03 Dec The tangled web of casual employment

What’s the difference between casual employment and permanent employment? What obligations do casual employees have to their employers? And what rights do casual employees have that employers should be aware of?

There seems to be a lot of confusion about casual employment.  A recent court case (WorkPac v Skene) has added to the confusion and caused some to fear that they will need to pay casual employees annual leave (or pay this out as an accumulated entitlement when an employee leaves their business). That’s what appears to have happened in the WorkPac v Skene case. However, this fear is unfounded. WorkPac v Skene is a classic case of a poor employment contract. WorkPac had every intention of employing Skene as a casual employee, but the contract of employment served dual purposes. It was used for both casual and fixed term employment – two very different types of employment.

This case highlights the importance of having good employment contracts in place. Skene’s contract referred to a 12 month probation period for casual employees. Probationary periods are associated with permanency (they are also associated with temporary and fixed term employment contracts). Therefore, making reference to a probation period in a casual employment contract is a problem because if the employment was intended to be casual, why would the employer include a clause referring to a probation period? And it turned out to be a problem for WorkPac. The contract also made reference to annual leave. Casual employees don’t receive annual leave.

The other problem for WorkPac was that the roster and working hours were set 12 months in advance. Again, this type of rostering is not consistent with casual employment. A number of clauses in the contract and the way Skene was rostered, caused confusion about the employee’s status: was he casual or permanent?

There is currently a lot of discussion about this case, as many employers have become fearful that they will be liable to pay annual leave to their casual employees. This fear is unfounded, provided you have good contracts in place, you understand the nature of casual employment, and that in practice, an employment arrangement that you call “casual” does not have the characteristics of permanent employment.

The nature of casual work
The concept of casual work is that it is informal, irregular and uncertain. You can think of it as a loose employment relationship, where the employer offers the casual employee work based on the demands of the business. If the business is quiet, the employee may not be asked to work at all and if it’s busy, the employee may be offered the equivalent of full-time (or more) work hours. However, the casual employee has no obligation to accept the work when it is offered.

As such, casual employment is very different from permanent employment. There is a mutual obligation with permanent employment. The permanent employee must be provided with the agreed number of hours of work (whether that is full time or part time) and the permanent employee has an obligation to work those agreed hours. There is no such obligation with casual work, in theory (and in legal-terms) anyway!

The reality of how casual employees are engaged
While casual work is characterised by its informal, irregular and uncertain nature, in reality it’s very common for casual employees to be engaged on a systematic and regular basis. A lot of casual employees work a fixed number of hours week-in week-out. I’ve also found some employers pay their casual employees when they take “sick days” and even when they take a holiday. This can create confusion over the actual work status and creates risk (as we have seen in the WorkPac v Skene case): is it really casual?

What about the new rights to permanency?
The majority of casual employees now have a right to permanent employment after 12 months of casual employment, as I wrote about here.  But as the WorkPac v Skene case has shown, the right to permanency largely existed before this change – basically, the nature of the employment relationship also determines the right to permanency. In other words, just because you categorise an employee as ‘casual’, if the employee’s work relationship resembles that of a permanent employee, and that relationship is tested, you may find the employee has the same rights as a permanent employee, including the right to personal leave and annual leave.

Casual loading
Casual employees receive a casual loading (this depends on the applicable Award, but often it is 25% in addition to the base rate). This loading compensates casual employees for not receiving paid annual leave, sick or carer’s leave, as well as for the insecurity of their employment.

Casual employees do not have access to paid annual leave or paid personal leave (sick and carers leave). Hence any time away from work, results in loss of pay. And when it’s quiet, casual employees get less shifts.

What if a casual employee has no desire to become permanent?
A casual employee has no obligation to accept permanent employment. But if this is the case, I think it’s a good idea to get the employee’s preference to remain casual in writing. Of course, if a casual employee becomes permanent, they lose their casual loading (usually 25%). This means they’ll get all the rights of a permanent employee (e.g. guaranteed work hours, personal leave and annual leave), but their take home pay will go backwards. That’s why a lot of employees prefer to remain as casual employees.

Of course, you need to make sure you are paying the appropriate award rates, for casual and permanent employees. A lot of employers are being caught out for underpaying their employees, which you can read more about here. Of course, you can’t reduce an employee’s wage by 25% (when they go from casual to permanent) if their rate of pay is already below the Award!

If you’d like assistance with getting your casual employment contracts right, please contact me at: john@girardi.com.au .