Casual Employees: What You Need to Know

For employers, casual employment has a number of distinct advantages. It provides significant flexibility, allowing employers to rapidly adjust staffing levels when required. For employees, casual employment may provide similar opportunities for flexibility through greater work-life balance and ensuring that personal commitments and family responsibilities can be sustained. If casual employment provides benefits all-round, why is this mode of employment such a contentious industrial relations issue.

In order for employers to truly understand the risks associated with entering into casual employment relationship, it is imperative to first deconstruct the meaning of the term “casual employee”. This proposition is all the more difficult as the phrase is not defined anywhere within Australia’s national employment relations legislation, the Fair Work Act 2009 (Cth) (“FW Act”). What is perhaps clear from reading the FW Act is that casual employees do not receive the same benefits available to permanent employees, such as paid statutory leave entitlements, paid public holiday, severance pay in circumstances of redundancy and minimum periods of notice of termination by the employer. To compensate casual employees for not having access to these entitlements and therefore having less job security, they generally receive a “casual loading” in the form of higher minimum rates of pay than permanent staff.

From a historical perspective, the most common understanding of casual employment was that a casual employee is someone hired on an informal, uncertain and irregular basis with no guaranteed hours of work or guarantee of ongoing work. Significantly however, this is no longer the only situation in which casual employment arises as there are now recognised casual employees working regular patterns of work with a single employer over an extended period of time. Given the lack of definition as to the meaning of casual employment, the Courts have traditionally adopted a narrow construction of the term, viewing it as work performed on demand for short or irregular periods. More recently, however, case law suggests a broader approach to the concept of casual employment, which supports the proposition that casual employment can be ongoing. This approach, some would argue, reflects the current industrial reality of casual employment in Australia. Despite the two opposing schools of thought, no certainty can be obtained from judicial reasoning to discern a universal understanding of the term.

Accordingly, the determination of whether an employee is a casual (or otherwise) will be judged on a case-by-case basis – in other words, the Court will examine the actual substance of the employment relationship rather than its characterisation by the parties. The common law test of casual employment which, traditionally, starts from the premise that casual employment has no continuity of engagement and is required on ad-hoc or needs basis. Other factors then considered to ascertain whether the employment is one of a true causal relationship include:

  • the regularity and certainty of work and hours of work including the existence of an organised roster;
  • the existence of consistent start and finishing times for shifts;
  • whether the employee follows a particular pattern of work, and the predictability of those hours;
  • the mutual expectation of continuity of employment;
  • how wages are paid – casual employees are generally paid by the hour rather by salary;
  • whether the employee was notified of the casual nature of the employment; and
  • how long the employee has worked for the organisation.

Whilst casual employment is a convenient option for many small business employers, particularly to fill short-term needs, employers need to exercise caution when thinking about hiring staff on a casual basis as there are several potential significant risks and dangers associated with the utilisation of this type of employment. Most notably, the main risk for employers is that an employee labelled as a casual may, if a dispute ever arose, be found by a Court to be a permanent employee. Where, for example, an employee has worked under the title of a casual employee over the long-term when in fact they ought to have been legally classified as a permanent employee, the employer may be subject to substantial claims for unpaid entitlements. This may include long service leave, severance pay, notice of termination and depending on whether a modern award applies and its terms, entitlements to overtime, weekend penalty rates, paid public holidays and allowances.

If an employee is found to be a permanent employee despite being classified as a casual, they may be eligible to bring an unfair dismissal claim in circumstances where their employment is germinated. In fact casual employees who have been employed on a regular and systematic basis with an expectation of ongoing work, will be entitled to bring an unfair dismissal claim as long as the other jurisdictional requirements set by the FW Act are met. As such it is critical that organisations give proper and due consideration to the actual role and purpose for which a casual employee will be performing work, particularly with respect to long-term casuals, to ensure they are engaged and remunerated correctly.

In a significant recent decision by the Fair Work Commission, it was held by Senior Deputy President Drake and Deputy President Lawrence (Commissioner Cambridge dissenting) that periods of regular and systematic casual employment before an employee converts to permanent employment status, will count towards the calculation of redundancy entitlements. Although the decision was heavily influenced by the language used in the employers Enterprise Agreement which specified that a 25% loading received by casual employees compensated them for notice and redundancy benefits, among other things, the majority in this decision found that redundancy pay was calculated according to periods of continuous employment, which under section 22 of the FW Act would include periods of regular and systematic casual employment (see AMWU v Donau Pty Ltd [2016] FWCFB 3075)

Although this decision has far-reaching and practical consequences for the particular employer in this case, more generally, the decision demonstrates that emerging line of authority that where a casual employee is performing predictable, systematic or regular hours of work, they are entitled to be treated as a permanent employee and be remunerated as such.

To safeguard against the risks associated with causal employment, it is important that employers ensure that appropriate employment agreements are issued to the employee upon commencement of his or her engagement, and that the circumstances of the relationship as they evolve are carefully monitored. Without more, monitoring the hours worked by casual staff and ensuring they are properly remunerated can reduce the risk of successful backpay claim and further eliminate the potential threat of being subject to unfair dismissal laws.

We regularly advise employers in relation to causal employment issues including by assisting to draft appropriate casual employment agreements and workplace policies. If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.