WorkPac Pty Ltd v Skene [2018] FCAFC 131
What’s the case all about?
A recent Full Federal Court (‘Court’) decision may have major implications for employers and labour hire companies who rely on a casual workforce.
Mr Paul Skene accepted an offer of casual employment from WorkPac Pty Limited (‘WorkPac’) and worked for two years until terminated. The Court determined that Mr Skene was in fact a permanent employee and therefore entitled to annual leave entitlements notwithstanding WorkPac’s argument that Mr Skene was a casual employee and was paid casual loading.
In reaching their decision, the Court looked to the substance of the employment relationship over the contract itself. Therefore, employers and labour hire companies will need to carefully consider the substantive role of their casual employees and review all existing casual employment agreements.
Mr Skene’s Claim and Decision at First Instance
Background
Mr Skene was employed labour hire company WorkPac as a casual dump-truck driver assigned to work at Clermont Mine operated by Rio-Tinto. Mr Skene signed a ‘casual employment agreement’ with WorkPac in or around April 2010. He subsequently worked pursuant to a seven day on, seven day off roster, scheduled twelve months in advance. On 23 April 2012 Mr Skene’s employment was terminated.
The Claim
Mr Skene originally brought a claim in the Federal Circuit Court against WorkPac claiming unpaid annual leave pursuant to the National Employment Standards (‘NES’) within the Fair Work Act 2009 (‘the Act’). The NES provides for certain minimum annual leave entitlements for employees, other than casual employees.[1] Further, Mr Skene sought the application of pecuniary penalties under section 44(1) of the Act, which provides that a penalty may be imposed for breaching the NES.
Mr Skene also made a claim for unpaid annual leave pursuant to the WorkPac Pty Ltd Mining (Coal) Industry Workplace Agreement 2007 (‘The Agreement’). The Agreement provided for additional annual leave entitlements for permanent employees, but made no provision for casual employees.
First Instance Decision: NES
At first instance the primary judge found that Mr Skene was not a casual employee pursuant to the NES and therefore entitled to annual leave. The primary judge made this determination based on the following facts:[2]
- Mr Skene worked regular and predictable hours as evidenced by his payslips.
- Mr Skene’s employment was continuous and rostered up to one year ahead.
- Due to the fly-in fly-out arrangements, it was a fallacy to say that Mr Skene could elect to work or not work on particular days.
- There was an expectation that Mr Skene was required to make himself available on an ongoing basis.
The above facts were determinative notwithstanding that Mr Skene knowingly accepted an offer of casual employment, and that his employment was terminable on one hour’s notice. In total, Mr Skene was awarded $21,054.69 by way of compensation in lieu of annual leave taken under the NES and $6,735.03 by way of interest.
First Instance Decision: The Agreement
The primary judge determined that Mr Skene had no entitlement to annual leave pursuant to the Agreement. In making this finding, the primary judge looked to clause 5.5.6 of the Agreement which provided that WorkPac would inform each employee of the status of their employment at the time of engagement. The primary judge found that at the time of engagement Mr Skene was informed of his casual status and therefore he was not a permanent employee under the Agreement.
First Instance Decision: Penalties
No pecuniary penalties were imposed on the basis that the contravention was not ‘knowingly deliberate’.[3]
Findings on Appeal
The Appeal
Both Mr Skene and WorkPac appealed the decision of the primary judge. Mr Skene appealed the primary judge’s finding that he was a casual employee under the Agreement, and also appealed the decision not to impose pecuniary penalties. WorkPac appealed the primary judge’s finding that Mr Skene was not a casual employee pursuant to the NES.
Definition of ‘Casual Employee’
On appeal, the Court was required to consider the definition of a ‘casual employee’. The Court recognised that the Act does not contain an express definition. Absent a clear definition provided by legislation, the Court found that the applicable definition of ‘casual employee’ was the legal meaning as established through prior judicial consideration.
The Court then analysed prior judicial consideration of the term ‘casual employee’.[4] In Hamzy v Tricon International Restaurants,, it was said that ‘the essence of casual employment is the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work’. [5] In Reed v Blue Line Cruisers Limited, casual employment was characterised as informal, uncertain, and irregular.[6]
The Court said that the status of employment must be determined by looking to the substance of the relationship, objectively assessed by all the surrounding circumstances.[7] The Court also warned of the changing nature of the employment relationship over time. That is, although the definition of ‘casual employment’ might apply at engagement, the relationship could naturally evolve causing the relationship to be defined as something else such as part-time or full-time employment.[8]
Appeal Decision: NES
The Court agreed with the primary judge that Mr Skene’s employment was not casual and rejected WorkPac’s appeal. The Court found that the ‘regularity, predictability, certainty and continuity of the pattern of Mr Skene’s work’ meant the ‘essence of casual employment’ was clearly absent and therefore Mr Skene was not a casual employee for the purpose of the NES and entitled to annual leave.[9]
In respect of any ‘double dipping’, or the payment of both annual leave and casual loading, the Court found that Mr Skene was not actually paid casual loading. Mr Skene was paid an ‘all in’ hourly rate of $55.00 and there was no evidence to suggest that any portion of that rate constituted casual loading. Therefore, the argument that Mr Skene’s compensation should be set-off by casual loading previously paid was rejected by the Court.
Appeal Decision: The Agreement
In respect of Mr Skene’s appeal that he was a casual pursuant to the Agreement, he argued that WorkPac could not unilaterally determine that he was a casual employee and that, like his employment under the NES, the substance of his employment should be determinative. The Court agreed with Mr Skene’s argument and determined that Mr Skene was not a casual for the purpose of the Agreement and therefore entitled to the Agreement’s additional annual leave benefits. WorkPac was ordered to pay an additional $5,954.48 compensation in lieu of annual leave taken.[10]
Appeal Decision: Penalties
Lastly, the Court found in favour of Mr Skene’s final ground of appeal that WorkPac should be ordered to pay additional pecuniary penalties for contravening the NES. The Court said that ignorance of the law will not avoid the imposition of penalties. With the maximum penalty for a single breach being $33,000, the Court had regard to the nature of the breach which was determined to sit at the lower end of the scale. WorkPac was ordered to pay an additional $1,650 to Mr Skene by way of a penalty.
What should you do?
With one out of five workers in Australia employed on a casual basis,[11] industries who particularly rely on casual workers such as mining, retail, and hospitality, to name a few, will need to pay close attention to the substantive role of their casual employees not only at the time of engagement but ongoing.
For existing or prospective casual
employees consider whether their work has ‘the essence of casualness’. That is,
the work must be irregular, unpredictable, uncertain, and have no guarantee of continuity.
If not, it may be necessary to deal with these particular employees differently
to realise ‘the essence of casualness’. Otherwise, you may need to consider
offering those employees part-time or full-time contracts. At a minimum, casual
employees’ pay should include a clearly identifiable portion for casual loading
which, while not ultimately determinative of a casual employment relationship,
could help with any set-off should a claim arise.
[1] Fair Work Act 2009 (Cth) pt 2-2 div 6, s 86.
[2] Skene v Workpac Pty Ltd [2016] FCCA 3035, 81.
[3] WorkPac Pty Ltd v Skene [2018] FCAFC 131, 230.
[4] Doyle v Sydney Steel Company Limited (1936) 56 CLR 545; Reed v Blue Line Cruisers Limited (1996) 73 IR 420; Hamzy v Tricon International Restaurants trading as KFC (2001) 115 FCR 78; Melrose Farm Pty Ltd (t/as Milesaway Tours) v Milward (2008) 175 IR 455.
[5] Hamzy v Tricon International Restaurants trading as KFC (2001) 115 FCR 78, 38.
[6] Reed v Blue Line Cruisers Limited (1996) 73 IR 420, 425.
[7] WorkPac Pty Ltd v Skene [2018] FCAFC 131, 181.
[8] WorkPac Pty Ltd v Skene [2018] FCAFC 131, 178.
[9] WorkPac Pty Ltd v Skene [2018] FCAFC 131, 184.
[10] Skene v WorkPac Pty Ltd [2018] FCCA 3628
[11] Geoff Gilfillan, ‘Characteristics and use of casual employees in Australia’ (Research Paper Series 2017-2018 Parliamentary Library, Parliament of Australia, 2018) 9.