A recent court ruling has exposed employers across Australia to claims by former casual workers who, despite being paid 25% pay loadings in lieu of benefits such as annual leave, are now eligible to make claims for unpaid annual leave and long service leave entitlements.
This is because the Full Bench of the Federal Court of Australia has now made a ruling on the definition of “casual work”. The court has found that someone who works regular and systematic hours with predictable periods of working time are entitled to personal leave, compassionate leave and public holiday payments. As such, the Court does not consider such workers to be true casuals.
The court found that the regulatory and predictability of the employee’s hours, the long term and advance rostering that was present, and (in this case) the provision of accommodation facilities suggested a permanent employee. The court found that the employee and employer had, in fact, agreed on employment of indefinite duration which was stable, regular and predictable.
The court also rejected the argument from the employer that the employer should be able to set off the casual loading it had paid to the employee against these unpaid entitlements. The employer was also told it was not entitled to restitution of the casual loading built in to the hourly rate. In fact, the employer was warned that failing to pay the national employment standard, including leave, would be considered a breach of the Fair Work Act.
The court also found that this would be the case, even if the employee had agreed to accept something else in lieu of, or in substitution of, the entitlements as parties cannot contract out of the national employment standards or the timing or manner of their provision.
Accordingly, regardless of what their contract says and regardless of the payment of any casual loadings, casuals in those situations are likely to be considered permanent employees with all associated entitlements.
Unions say this ruling will see the end of the “sham” employment arrangements or “permanent casual.” As a result, it is estimated that businesses across Australia are now exposed to up to $8b in potential back pay claims for casuals who have been with the same employer for some time, working regular and systemic shifts with a reasonable certainty of those shifts continuing. Such claims will be limited to a period of the preceding 6 years.
Given the potential for significant claims by such casuals, employer association groups have called for an intervention from the Government to provide clarity into the future as to how casuals will be employed. That is, they are calling for an amendment to the definition of a casual employee under the Fair Work Act in a simple and clear manner to address the uncertainty caused by the decision.
Employer groups note that this may make employers reluctant to hire people on a casual basis and thus may lead to a reduction in available jobs, particularly in casual-dependent industries such as retail, hospitality and tourism.
However, the decision highlights that there are mine fields aplenty in the Fair Work Act and any employer would be prudent to obtain legal advice as to their employment contracts and obligations before taking on employees.