Luis Izzo advises businesses to review their contracts with casual employees after court ruling gives them new entitlements
In a huge development for businesses that employ casual staff, the Federal Court ruled in August that certain casual employees were entitled to paid annual leave under the Fair Work Act.
The ramifications of this decision are huge, particularly for businesses that rely heavily on casuals.
The court ruling
Most awards and enterprise agreements simply describe a casual employee as one “paid and engaged as such”. Until very recently the Fair Work Commission held that, provided an employee was called a ‘casual’ and paid a casual loading, they could legitimately be considered casual, notwithstanding their actual pattern of work.
However, in the recent Full Federal Court decision of Skene v Workpac, the Court found that where employees have regular work patterns over an extended period of time, those employees may in fact be considered permanent, notwithstanding the description the parties have given of the relationship, and notwithstanding that the casuals have been paid a casual loading.
This means the employees will be entitled to a range of benefits under the National Employment Standards (NES), including:
- annual leave
- paid personal/carer’s leave
- other forms of paid leave
- notice of termination
- redundancy pay
In other words, while the employee might be a ‘casual’ for the purposes of a modern award or enterprise agreement, it will not mean they are a casual for the purposes of the NES. Even more alarming was the Court’s finding that an employee can initially meet the definition of a casual but can then ‘morph’ into a permanent employee at some later point during their employment, which would then trigger an obligation to provide them with leave and other benefits.
What you need to know
Your business may be exposed to claims for back payment from both current and former employees who may have been engaged on a casual basis but worked on a long-term, regular or predictable basis. This could include claims for up to six years of unpaid annual leave as well as payments upon termination of their employment.
What you should do
Review the use of casual employment in your business, particularly where the arrangement involves long-term, regular work patterns. For those employees, offer conversion to permanent employment wherever practical.
Take steps to mitigate your exposure through well-drafted employment contracts that include clearly defined casual loading provisions and set-off clauses to maximise your ability to recover any payments made in error, should the casual employee seek to claim unpaid leave entitlements.
Seek expert advice on how this latest employment standard ruling may affect your business.
Australian Business Lawyers & Advisors (ABLA) was voted #1 Employment and Workplace law firm of the year. If this article has caused concern for your business, call Luis Izzo, managing director, on 1300 565 846.