Annual Leave for Casual Employees

Annual leave for casual employees?  What the decision in Workpac v Skene means for you.

Under the Fair Work Act 2009 (Cth), an employer is required to pay its permanent employees (part-time and full-time) a number of entitlements, such as:

• paid annual leave;
• paid personal leave;
• paid compassionate leave; and
• redundancy pay.

Casual employees, on the other hand, are paid at a higher rate than their permanently employed colleagues (due to a 25% casual loading allowance), although there is no requirement for an employer to pay its casual employees any other entitlement, such as annual leave.

However, that position has been challenged in the landmark ruling in Workpac v Skene (2018) FCAFC 131 ("Workpac v Skene").  In that matter, the Court found that an employee engaged on a casual basis, yet working a regular seven day on, 7 day off roster (set 12 months in advance), was properly characterised as a permanent employee and therefore entitled to be paid annual leave.

In summary, Mr Skene was employed by Workpac as a fly-in, fly-out, mine-site machinery operator between April 2010 and April 2014.  At all material times, Mr Skene's employment with Workpac was described as casual.  Following termination of his employment in April 2014, Mr Skene made a claim for unpaid annual leave entitlements, on the basis that his employment was actually permanent in nature.

Ultimately, the Full Court of the Federal Court of Australia agreed with Mr Skene, and found that his employment with Workpac - although described as casual - lacked the "essence of casualness".  In particular, the Court noted that casual employment generally involved the following:

• irregular work patterns;
• uncertainty;
• discontinuity;
• intermittency of work;
• unpredictability; and
• flexibility in the employment relationship.

As a result, the Court held that Mr Skene was entitled to be paid annual leave entitlements.  However, the Court also recognised that it was inequitable for an employee to receive both permanent employment allowances (such as paid leave) and casual employment allowances (i.e. loading).  As such, it was held that an employer is entitled to set off any permanent employment entitlements against casual loading actually paid, provided that the amount paid for loading could be readily ascertained.  Certainly, the introduction of the Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) now provides an employer with a statutory right to set off permanent employment entitlements owed, with casual loading already paid.

Workpac v Skene is an important decision that has the potential to impact many employers of casual employees.  The decision serves as a reminder to employers that they should:

• review existing agreements to ensure employees are properly characterised and paid the appropriate allowances;
• review rostering practices and avoid engaging casual employees on a regular and consistent basis;
• ensure that casual employees are being paid a clearly identifiable casual loading; and
• consider transitioning long-term casual employees to permanent positions.

If you require more information regarding the decision in Workpac v Skene, or employment matters in general, don't hesitate to contact our local, expert team on 07 4963 2000 or via our online contact form below.