates would see the actual employment characteristics as a part or full-time employee.  “It is also necessary to bear in mind that employment arrangements may change during the course of an employment. What is agreed to at the commencement of an employment is relevant to the characterisation process, but an employment which commences as casual employment may become full-time or part-time because its characteristics have come to reflect those of an on-going part-time or full-time employment,” the court said.

Actions for Employers

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This article is intended to provide commentary and general information. It should not be relied upon as comprehensive or legal advice. Formal legal advice may be necessary, in particular transactions or on matters of interest arising from this article. The HR Experts International is not responsible for the results of any actions taken on the basis of information in this article, nor for any error or omission in this article.