Long term casuals – Are they entitled to leave entitlements?

It is common knowledge that employers have a choice as to how they employ their employees. In circumstances where the employer does not need someone to work full-time hours, they can either employ the individual as a part-time permanent employee, or as a casual employee. However, many employers have abused the concept of casual employment by effectively retaining employees for long periods of continuous and predictable employment. We should also recognise that many employees prefer casual employment as they receive a greater rate of pay than they would otherwise as a permanent employee. However, this issue has become quite a political and legal hot potato and in the last 12 months there have been a number of cases heard by the Courts in which employees have argued that despite receiving a casual loading, they should be paid the value of annual leave entitlements to which they would have otherwise been entitled had they been employed as permanent employees.

This issue has understandably caused a great amount of concern for employers, as it has raised the very scary prospect that they may be liable for hundreds of thousands of dollars in back pay claims for part of their casual workforce that has regular and systematic employment and an ongoing expectation of work. This issue was of such significance during the last federal election, that the Labor Party pledged to deal with this issue legislatively and define the meaning of casual to ensure “long term” casuals were treated in the same way as permanent employees.

In August 2018, the Full Federal Court determined that a labour hire employee working for Workpac in the mining industry was entitled to annual leave entitlements despite the fact that he had been engaged as a casual employee. The employee worked a continuous rolling roster of 7 days on and 7 days off, in the same manner as the mining company’s permanent staff. There was no element of choice as to when he worked, or the hours he worked. The company chose not to appeal this decision, however, is fighting the same issue in respect of another employee. That matter is currently before the Federal Court and the Commonwealth has intervened to try to ensure that casual employees cannot “double dip”. In other words, the government wants to ensure that if the Court determines that the employee is actually a permanent employee and therefore entitled to leave, the casual loading paid to him will be offset against any leave entitlement determined by the Court.

The issue has just become even more contentious as the Construction Forestry Maritime Mining Energy Union (“CFMMEU”) this week launched a class action against Workpac, seeking at least $12 million in unpaid annual leave entitlements for what it calls “misclassified” casual employees. This action follows another class action by Adero law last year seeking similar orders.

What does this all mean for the average employer that engages casual employees as part of their workforce? One thing is clear – until this matter is resolved either by the courts or by legislation, employing long term casuals places employers at risk of significant underpayment claims. So, what should employers do?

• Ensure that any casual employees are actually casual. This means the employee is employed on an ad hoc as needs basis. The employee should not have recurring predictable work, so as to give rise to a reasonable expectation of ongoing work; and
• Convert long term casual employees to either permanent full-time or permanent part time employment.

Employers must however remember that they cannot force employees to convert to permanent status. In addition, casual employees have the benefit of the General Protection provisions of the Fair Work Act 2009 (Cth), and as such any actions taken by an employer that may affect them must be done with care.

In addition, we remind our clients that all Modern Awards now include a casual conversion clause which allows employee to request that their employment be converted to full-time or part-time employment in circumstances where the casual employee has in the preceding period of 12 months worked a pattern of hours on an ongoing basis and without significant adjustment. This request may only be refused on reasonable grounds in accordance with the modern award provisions.

We recommend that if this is an issue for your business, you seek appropriate legal advice.

If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to your employment relations framework, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.