Landmark Decision Impacts Casual Engagement Model

The recent decision of the Full Court of the Federal Court in the matter of WorkPac v Skene[1] creates an enormous challenge for Australian businesses, and has led to fears of significant liabilities for the back payment of wages arising from the engagement of casual employees.

In this matter the Full Court of the Federal Court held that a labour hire casual who worked regular and predictable hours was a permanent employee at law and was therefore entitled to paid annual leave, and other permanent employment rights, despite WorkPac paying him as a casual.

The Full Court determined that when considering the proper nature of a casual employee’s engagement an objective assessment needs to be undertaken. While a valid Casual Contract of Employment would go to identifying the intentions of the employee and employer at the commencement of the employment relationship, the Full Court importantly held that the provision of an agreed and continuous pattern of work can demonstrate a contrary intention to that contained within the employment contract, and in certain circumstances give rise to a permanent employment relationship.

The Full Bench ruled that Mr Skene was entitled to $21,000 in compensation plus interest of $6700 for accrued annual leave under the National Employment Standards (NES). Significantly, the Federal Court has also set the matter down for consideration of the pecuniary penalties which would be imposed in this matter for the failure of WorkPac to pay Mr Skene permanent employment entitlements.

This decision has resulted in understandable concern from employers engaging casual employees who fear it may result in a significant volume of claims from employees challenging the status of their engagement and seeking the back payment of permanent employment entitlements such as annual leave, redundancy and notice of termination.  With employees having 6 years in which to raise a claim, the decision provides both current and former employees with an opportunity to pursue a claim of this type.

It is important to note that the decision does not require employers to begin back paying current casual employees nor does it mean that all casuals are now entitled to annual or personal leave.  For casual employees who work a consistent number of hours each week, with little or no variation in the days worked or start and finish times, the risk is significant.  At the other end of the scale, casuals who work irregular hours, with changes in the number of hours and times when those hours are worked, there is very little risk of deemed permanent employment.   A large proportion of casual employees are, however, somewhere in between the two extremes.

With a recent announcement that casual employees in the mining industry commencing a class action against a mining company, and one of Australia’s leading labour hire companies, concerning the misclassification of workers engaged as casuals, this issue is likely to escalate.

Given the serious ramifications arising from this decision many leading business and employer groups have called upon the Government to legislate to remove any ambiguity which may exist with the engagement of casual employees and avoid employees effectively “double dipping”.

It is widely predicted that this matter will be the subject of a High Court appeal, however as yet an appeal process has not been initiated. Unless (or until) a High Court appeal is lodged and determined, the decision stands as law, and businesses need to review their own casual engagement model and take steps to quantify the potential risk and implement measured to minimise risk.

HR Assured clients can have peace of mind knowing the casual employment contracts within the HRA Cloud are best practice and compliant, expressly referring to the casual nature of employment and the payment of casual loading.

HR Assured will continue to review and update clients accordingly in relation to this matter, however, until that time clients are strongly encouraged to contact the Telephone Advisory Service on (02) 9083 0000 for guidance upon this decision and what steps can be taken to minimise the risk to your business

[1] WorkPac Pty Ltd v Skene [2018] FCAFC 131