Casual Employment

Williams v MacMahon Mining Services Pty Ltd [2010] FCA 1321 (30 November 2010).   

The Federal Court found in this case that a mining worker (Williams) in Western Australia who was engaged as a “casual”, was not a “genuine casual” employee, and so he was entitled to permanent employment benefits.  The Federal Court ruled that the parties to the employment contract could not define the relationship as “casual” and expect that characterisation to prevail, where a court did not regard the relationship to be truly “casual”.

This meant the Company (MacMahon) was liable to pay the employee back pay for unpaid annual leave of just over $8,000.  Further, MacMahon’s was fined almost $15,000 for contravention of the Workplace Relations Act (now the Fair Work Act 2009).

Facts:

Williams was employed, as a miner, by MacMahon’s at the Argyle mining site in Western Australia.  The letter of employment provided that Williams was appointed as a “casual miner” and was required to work on a “fly-in fly-out” basis according to a roster which saw him work “two weeks on and one week off”.  Williams was paid an hourly rate of $40 which was expressed to be all inclusive of overtime, penalty rates, allowances and a casual loading (and in lieu of paid leave entitlements).  The employee was required to work 12 hour shifts on a two weeks on/one week off roster, and the letter of employment stated that the relationship could be terminated by one hour’s notice by either party.

Williams’ employment was terminated approximately one (1) year after his appointment, and he was given one (1) hour’s notice as per the letter of employment and did not receive any payment for annual leave on termination.   William’s noted that until the termination of his employment, he constantly worked the rostered shift rotation.

The Federal Court, in deciding that Williams’ was not a casual employee, was influenced by the following:

• an expectation that the employee would be available, on an ongoing basis, to perform the duties required by him, in accordance with the roster;
• stable, organised and certain roster;
• mutual expectation of continuity of employment;
• the nature of the work required by the employee was stipulated; and
• travel arrangements were organised by the employer.  

MacMahon’s relied on the termination provision to argue that the contract was expected to have a short, intermittent life.  However, after considering the contract overall, the Court decided that the real expectation of the parties was that the contract would only be terminated for cause.

Critical Finding:

The Court found that MacMahon’s was required to pay Williams the annual leave he would have been entitled to as a permanent employee.  The Court also prevented MacMahon’s from relying on the contract to offset the casual loading in satisfaction of annual leave entitlements.  The Court ruled that the contract term which specified that the hourly rate paid compensated Williams’ for his annual leave had no effect as a person normally cannot contract out of their entitlement to be paid out annual leave during or at the end of their employment.

Further, Justice Barker found that MacMahon’s could not offset the percentage of the hourly rate they had been paying against the claim for annual leave, because the loading built into the hourly rate of $40 was a global percentage calculated to compensate Williams for the absence of a range of benefits, not just the absence of annual leave.  More importantly, the principal reason why the argument was rejected was because of the impact of section 173 of the Workplace Relations Act 1996, which provided as follows:

“A term of a workplace agreement or contract has no effect to the extent to which it purports to exclude the Australian Fair Pay and Conditions Standard.”

Justice Barker considered there was an inconsistency between the contractual term about paying a loading in lieu of giving annual leave during the employment and the statutory right to be paid for any untaken annual leave in money form on termination of the employment under the then Australian Fair Pay and Conditions Standard. He said:

“Section 173 reflects a parliamentary intention that a person cannot, by one means or the other, contract out of their entitlement to be paid out annual leave and other leave entitlements at the end of a employment period, save for the particular provisions allowing for sacrifice of annual leave.”…

This decision was given in the context of the then prevailing provisions of the Workplace Relations Act which have now been superseded by the provisions of the “National Employment Standards” found in Part 2-2 of the Fair Work Act 2009. The equivalent provision to Section 173 of the former Workplace Relations Act in the current Fair Work Act is section 61(1) which provides:

“This Part sets minimum standards that apply to the employment of employees which cannot be displaced, even if an enterprise agreement includes terms of the kind referred to in sub section 55 (5)”.

While the words of section 61(1) of the Fair Work Act are different to those of section 173 of the Workplace Relations Act, it seems that the intention is the same and it is expected that the same approach as applied by Justice Barker to the meaning of section 173 in the Williams’ case will also be applied to section 61(1) of the Fair Work Act.

Impact of Decision:

The impact of this case is that, as an employer, there are dangers in engaging employees as casuals as a matter of course even more so with an offset provision for permanent employment entitlements.  It is important to give proper consideration to the actual role the employee will be performing to ensure he/she is engaged (and paid) on the correct basis.  Merely describing the relationship as one of casual employment in a letter of offer and/or employment contract may not be determinative of the issue.  Courts and tribunals will look behind the “name tag” to the facts of the case to decide whether an employee is really a casual or not.

In this case, the Federal Court considered the following key features of casual employment:

• informality, uncertainty and irregularity of work and hours of work;
• no firm commitment as to the duration of the employee’s employment or the days (or hours) the employee will work;
• short periods of work on an irregular basis; and
• the employee works only on demand by the employer and can elect to work (or not work) when work is offered; and
• The High Court decision of Doyle v Sydney Steel Co Ltd (1936) 56 C.L.R.545 that held that the concept of “casual employment”, although “ill defined” in Australia, has the essential essence of “intermittency and irregularity”.

If your employees may be regarded as anything other than casual employees, you may be exposed to back pay claims for annual leave, and potentially claims for redundancy pay (where applicable).  Furthermore, under a number of modern awards casual employees have the right to elect to convert to part-time or full-time employment after a qualifying period, and the Company must be aware of this.