On 16 August 2018, the Full Court of the Federal Court handed down a very problematic decision in the WorkPac v Skene case.

The Federal Court’s decision creates significant uncertainty for businesses and has already led to some employees who have been engaged and paid as casual employees, making claims for annual leave and other entitlements under the National Employment Standards in the Fair Work Act.

The case concerned a casual worker (Paul Skene) who was employed by labour hire company WorkPac between 2010 and 2012 to work in coal mines operated by Anglo Coal and Rio Tinto. Throughout his employment, Mr Skene was paid in accordance with an enterprise agreement reached between WorkPac and its employees. The enterprise agreement included all-in rates of pay, with a higher all-in rate payable to casual employees. During the period that he worked at Rio Tinto’s Clermont Coal Mine as a “fly in, fly out” worker, Mr Skene was given 12 month rosters at the start of each year setting out the hours that he would work. After the termination of his employment, Mr Skene made a claim for annual leave in accordance with the National Employment Standards in the Fair Work Act for the two year period that he worked for WorkPac.

The Full Court of the Federal Court (Justices Tracey, Bromberg and Rangiah) upheld Mr Skene’s claim. The Court decided that:

• Division 6 (Annual Leave) of Part 2-2 of the Fair Work Act states that the Division applies “to employees, other than casual employees”, but the term “casual employees” is not defined in the Act.
• Just because an employee meets the definition of a casual employee under an award or enterprise agreement, does not necessarily mean that the employee will be a “casual employee” for the purposes of the National Employment Standards in the Fair Work Act.
• The term “casual employee” has no precise meaning and whether any particular employee is a casual employee depends upon an objective characterisation of the nature of the particular employment as a matter of fact and law having regard to all the circumstances. In this regard, there are a number of indicators of casual employment.
• A “casual employee” has no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work.
• Irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability are the usual features of an absence of a firm advance commitment. However, it is possible for a casual employee to ultimately work a regular pattern of work (in the absence of advance commitment and predictability), and for the employee to still be considered a casual.
• The payment by the employer and the acceptance by the employee of a casual loading, and the description of the type of employment given by the parties in the contract of employment, are indicators of the intent of the parties to create and continue a casual employment relationship.  However, any objective assessment needs to consider whether that intent has been put into practice and maintained.
• Mr Skene was paid an all-in flat rate (initially $50.00 per hour and later $55.00 per hour) under his contract of employment. It was not clear that he was paid a casual loading and his contract of employment did not allocate any part of the all-in rate to a casual loading. The Court held that if Mr Skene had been paid a casual loading, this could be a “relevant indicator” as to whether he was a “casual employee” for the purposes of the Fair Work Act, but this would not be determinative.
• WorkPac’s enterprise agreement did not define “casual employment”. If the enterprise agreement or employment contract had defined or described Mr Skene as a casual employee for the purposes of the annual leave provisions of the Fair Work Act, that would have been a relevant factor to be taken into account, but neither the enterprise agreement or the employment contract did this.
• The Court held that Mr Skene’s pattern of work was regular and predictable, continuous and not subject to significant fluctuation, in circumstances where there was an expectation that he would be available, on an ongoing basis, to perform the duties required of him in accordance with his roster (set 12 months in advance).

Further Federal Court test case

An application for special leave to appeal the above Federal Court decision to the High Court has not been filed by WorkPac. However, WorkPac has initiated another important case about casual employment in the Federal Court.

In the WorkPac v Rossato Case, the Court will consider further arguments about the meaning of the expression “casual employee” in the Fair Work Act and also arguments about the ability for an employer to offset any casual loading paid against other entitlements that may be owed. The case was listed for an initial case management hearing in the Federal Court on 18 October.  This case is separate to the WorkPac v Skene case referred to above.

In an 18 October media release, Ai Group welcomed the Australian Government’s decision to intervene in the WorkPac v Rossato case. This case will provide an opportunity for all of the relevant issues to be considered by the Court including matters that were not fully explored in the WorkPac v Skene case.

What steps can employers take to reduce risks?

To reduce risks of claims by casual employees for annual leave and other entitlements of full-time and part-time employees, employers should consider:

(1) Ensuring that new casuals sign a written employment agreement prior to commencing employment, that:

Specifies that the person is a casual employee.

Specifies that there is no advance commitment of ongoing work or regular work.

Specifies the casual loading that is paid (e.g. 25 per cent).

Specifies that the casual loading is paid instead of annual leave, personal/carer’s leave, notice of termination, redundancy benefits and the other attributes of full-time and part-time employment.

Includes an offsetting clause that clarifies:

That the total rate of pay is paid to the employee firstly in payment of any award and legislative entitlements; and

That the balance may vary from pay period to pay period depending upon award or legislative entitlements of the employee in that pay period.

(Note: Ai Group Workplace Lawyers can assist in drafting appropriate offsetting clauses)

(2) Ensuring that pay records and pay slips identify that the employee is a casual and show the casual loading separately.

(3) Whether or not the employment contracts of existing casual employees should be reviewed.

(4) Whether any company policies or enterprise agreements should be reviewed.

If you would like more information about engaging casual employees, please contact Ai Group’s Workplace Advice Service on 1300 55 66 77.

Alternatively, if you would like assistance in preparing casual employment contracts please contact your local employment, workplace and industrial lawyer in Sydney, Newcastle, Wollongong, Adelaide, Melbourne or Brisbane or email Ai Group Workplace Lawyers at info@aigroupworkplacelawyers.com.au.