Legal, People & Human Resources

Unprecedented Federal Court decision could have “dynamite” consequences for businesses employing casual workers

Dominic Powell /

An unprecedented decision by the full bench of Australia’s Federal Court could have huge ramifications for a huge number of Australian small businesses who employ casual workers.

In a decision handed down yesterday, the full power of the Federal Court ruled in favour of a casual truck driver who was employed at a Rio Tinto mine by labour-hire company Workpac.

The employee had been terminated by the company after working there for nearly four years in a casual position. Upon the end of his employment, the worker felt his work with the company was akin to regular employment, due to his work being 12.5-hour shifts in “a seven days on, seven days off continuous roster arrangement”.

The worker then took the labour-hire company to court, claiming he was owed around $21,000 in annual leave, along with nearly $7,000 in interest. Despite the company adamantly claiming the worker was a casual employee under the Fair Work Act, the full bench of the Federal Court found otherwise and ruled in favour of the truck driver.

This was thanks to the regularity of the worker’s employment at the mine, which director at Workplace Law Athena Koelmeyer told SmartCompany was a key tenet of considering when an employee is a casual worker.

“The law says casual employment should be random and ad hoc, but a lot of small businesses once they get a ‘good’ casual worker they’ll keep using them in a regular and systematic way,” she says.

“This runs the risk of employees saying after a period of time: ‘I come in on the same days at the same time, I think I’m full time and I should be getting other entitlements’.”

In this case, Koelmeyer says it’s a “worst case” scenario, where a worker had been working regularly and systematically and then argued for annual leave at the end of their employment term.

She says most employers can successfully argue in this case that due to paying a 25% casual loading that they have already offset the annual leave value, but the Court’s decision has shown this defence is no longer reliable.

Koelmeyer calls this case “dynamite”, and doesn’t understate its importance to Australian SMEs, saying with the full bench’s unanimous decision on the case, only the High Court can overturn it at this point.

SMEs could be subject to backpay claims

For Australian small and medium businesses employing casual workers in any regular or even semi-regular fashion, this has “opened the door” for those employees to argue they are entitled to things such as annual leave.

“I can imagine there will very quickly be a queue out the door for employees filing backpay claims, as with the full bench’s decision there’s no argument anymore,” she says.

“This is absolutely going to affect a number of businesses in Australia, small ones in particular. Even if your casual employee turns up every Wednesday or even every second Wednesday, that might not be a lot of annual leave but it’s still a liability you haven’t accounted for.”

Koelmeyer thinks there’s a decent chance the High Court will hear this case due to the significance, which she puts at the top of the list in terms of risk for employers.

Australia’s Fair Work Act 10 years behind

This is the second case to be heard by the Federal Court that could have wide-ranging and dire consequences for Australian small businesses, with a case by Mondelez currently before the courts which could change how sick leave is calculated for shift workers in Australia.

If previous decisions are upheld, employees doing 12-hour shifts could be entitled to 120 hours of sick leave a year, based off the National Employment Standards stating they are entitled to “10 days” of sick leave annually. The case has even shaken Australia’s workplace watchdog, who updated their site with a note advising employers current court action could change how sick leave should be awarded.

“The method of accruing and taking personal/carer’s leave for the purposes of the National Employment Standards is currently the subject of legal proceedings before the Federal Court. The decision in these proceedings may impact upon the FWO’s advice on these matters,” the FWO website states.

With both these cases coming to the fore at once, Koelmeyer says it’s indicative of Australia’s Fair Work Act being “10 years behind reality”.

She says while it would be “really nice” for the government to step in and take action around revamping the Fair Work Act, she says it has so far shown a “distinct lack of interest” in fixing a number of other lingering problems, such as those relating to enterprise bargaining agreements that have been going on for years.

For worried SMEs, Koelmeyer doesn’t have a lot of good news and says to “expect you’re at risk” for annual leave claims by regular casual employees.

SmartCompany contacted Small Business Minister Craig Laundy and was told by a spokesperson the minister was withholding comment until the government had made a decision on intervention.

NOW READ: Controversial Fair Work Commission decision on sick leave could lead to grave consequences for small business

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Dominic Powell

Dominic is the features and profiles editor at SmartCompany.

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