RADAR WARNING- Employers should note these decisions on casuals' leave
In what circumstances will Courts rule that a person is a casual or permanent employee? What is the Fair Work Commission’s (FWC’s) attitude to the calculation of sick leave entitlements for shift workers?
Casual employment and leave entitlements is an emerging area of law that employers and their advisers should monitor closely.
For example, two recent decisions create doubt about leave entitlements under National Employment standards (NES). These are minimum standards that override any other conditions of employment – notably awards and enterprise agreements, or contracts of employment where conditions are inferior to NES.
Because employers who breach NES provisions face significant financial penalties they should ensure documentation and workplace practices unequivocally represent a casual employee’s engagement, and accommodate risks associated with determining leave entitlements in long term employment. However, it may NOT be an easy task.
Casual employees and leave
The Full Federal Court recently ruled that a casual labour-hire employee was, as a matter of law, not a casual employee and therefore entitled to annual leave under the NES.
Understandably the employer was shocked, because the employee had been paid a loading on the flat rate that included a casual loading, in effect amounting to a double dipping of entitlements. Arguably, it is not appropriate for employees to be receiving a pay loading thus getting compensation for statutory entitlements and then being able to claim these entitlements.
However, the decision does not mean all casual employees are, or may be permanent employees, as there were matters before the court of particular significance to this case alone. They included ambiguity in terms of the engagement and the fact that the worker had worked over an extended period of time on a regular fly-in/fly-out roster.
Accordingly, the Court concluded the employer and employee had not entered into an arrangement that, as a matter of law, was casual.
On the basis of that ruling, it follows that under the NES there is entitlement to annual leave and with extension of the same logic, to paid personal leave – and arguably to public holidays, notice of termination and redundancy.
Employers should note that casual employment is characterised by:
- Absence of a firm on-going commitment about duration, pattern or continuing nature of employment
- Irregular, and/or uncertain working times
Urgent need for legislation
It’s not surprising employers want a legislative response to the Federal Court’s decision on what is meant by casual employment. They believe existing uncertainty leaves them exposed to a variety of claims and possible court actions.
The FWC ruled recently that entitlement to 10 days personal leave means in essence 10 normal working days. But personal/sick leave entitlements have generally been accrued as 76 hours for people working a 38-hour week, a procedure so common that it’s the way business software packages calculate it.
Traditionally it hasn’t mattered whether the leave entitlement has been expressed in days or hours. However, the Commission’s decision has potentially serious implications for some workers. For example, shift workers on a four-hours-on, four-off roster, or for any other workers who may be on the job for more than 7.6 hours in a day.
The FWC ruled that workers who worked 12 ordinary hours in a shift were entitled to be paid for all of those hours when calculating a “day” of sick leave.
The effect of this decision could mean an employee would be entitled to up to 120 hours of sick leave annually even though the conventional accrual is 76. This raises the question, for example, of how a personal carer’s leave is accrued and calculated when more than 7.6 hours are worked in a day. How should rostered day off (RDO) accruals, not traditionally accrued in sick leave calculations, be dealt with henceforth?
Because similar terminology is used for annual leave entitlement – although it refers to “weeks” instead of “days” – it makes an issue of how employers are expected to provide periods of leave that are less than a week, especially where part days of employment are involved.
Parliament must now act
Given the absence of an appeal, Parliament must now act immediately to legislate to clarify that casual employees cannot claim compensation where it would result in double dipping on entitlements
Unless such action is taken, we will see a significant blow-out to the Fair Entitlements Guarantee (FEG) at a big cost to the Commonwealth. The FEG scheme has cost taxpayers $1 billion in unpaid employee leave entitlements from company collapses over the last few years. Unless action is taken quickly, the litigation resultant from the decision may well lead to a significant rise in business insolvencies and a large blow-out to the FEG scheme.
Meanwhile what should employers do?
Given the uncertainty occasioned by these two decisions, all employers can do pending legislation to provide clarity, is to minimize risk as best they can.
Employers whose workers are on the job often for more than 7.6 hours a shift will need to consider how sick leave should be given and taken and insisting annual leave is taken only in whole week blocks.
They should review the work patterns of casual employees. Where workers have been employed for long periods of time on set rosters, employers should seek urgent advice from legal specialists in this area on whether or not these people are legally casual employees.
Watch this space, see next article legislative vacuum on casual’s is $8bn back pay employers’ headache.
