On 6 September 2018, the Full Court of the Federal Court decided that a casual employee was entitled to holiday pay (WorkPac v Skene).

Quick Background

Skene was a casual employee from April 2010 to July 2010 and again from July 2010 to April 2012, when his employment was terminated.   He worked set hours based on a roster at a remote mine.   He was paid a loaded rate which was argued was a base rate plus a casual loading.

The Decision

The Court held that Skene was not a casual, and that annual leave had to be paid and at the loaded rate.   There were two key issues in the decision:

1. That 'casual' takes its meaning from decided legal cases and not the National Employment Standards under the Fair Work Act.   The Court considered casualness meant the lack of advance commitment as to duration of employment or the days or even hours to be worked.   The essential factors are "irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work".

2. That an employer cannot determine status by making an arbitrary declaration.   Whether a person is a casual is still objectively determined by the 'essence of casualness' as in para. 1.

The Implications

There are two concerns.

1. Fair Work recognises that there can be 'a long term casual employee', but this decision considered that the regular and systematic basis of employment applied to the engagement as much as to the hours of work.

2. The loaded rate plus the annual leave means there is 'double dipping'.   The Court considered that the employer had erroneously presumed that the employee was a casual and so not entitled to payment of annual leave.   Even if a loading was paid this is not a legitimate basis for construing an employee was not entitled to annual leave under the NES.

In a Nutshell

If employees do not have the "essence of casualness", determined by 'irregularity, uncertainty, unpredictability, intermittency, and discontinuity in the pattern of work', the employer may face claims that its employees are permanent employees (or permanent part time).

This may go to the High Court, or may even result in legislative change.   However, it is also possible that it may result in compensation claims being made in the near future.

Actions to Take

1. Consider whether to convert casual employees (based on the "essence of casualness" test) to permanent part-time or full-time arrangements.   Depending on the hours involved there may even be a saving in annual pay.

2. Show the payment of casual loadings separately from base pay rates, rather than as a combined loaded pay rate.   This may result in holiday pay only being paid on basic rates and not the loaded rate (however, this is sure to be a matter for the High Court and so may be challenged).

We have maintained for some time that this problem was coming, either as a concern that casuals should be properly classified as permanent part-time (partly because employees have regular and set hours), and that there were savings possible by not paying at a loaded hourly rate.   It may be months before a decision comes from the High Court, and so it could be advantageous to assume that a change should be considered now, not after a decision which may result in back pay.

If you would like to discuss the implications for your business or seek assistance in working through the actions required we would be happy to assist.