26th May, 2020
The Australian Federal Court has ruled that employees classified as casual but who work regular and predictable hours are in fact permanent workers and therefore able to access the entitlements of permanent employment.
After hearing a case regarding the misclassification of a casual employee, the Australian Federal Court recently handed down a ruling that may have widespread ramifications for many employers across Australia.
The Sydney Morning Herald (SMH) reported that the ruling allowed for casual employees who worked “regular and predictable shifts” with a “firm advance commitment to work”, to take annual, sick and carer’s leave – irrespective of how their status is described on their employment agreement.
The verdict was reached after the judges found that Robert Rossato, a coalmine worker, was entitled to three and a half years of leave entitlements despite having been employed on a ‘casual basis’.
According SMH, at least one of Rossato’s employment contracts stated that he worked seven days on and seven days off with 12-hour shifts set in advance. The judges found that although his employment status was classified as ‘casual’ in his agreement, since the work was “regular and continuing”, he should have been allowed to enjoy the benefits of paid leave.
Since casual staff can often make up a large portion of a SME’s or startup’s team, the ramifications of this court ruling have the potential to be quite significant.
According to Alison Baker, an employment law expert and partner at Hall & Wilcox, this ruling should act as a reminder for SMEs about the importance of understanding the obligations relating to casual employment arrangements.
“It is important for small business owners to understand what constitutes a casual engagement and their obligations under the National Employment Standards and applicable modern awards with regard to the engagement of casual employees,” Baker told The Pulse.
Baker explained that this included understanding the right under modern awards for casual employees to request conversion to permanent employment.
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As a result of this historic ruling, small business owners around the country have begun considering transferring their casual employees into permanent staff in an attempt to decrease their chances of being liable for granting their casual staff additional leave entitlements that haven’t been budgeted for.
According to Baker, care needs to be taken when considering these transfers and small business owners should seek advice on a case-by-case basis.
“This court ruling does not eradicate casual employment, rather it sets parameters for determining whether an employee is a permanent or casual employee.
“Small business owners should take care in transferring employees from casual to permanent employment – they should seek advice on a case-by-case basis to address any potential exposure to claims for historical leave entitlements, to ensure the employee is actually a permanent employee and to manage the change in remuneration and employment conditions which will be offered to the employee once engaged on a permanent basis.”
Another key takeaway from this court ruling was that simply classifying an employee as ‘casual’ in their employment agreement holds only some weight, and going forward, the ability for employers to self-assess whether an employee of theirs is ‘casual’ or ‘permanent’ is crucial.
When asked about how to go about this assessment process, Baker encouraged business owners to clue themselves in on the facts that determine an employee’s classification.
“Whether an employee is a casual employee or a permanent employee is determined by the facts, that is, the actual characteristics of the employment relationship, not solely by a classification in an employment contract.
“A casual employee is one engaged to work on an ad-hoc basis determined by the employer’s changing business requirements with no regular pattern of work or guarantee of ongoing work, and with a right to refuse work.
“If an employee works a regular pattern of work that is predictable, the employee will likely be a permanent employee and therefore entitled to such entitlements as annual leave and sick leave.”