The recent judgment of the Federal Court in the WorkPac Pty Ltd v Skene case has had many employers very worried. But we’re not convinced the decision actually changes anything. Read on for our take on the WorkPac case.
What was the WorkPac case about?
Paul Skene was employed in 2010 as a casual dump-truck operator in a Queensland coal mine by labour-hire business WorkPac. The terms of Mr Skene’s employment were set out under a Workplace Agreement.
When applying for the job, WorkPac’s recruitment officer told Mr Skene that:
- He would be required to work 12-hour shifts on a rotating weekly roster;
- After a 3-month probation period he would be made a permanent employee;
- He would be paid a flat rate of $50 per hour; and
- Flights and accommodation were ‘included’ in his remuneration.
WorkPac terminated Mr Skene’s employment in 2012. He subsequently brought a claim against WorkPac for unpaid leave entitlements on the basis that he had not taken any leave while he was working in the mines.
The Court found that Mr Skene was not, in fact, a casual employee, and ordered WorkPac to pay hefty compensation to Mr Skene.
What went wrong for WorkPac?
If you employ casual workers, then the WorkPac case may give you cause for concern. It certainly muddies the waters of whether a casual employee is really a casual employee.
WorkPac tried to rely on the fact that Mr Skene had been paid the casual loading (25%) on the ordinary hourly pay rate as evidence that he was a casual. (As it happened, there was doubt as to whether WorkPac had actually paid Mr Skene the loading, which further jeopardised its position.) Besides that, WorkPac largely relied on a technical legal argument to support the notion that Mr Skene was a casual employee.
The Court made two important observations when deciding whether Mr Skene was a casual worker:
- There is no one definitive test to determine whether an employee is in fact casual; and
- Just because a contract defines the worker as a casual does not mean they are a casual.
Considering those two key observations, the Court concluded that the term ‘casual employee’ has no precise meaning and that the nature of the employment relationship depends on “the conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship will need to be assessed”.
What does the WorkPac case mean for your business?
Honestly, the WorkPac case is just further confirmation of what we’ve been telling business owners for years. Namely, that the label you use for an employee means very little, and that you cannot make someone a casual worker just by calling them one.
In case you need a refresher, the following are some hallmarks of a true casual employment relationship:
- Short-term engagement (i.e. ‘Christmas casuals’);
- Shifts allocated on a roster;
- Shifts are irregular and unpredictable;
- Loading paid on top of usual hourly rate (usually 25%) as compensation for other benefits such as annual leave;
- There is no firm commitment about days or hours employee will work;
- The work is not provided on an indefinite basis.
Not all of these hallmarks need to be present for an employee to be a casual. But if you have casual employees that do not fit any these categories, they may be permanent employees.
A good test is to do a mental ‘trial run’ of whether you could engage an employee on a permanent part-time or full-time basis. If you think you could convert an employee across to permanent shifts without too much hassle, then the employee should likely actually be permanent. However, if you find yourself running into too many hurdles (e.g. “I might only need them for one shift that week”, “I won’t need their assistance anymore after the Christmas busy period”), they are probably correctly classified as a casual.
What happens if you get it wrong?
The big downfall for employers if they get the employment arrangement wrong is that any loading they have paid to a supposed casual is generally viewed as a ‘bonus’ for the employee. Generally, the employer is still required to pay the employee leave entitlements on top of the generous hourly rate the employee has been receiving as a ‘casual’. This can be an expensive mistake.
Employees that are incorrectly treated as casuals are also sleeper problems – they generally rear up after the employment relationship has broken down. Consequently, the financial aspect of the problem is often quite large by the time it is addressed. We always advocate that employers get on the front foot with any concerns they have that an employment arrangement might not be properly classified. Putting your head in the sand just delays – and increases – the pain at the end.
If the WorkPac case has made you nervous or you think it is time to do a general review of the employment arrangements in your business, we are happy to help. We have lots of experience in giving business owners practical and definitive advice when it comes to employees and entitlements.
For assistance, call Andreyev Lawyers on 1300 654 590.