Many employers, including medical practices, employ casual employees who are often longstanding members of their workforces. Do these employees really satisfy the criteria for casual employment? A recent decision of the Full Federal Court of Australia (Court) in WorkPac Pty Ltd v Skene [2018] FCAFC 131 should prompt medical practices to review their employment contracts.
Background
Mr Paul Skene was employed by WorkPac on 20 July 2010 as a fly in, fly out worker for their mining operations. During the term of his employment, Mr Skene’s contract classified him as a casual employee and provided for him to be paid a flat rate per hour which included a loading in lieu of leave entitlements. Mr Skene was required to submit timesheets, he did not receive any paid leave, and his contract provided for termination of his employment with one hour’s notice.
Mr Skene’s employment was terminated by WorkPac on 17 April 2012. Despite his employment contract classifying him as a casual employee, Mr Skene lodged an application in the Federal Circuit Court of Australia (FCC) seeking compensation for unpaid annual leave under the National Employment Standards (NES) and the relevant industrial agreement, being the WorkPac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007 (Industry Agreement).
The FCC held that Mr Skene was not a casual employee as his hours of work were clear, predictable and set twelve months in advance, and both he and his employer made a ‘firm advance commitment’ regarding the duration of his employment and the days / hours he would work.
Appeal
WorkPac appealed and argued that Parliament intended for employees to either be permanent employees and therefore entitled to a minimum period of leave, or casual employees and therefore entitled to monies in lieu of the period of leave.
On appeal, the Court agreed with the FCC’s interpretation and held that Mr Skene was not a casual employee and was entitled to annual leave payments for the period of his employment.
Given there is no definition of casual employment in the Fair Work Act 2009 (Cth), the Court considered whether Parliament intended for the term ‘casual employee’ to be used in its ordinary sense, or in a specialised manner as was referred to in the Industry Agreement.
The Court also looked at Mr Skene’s employment agreement and the NES. It was noted that the NES are the ‘pinnacle‘ and have superiority over employment contracts and industry agreements.
Casual employees
The Court held that characterising a casual employee is difficult but identifying the ‘essence of casualness’ is important and requires parties to consider whether in the employment relationship there is the absence of a firm advance commitment regarding:
- The duration of the employee’s employment or the days or hours the employee will work;
- Continuing and indefinite work according to an agreed pattern of work (with the casual employee also not providing a reciprocal commitment to the employer); and / or
- Irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.
Double dipping
The Court also considered the possibility of an employee ‘double dipping’, that is, the process where employees may be entitled to both the benefits of paid annual leave and a casual loading rate.
In this case, the Court held that there was no evidence that Mr Skene was actually paid a casual loading at all. Further, the Court reiterated that:
- If a worker meets the definition or a full or part time employee, they are not required to be paid a casual loading; and
- If an employer still elects to pay the employee loading that does not reflect on their status of employment and is not a legitimate basis to make a determination that the employee is in fact casual.
In response to the WorkPac case, the Commonwealth Government amended the Fair Work Regulations 2009 on 18 December 2018 so that there could be no ‘double dipping’. Employers are now allowed, in certain circumstances, to offset the casual loading paid to an employee against certain entitlements that may otherwise be owed to the employee if they are found in the future to be a permanent employee.
This amendment is retrospective and requires the employer to be paying a ‘clearly identifiable’ loading amount to the employee which compensates the employee for not having entitlements under the National Employment Standards.
Modern Awards
As at 1 October 2018, 84 Modern Awards were updated to include a model casual conversion clause (Conversion Clause) which means that casual employees are given the right (subject to a number of conditions) to request in writing a full time or part time position from their employer. This amendment applies to the Health Professionals and Support Services Award 2010 and the Nurses Award 2010.
The Conversion Clause will apply if the employee has worked a pattern of hours on an ongoing basis in the preceding 12 months (without significant adjustment) which reflect the hours of full time or part time employment. The employer can only refuse the employee’s request on reasonable grounds such as if it is known or reasonably foreseeable that the regular casual employee’s position will cease to exist within the next 12 months, or that their hours are likely to reduce within the next 12 months.
Employers are not however required to offer permanent employment to casual employees under this clause – rather, casual employees are entitled to request from their employer conversion to permanent employment.
Employers were required to provide a copy of the Conversion Clause to an employee by 1 January 2019 if the employee was employed as at 1 October 2018. If the employee was engaged at any time after 1 October 2018, then a copy must be provided within the first 12 months of the employee’s employment.
What should you do?
Medical practices that employ casual employees should regularly review and monitor their workforce and take steps to:
- Review the substance of their employees’ contracts and understand how their casual employees are engaged;
- Consider whether their employees should be engaged as part or full time employees and converting those employees from casual to permanent contracts;
- Ensure their casual employees’ contracts reflect their actual working arrangements in an attempt to avoid double dipping; and
- If their employees are casual, ensure casual loading is clearly identifiable in pay slips, and ensure contractual arrangements clearly state that the purpose of the loading is to compensate the employee for not having entitlements under the National Employment Standards.
It is also important for employers to thoroughly consider the requests of prospective employees who may prefer to be classified as casual employees (to obtain the immediate benefit of the casual loading) when in fact their arrangements are likely to reflect those of a part or full time employee.
Employers must also be aware that if they continue to employ casual employees who do not satisfy the criteria for ‘casual employment’ they may be liable for payments in the future (including annual leave payments) if the employment relationship is actually one of a part or full time employee.
This article was written by Karen Keogh, Partner and Patricia Marinovic, Associate.
P: +61 2 9334 8884
E: kkeogh@hwle.com.au