The ‘Permanent Casual’ and the Risk to your Business

Historically, employers have relied upon casual employment to meet periodic demand without the same financial and legal commitment that is present with permanent employees.  The Fair Work Act 2009 (Cth) and most Modern Awards exclude casual employees from redundancy pay[1] and allow for substantial flexibility of hours, which was of benefit to employers affected by the COVID-19 pandemic.

However, in a landmark decision by the Full Bench of the Federal Court,[2] the Court has ruled that a casual employee can be considered eligible for leave entitlements despite being classified as a casual.  The Court determined that, following from Workpac v Skene,[3] a casual employee with stable, regular and predictable employment was effectively a permanent employee.  Most concerning was the rejection of the argument that the employer should be able to off-set the 25% casual loading against any unpaid leave entitlements, with the effect of allowing the casual employee to retain both benefits.

The impact of this ‘double-dipping’ is significant, with employers exposed to potential underpayment claims from current and former casual employees despite paying the appropriate loading.  Employer groups such as Ai Group have pushed for legislative changes, including the definition of casual employee to be changed to ‘an employee engaged as a casual and paid as a casual, regardless of the pattern of work’.[4]  IR Minister Christian Porter has also flagged an interest in the case, noting that the Government would consider joining a High Court appeal if one were to be launched.[5]

The outcome of this decision is yet to be seen, though a High Court appeal of the matter is likely.  In the meantime, you can proactively protect your own business from potential underpayment claims by addressing how you utilise casual employees:

• Rostering for casual employees should only be done on a pay cycle to pay cycle basis, rather than several weeks in advance. 
• Further, casual employees should be assigned to alternate duties from time to time, as demand allows. 
• Where casual conversion is possible, it is recommended to write to the employee indicating that conversion will occur unless the employee objects in writing; this allows you to have written evidence that the employee chose to remain on casual terms and conditions. 
• Finally, if possible, consider the use of fixed-term, maximum-term or project-specific contracts rather than hiring casual employees.  This provides a clear indication of the duration of expected employment and removes any ambiguity regarding permanency.

IRIQ Law will be paying close attention to any developments related to this case and is available to provide assistance to any business with concerns regarding compliance or potential underpayment claims that may arise.

[1] Fair Work Act 2009 (Cth) s 123(1)(c).

[2] WorkPac Pty Ltd v Rossato [2020] FCAFC 84.

[3] Workpac Pty Ltd v Skene [2018] FCAFC 131.

[4] ‘Parliament needs to act quickly to restore fairness, given today’s Federal Court Workpac v Rossato decision’, Ai Group (web page, 20 May 2020), https://www.aigroup.com.au/policy-and-research/mediacentre/releases/workpac-rossato-Fed-decision-20May/.

[5] Doran, Matthew and Conifer, Dan, ‘Federal court ruling on casual entitlements could be appealed by Government as industry groups voice concern’, (web page, 21 May 2020) <https://www.abc.net.au/news/2020-05-21/federal-court-casual-entitlements-annual-leave/12270724>.