Service as Casuals – Not the automatic write-off you think

27 Sep 2016

Earlier this month we reported on the decision of AMWU v Donau Pty Ltd [2016] FWCFC 3075 (Donau), where the Full Bench of the Fair Work Commission (Commission) found that service of an employee as a casual employee prior to becoming a permanent employee is to be taken into account when calculating redundancy pay entitlements. We noted that it is likely that this decision will not only affect the calculation of redundancy payments, but will also have significant ramifications on the calculation of other "service-related" entitlements, such as annual leave, personal/carer's leave and notice of termination.

Decision at First Instance

At first instance, the Commission considered the interpretation of a certain provision in an enterprise agreement of which the Respondent was a party (the EA). In doing so the Commission looked also to the construction of the Fair Work Act 2009 (Cth) (the Act), on the basis that the EA incorporated provisions of the National Employment Standards. At first instance, Commissioner Riordan found that employees who had been employed by the Respondent as casuals before being appointed to permanency were paid a casual loading which compensated the employees for notice and redundancy pay entitlements. It was held that prior contiguous service did not count towards the calculation of the period of service when calculating notice and redundancy pay. The Australian Manufacturing Workers' Union (AMWU) appealed the decision.

Full Bench Appeal

Senior Deputy President Drake and Deputy President Lawrence granted permission to appeal, and quashed the earlier decision of Commissioner Riordan.

Section 22 of the Act was considered, and it was found that the definition of "continuous service" included periods of "regular and systematic casual employment". While only the redundancy provisions of the Act were considered in the proceedings, as other entitlements (such as annual leave and personal/carer's leave) are calculated with reference to the definition of "continuous service" it is likely other service based entitlements will also be required to calculate service as a casual. Casual employees who do not have any periods of "permanent" employment will continue to be excluded from receiving redundancy pay entitlements.

In a dissenting judgment, Commissioner Cambridge was of the view that "any arrangement of casual employment, by its intrinsic nature, does not count as service, nor does it attract service related benefits...", and raised concerns with the wider effects the decision is likely to have to the calculation of other entitlements. In considering the reasoning applied by the majority, Commissioner Cambridge highlighted the risk and implications of the decision, by noting that a permanent employee who formerly worked on a casual basis for one day per week for a period of seven years (this being "regular and systematic employment"), would receive redundancy entitlements based on the full seven year period.

After Donau

Subsequent to Donau, the Australian Industry Group (Ai Group) has requested that the Commission reconsider and overturn the Full Bench's majority decision arguing that casual service should not be included when calculating termination entitlements. The request has been made in conjunction with submissions lodged in respect of the Commission's 4 yearly review of modern awards. Ai Group have noted that Donau involved the construction of certain provisions in an enterprise agreement and argued that different principles apply to the construction of statutory provisions. Further that because casuals receive a casual loading, to count casual service would be 'double dipping'.

Submissions have also recently been filed by the AMWU and the Australian Council of Trade Unions (ACTU) opposing Ai Group's submissions, and by the Australian Chamber of Commerce and Industry, in support of Ai Group.

Next Steps

Currently the decision in Donau stands. If you employ casual employees it is imperative that you review your redundancy and termination procedures (including redundancies arising from a transfer of business) and seek advice when the status of an employee changes and when calculating termination payments. We will keep our readers updated as to further developments on this case.

For further information please contact bertonl [at] kempstrang [dot] com [dot] au (Lisa Berton,) Partner or smiths [at] kempstrang [dot] com [dot] au (Shannon Smith), Lawyer. 

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