When is a casual not a casual?

The Federal Court of Australia has decided that an employee working at a mine on a fly-in, fly-out basis was not employed on a casual basis even though he was treated as a casual on the books and was regarded as a casual by management. As a result of the decision, the employee was entitled to annual leave and other permanent employee entitlements despite the fact he had received a casual loading as compensation for these entitlements.

Central to the decision was that an essential distinguishing feature that made an employee permanent was that they worked set hours that were inflexible. Further, there was a high degree of certainty about ongoing work.

It has long been held that casual employees are employees who are engaged on a casual basis and are paid a casual loading instead of accruing certain entitlements of permanent staff (such as annual leave, personal/carer’s leave or paid public holidays).

The Federal Court decision dismisses this approach as simply wrong.

Instead, the court found that the determination of the proper nature of the relationship (i.e. as either casual or permanent) must be considered against “the real substance, practical reality and true nature of the relationship”, as opposed to adopting the description the parties have given to the relationship.

The court held that for an engagement to be considered “casual” in nature:

• there should be no certainty about the period over which the employment is offered; and
• there should be an informality, uncertainty and irregularity about the engagement.

Furthermore, the court held that although a casual employee is paid a casual loading of 25 per cent, it’s not determinative of whether they are in fact a “casual”.

 

What does the decision mean for employers?

The business community is up in arms about this Federal Court decision and the government is now being asked to address the problem by amending legislation. But given the very sensitive political environment we’re currently facing, this outcome seems highly unlikely.

Due to this decision, it’s appropriate that you review your “casual” workforce to establish if any of your existing casuals are at risk of being considered permanent. You may want to consider providing such employees with the opportunity to convert to part-time employment (with the corresponding reduction in pay).

 

Changes to modern awards will support this court decision

Ironically, the Fair Work Commission recently announced that all modern awards – including the Real Estate Industry Award and the Clerks – Private Sector Award – will be varied to provide for casual conversion.

Effective from 1 October 2018, employees will be able to make a request to their employer to have their status converted from casual to permanent, subject to meeting certain criteria. In this regard, an employee must have:

• worked for the employer as a casual for at least 12 months; and
• over the 12 months, worked a pattern of hours on an ongoing basis, without significant difference and that could continue to be performed as a full-time or part-time employee.

The employer can only refuse the employee’s request to convert to a permanent position if:

• the change in status requires a significant adjustment to the employee’s hours of work in accordance with the award (for example, some awards prescribe that to be classified as a part-time employee a minimum number of hours must be worked each week)
  
  OR
  
  
• it is known, or is reasonably foreseeable, that within the next 12 months the casual employee’s position will cease to exist
  
  OR
  
  
• the employee’s hours of work will be significantly reduced in the next 12 months
  
  OR
  
  
• it is known, or is reasonably foreseeable, that in the next 12 months there will be a significant change in the days and/or times at which the employee’s hours of work are required to be performed that cannot be accommodated within the days and/or hours during which the employee is required to work.

 

Casual conversion in practice

Mary works for XYZ Real Estate as a casual property management assistant. Her rostered days and hours of work are Monday, Tuesday and Friday from 9am to 3pm. Mary works these hours with only very infrequent variation. She is paid a casual hourly rate of pay, which includes a 25% casual loading.

After being employed on this basis for 12 months, Mary asks her employer to change her status from casual to part time, but with no change to the agreed days and hours of work.

Mary’s employer must agree to her request to a change in status, unless it can be denied for one of the reasons prescribed by the award. If the change is agreed, Mary’s rate of pay may be adjusted by removing the 25% casual loading on the hourly rate of pay. This new rate of pay reflects the change in status. Mary will, of course, start to accrue leave and NES entitlements from the date the change in status comes into effect.

 

Questions?

If you have any questions, speak with a REEF Workplace Relations Advisor by calling 1300 616 170.