Late last month, the Federal Court ordered a small South Australian Construction business to pay a former casual worker 15 years’ worth of annual leave on the basis that the casual worker should have accrued the leave entitlements of a permanent employee.

On the face of it, this decision should send shock waves through the Australian Business Community as it challenges the notion of a casual worker and amounts to double dipping by casual employees given that casual pay rates already make financial consideration for the non-payment of leave entitlements.

“Analysis of the decision by the Australian Industry Group suggests that the decision could potentially have implications for the employment of around 1.6M of the 2.6M casual employees in the Australian workforce – and could result in employers being required to pay anywhere between $5.7B and $8B in retrospective costs”, said ACAPMA CEO Mark McKenzie

“But before we scare the horses too much, it is worth noting that several aspects of this decision are peculiar to the individual case”, said Mark.

The circumstances of the Federal Court decision do not appear to be typical of a casual worker that is employed under an Australian Industrial Award in that:

  • The worker was employed under an Australian Industrial Award for the first 7 years of their 15 years of employment and under an Australian Workplace Agreement for the remaining 8 years.
  • The worker worked regular full-time hours for a period of 15 years
  • Despite the employer noting that the employee was employed as a casual, there was no indication of this employment status on their payslips
  • While the employer claimed that the hourly rate paid to the worker included a 20% casual rate, there was no evidence of this loading having been paid and, in any event, the worker should have been paid a 25% loading under the relevant workplace agreements.

“Given the specific circumstances, this case is perhaps better considered in terms of the obligations of an employer when employing casuals – rather than sounding the death knell for the future employment of casuals in Australian businesses”, said Mark

After all, the employment of casuals is an important aspect of Australian workforce productivity.

In a recent report, the Australian Productivity Commission noted that the growth in casual part-time workers in the last 50 years had been driven by both (a) supply side factors where employees have sought to balance family and social commitments with work demands, and (b) demand side factors where employers have sought increased workforce flexibility.

“What often gets lost in the ideological debate between employer groups and the union movement is that many employees prefer the flexibility of casual work over permanent part-time and full-time work”, said Mark.

“And this choice of casual employment is the key point in the recent Federal Court decision”, continued Mark

The Federal Court decision determined that the worker was not conscious of being employed on a casual basis and that the employer had not provided any evidence (i.e. employment contract or payslips) that the employee had been clearly advised that they had been employed on a casual basis.

In addition, there was no evidence that the employee was given the choice of transitioning to permanent work after working more than 6 months of regular hours as required in many Australian Industrial Awards.

So, while there remains some uncertainty about what constitutes ‘regular working hours’ – an issue that ACAPMA is pursuing with the Federal Government in partnership with other industry groups like COSBOA – there are some simple but essential actions that fuel retail businesses must take with respect to the employment of casual employees.

These steps can be summarised as follows:

  • The letter of employment issued to an employee upon initial engagement should clearly identify that the role is classified as a casual employee
  • Wages must be paid at the minimum casual hourly rate (which takes account of not paying leave entitlements) as stipulated in the relevant Award (in the case of fuel retailers, the relevant award is the Vehicle Manufacturing, Repair, Services and Retail Award that can be found at http://awardviewer.fwo.gov.au/award/show/MA000089)
  • All payslips should stipulate that the worker is employed as a casual worker (e.g. Casual Console Operator, Casual Roadhouse Attendant or Casual Driveway Attendant)
  • Under Clause 13 of our Award, a casual employee working regular hours, must be given the choice of transitioning to permanent employment (either part time or permanent depending upon hours worked). The employer must notify the employee of this right within 4 weeks of them having worked six months of ‘regular work hours’
  • Upon receipt of this notification – or alternatively as a result of the employee initiating the conversation after six months – the employee has 7 days to notify the business of their choice to transition to permanent employment or remain as a casual.
  • Importantly, the employer cannot reasonably refuse a request of a casual working regular hours to transition to permanent employment.

Note that on transitioning to permanent employment, the employee’s hourly rate is typically lowered to the normal hourly rate in lieu of them being entitled to payment of leave as stipulated in the Award.

“Given that our industrial award already makes provision for a casual employee working regular hours to transition to a permanent employee, the recent Federal Court case is most significant if the business has not followed – with appropriate documentation – the procedures set out in Clause 13 of our Industry Award”, said Mark

“That said, the question remains over what constitutes ‘regular work hours’ and this is an issue that we are pursuing with the Federal Government as a matter of some urgency”, added Mark.

In the meantime, it is suggested that member businesses adopt a fairly liberal view of ‘regular work hours’. For example, if an employee is working three shifts per week over 6 months – and these shifts are generally (but not always) occurring on the same days – then it may be prudent to consider this situation as constituting ‘regular work hours’.

In any event, it is important that the employer engage in a conversation with their casual employees about their rights to transition at the six month-employment mark (and document such conversations for future reference).

Member businesses seeking further information on this issue should contact the ACAPMA Secretariat on 1300 160 270 or email employment@acapma.com.au