WorkPac v Skene

There has been much media commentary on the Federal Court’s recent decision surrounding the case of WorkPac Pty Ltd v Skene [2018] FCAFC 131.  Much of the dialogue has suggested that the case is novel, and has focused on the concept of double dipping: when someone classed as a casual employee subsequently claims leave entitlements, which the employer feels has been covered by the casual loading included in the employee’s pay.

However, the WorkPac vs Skene case essentially reinforces the traditional view of casual employment (this being its irregularity and uncertainty, as opposed to the regularity of part-time or full-time employment), and overturns some recent case law which, to an extent, allowed the label ‘casual’ to override the true nature of the employment.

The decision reasserts the traditional view that you cannot convert an employee who is really a regular full, or part-time employee into a casual simply by calling the employee ‘casual’.  It is crucial to look at the actual facts of the employment relationship in deciding what the real nature of the relationship is.

This outcome is not surprising, given the circumstances of Mr Skene’s employment.  He was engaged as a fly in/fly out “Casual Field Team Member” at a mine, under a contract and enterprise agreement which included that classification.  His employment was full-time (12.5 hours a day, 7 days on, 7 days off) and entirely predictable as he was on a 12 month roster.  In turn, he was paid at a rate of $50 (later $55) an hour, said to include “a loading in lieu of leave entitlements”.  

When Mr Skene’s employment ended, he claimed annual leave on the basis that, in reality, he was not a casual employee, and that he therefore qualified for annual leave under both the Fair Work Act (‘the Act’) and the National Employment Standards.

The Full Federal Court agreed with him and held that where the Act refers to ‘casual employment’, it means casual employment in the traditional sense of irregular and uncertain employment.  As the Act takes priority over modern awards, enterprise agreements and employment contracts, the meaning of ‘casual’ in the annual leave provisions in the Act cannot be altered by any of those subsidiary instruments, nor  by use of a title which did not reflect reality.

Double Dipping

As there was no clear evidence that Mr Skene had in fact been paid a casual loading (there had been no dissection of his hourly rate into ordinary base pay/casual loading in his contract or anywhere else), there was no basis on which to calculate the alleged loading, so as to offset it against his claim for leave.  In addition to this, Mr Skene was not in fact a casual, therefore WorkPac was not required to pay loading – so if it chose to do so, it did not give rise to double dipping.

In the process, the Federal Court overturned a line of cases in the Fair Work Commission which have since held, although as modern awards usually define a casual employee as one who is ‘engaged and paid as such’, parties can rely on the combined use of a ‘casual’ title and an apparent agreement between the parties as to the casual nature of the employment, regardless of the circumstances, to class the relationship as casual.  ‘Engaged and paid as such’ could well be interpreted to mean really engaged and paid as a casual, not just called ‘casual’.  To hold otherwise would elevate form over substance.

Where does this leave us?

Standard advice over many years has been that where someone is called a casual, but does not really work on a casual basis, the relationship is vulnerable to be classed as permanent employment, with all the entitlements that flow from that.  WorkPac Pty Ltd v Skene [2018] FCAFC 131 reasserts the validity of that longstanding advice.

What is an employer to do (or not do)?

There are several options:

• Be careful to only use the title ‘casual’ with employees who are genuinely casual, and accept the reality that any ‘casual’ employees who do regularly work either full or part-time are likely to have permanent employment entitlements;
• Do not expect the use of the title ‘casual’ in itself to determine an employee’s status;
• Where an employee is engaged as a casual, manage the relationship to ensure that the employee remains casual and has irregularity and uncertainty in employment rather than becoming ‘part of the furniture’, working 38 hours a week, or regular part-time hours, week after week;
• If your business has ‘casuals’, who may not actually be casual employees, you need to look at correcting the disjunction between the reality and the description of the relationship in order to minimise risks.You might do this by offering a casual employee the opportunity to become permanent – as the new casual conversion clauses in modern awards require (see our article: An Update on Casual Conversion Clauses in Modern Awards) – and, if the employee refuses, by ensuring that the offer and the refusal are officially recorded so that in the event of any future dispute, it can be made clear that the employee did actively choose to remain as casual rather than opting for permanent employment and entitlements;
• It will also be beneficial for the facts surrounding casual loading (i.e. whether it is being paid and in turn, what the casual loading is) to be recorded in writing, so as to avoid any future disputes over whether or not loading was paid.

On this note, it would be wise to include in correspondence relating to pay (e.g. employment contracts, letters of offer etc.) a dissection into base pay plus loading, so that if a claim for permanent employment entitlements is made, there will at least be a basis to claim an offset for the additional amount paid to the employee on the basis that they were casual.

The WorkPac decision has caused considerable activity at high levels:

• employer organisations seeking changes to legislation and applying to the Fair Work Commission to allow a new category of employee in modern awards under a ‘perma-flexi’ category; and
• employee lawyers threatening class actions against major employers of so-called casual employees (particularly in the mining industry and in situations similar to Mr Skene) to recover millions of dollars in unpaid entitlements for large numbers of employees.

It remains to be seen whether either of these strands of development will bear fruit, but in the meantime, for most employers the issue will be dealing with the issues above in the face of employee resistance – because casual employees often value the additional ready money more than the potential leave benefits of permanent employment, and will therefore resist being converted to permanent employment.  You may need to work out strategies to deal with this, which will at least involve ensuring clarity about the composition of pay as base plus loading.

What can Coleman Greig’s Employment Law team do to help?

Coleman Greig’s experienced employment lawyers can review documentation and provide specific advice surrounding your use of casual workers, as well as who is or is not likely to be casual.  Similarly, we can advise on strategies for resolving issues and minimising risks if a dispute arises.

If you would like to speak with a lawyer in our Employment Law team, please don’t hesitate to get in touch: