Does an Australian employee's service include periods of casual employment?

30 August 2016

Kristy Peacock Smith

Does an Australian casual employee's period of service count towards service related entitlements under the Fair Work Act? A Full Bench of the Fair Work Commission has recently found that yes, it does.

In Automotive, Food, Metals, Engineering, Printing and Kindred Services Union known as the Australian Manufacturing Workers' Union (AMWU) v Donau Pty Ltd [2016] FWCFB 3075, a majority of the Full Bench of the Commission, found that the Act does not exclude a period of regular and systematic casual employment from the definition of service or continuous service for the purpose of a severance payment. As a result, in circumstances where an employee converts from casual employment to permanent employment and their role is then made redundant, the entire period of the employee's service, including the period of casual employment, should be considered when calculating the employee's severance payment.

But is this the right interpretation?

Sub-sections 22(1) to 22(4) of the Fair Work Act (Act) define the words 'service' and 'continuous service' for the purpose of a number of service related benefits under the Act.  There are a number of periods that are specifically excluded from the definitions, including periods of unpaid leave or unauthorised absence. However, there is no exclusion for a period of regular and systematic casual employment. The Majority's reasoning in the case is that this lack of a specific exclusion leads to the conclusion that the period must, therefore, be automatically included.

What is the practical effect of the decision?

However, is the effect of the decision that service-related benefits, unambiguously not available to casual employees, become retrospectively bestowed upon a casual employee on their conversion to permanency for a period which would not normally have provided any entitlement for that benefit? And does this mean that casual employees are, in effect 'double dipping'? That is, they receive the benefit of a casual loading on their pay rates during a period of casual employment, paid, in effect, in order to compensate them for the loss of service related benefits offered to permanent staff (including paid annual leave and redundancy pay); and then receive the benefit of those same service related entitlements upon becoming permanent employees, including for the period during which they received the casual loading.

Certainly that was Commissioner Cambridge's concern in this case. His dissenting decision  warns that if 'service' is given a meaning that encompasses a period of casual employment prior to permanent employment being established, it could affect entitlements beyond those dealt with in this particular case, that is, entitlements that flowed on termination of employment and redundancy.  In particular, the Commissioner's reasoning highlights that the definition of 'service' also affects the entitlement to annual leave under section 87 of the Act and paid personal/carer's leave under section 96, both of which are entitlements calculated upon "each year of service".

How wide is the potential impact of the decision?

This case does of course relate to the specific wording and interpretation of a particular enterprise agreement and so there is an argument that its impact is not as far reaching as the Australian Industry Group, the Respondent's representative, is suggesting.
 
Significantly, the relevant enterprise agreement in the case provided that the Company was not required to make severance payments or notice payments where the employee would not be entitled to notice or redundancy pay in accordance with the NES. Relevantly, section, 123 of the Act precludes casual employees from accruing any entitlement to redundancy pay.

However, the reasoning of the Majority was that, provided there was no break between an employee's previous period of casual employment and their subsequent period of permanent employment, and in light of the fact that there is no exclusion in ss. 22(1) for a period of regular and systematic casual employment, there was no provision in either the Agreement or the Act that excluded a period of regular and systematic casual employment from an employee's period of service.

Is this decision relevant to other decisions currently before the Commission?

The issue is not strictly limited to the current case, as final submissions were made only last week in the Fair Work Commission's hearings into part-time and casual employment. In its submissions to the Commission in that case, the ACCI warned that the ACTU's claims around, amongst other things, casual conversion, may actually discourage the hiring of casual staff for fear that it might lead to legal entitlements (presumably such as those dealt with in the AMWU v Donau matter) being granted that are not sustainable, thereby leaving a significant hole in the economy and potentially as many as 19,000 fewer full-time equivalent jobs.

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