FULL BENCH DECISION WILL CHANGE THE WAY CASUALS ARE EMPLOYED

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In one of the most significant decisions in some time, the Full Bench of the Federal Court has handed down a decision in relation to the employment of casual staff.  If this decision stands, the ability of employers to employ staff on a casual basis will be greatly restricted and the risks associated with doing so potentially dramatically increased.

The Decision in Workpac Pty Ltd v Skene will in effect mean that many employees who are currently employed as casuals are in fact actually employed on a permanent basis and as such are entitled to annual leave, personal leave and paid public holidays, amongst other entitlements.  This is the case even though they are paid a casual 25% loading. Whether the casual loading can be set-off against the obligation to pay for annual leave was not considered in this matter and so remains unclear, however, previous decisions in this area have not allowed set-off to occur.  The only way we will determine with certainty if set-off is possible is through further litigation.  This puts businesses in a very difficult situation. 

If you have casual employees that are employed with a reasonable expectation of ongoing employment, then you may have ticking bomb in your business. It is also possible that employees initially engaged as true casuals may evolve to permanent employees at some point during the period of their employment.

This issue has been out there for a while with decisions of a single judge occurring from time to time along these lines.  What is different here is that this Decision has come from the Full Bench of the Federal Court and, unless it is overturned by the High Court, it will be used as a precedent decision by the lower Courts.  Employees that make these type of claims will now have a strong precedent decision to rely on, as will Unions and plaintiff law firms who wish to further their clients’ and their own agendas.



The Decision not only affects current and future staff but also potentially staff no longer employed at the business. 

The Full Bench reviewed previous decisions in this area, some of which greatly restricted the circumstances where an employee could be considered to be a true casual.  The common indicia for casual employment include;

  1. there should be no certainty about the period over which the employment is offered; and
  2. there should be an informality, uncertainty and irregularity about the engagement.

The fact that a casual loading is paid is not determinative of the employment status.  The circumstances of the engagement are what are relevant and not the label placed upon it by the parties.

Implications

In addition to the risk that employers will have to back pay employees for leave entitlements, Workpac are now also facing pecuniary penalties for not complying with the terms of their enterprise agreement.  In the initial decision, the judge found that it was an unintentional breach and, whilst he ordered the back pay of entitlements, he declined to impose a penalty.  The Full Bench has also overturned this part of the Decision.

Until this issue is further clarified, if a claim does emerge against your business, you will be in a very difficult situation.  You could litigate the matter with all the costs and potential penalties that this option has, or allow the employee to double dip by claiming both the casual loading and the annual leave. Neither option is very palatable.


What to do Next

Several things may happen from here.

  1. The government may seek to legislate certainty as to these types of claims. However, the current government has shown little interest in correcting other problems with the Far Work Act 2009.  Given the current chaos in the government, this may not occur, and if it does, it may not get through the Parliament.
  2. The matter may be appealed to the High Court. This will take time and there is no guarantee that the High Court will even decide to hear the matter.  Even if it does, there is certainly no guarantee as to the outcome.
  3. We might be stuck with this and over time it will become clear how much of a problem this is going to become.

Businesses will need to start thinking as to how this Decision might affect them and what risk minimisation strategies they might wish to adopt.  Unfortunately, it may not be clear for some time whether those strategies are going to be effective in limiting the impact of this damaging decision.

Amongst the many problems raised by this Decision is that many staff want to remain as casual because it suits their purpose as much as the employer.  The restrictions in Awards relating to part time staff are real and not at all suited to the operations of many types of businesses.

Whilst there are a number of issues that need to be considered here, one in particular is why is the business employing staff on a casual basis.  In many situations, there are legitimate reasons, however, in some cases it is less clear and as a result of this Decision, some businesses may need to change their arrangements

We are closely watching developments in relation to this decision and will keep clients informed about general developments through e-mail updates.  However, this will not be sufficient for many clients that are employers of large numbers of casual staff and so we are available to discuss individual circumstances with clients on an as needs basis.