When is a true casual employee not a true casual?

In an important decision that effectively reverses how employers assess whether their award or agreement covered employees are ‘true’ casual employees under the Fair Work Act 2009 (FW Act), the Full Bench of the Fair Work Commission (the Commission) has held that the characterisation of “casual employee” should be solely based on the specific definition in the relevant enterprise agreement or modern award, and not according to principles in the general law.

In Telum Civil (Qld) Pty Limited v Construction, Forestry, Mining and Energy Union [2013] FWCFB 2434 (Telum) the Commission considered whether the employees in question, who were engaged and paid as casuals, were entitled to redundancy pay after being terminated at the end of a project. The employees worked regular and systematic hours for a period of over 12 months, with an expectation that they would arrive at work each day without being directed to do so. The CFMEU contended that the employees were entitled to redundancy pay under the National Employment Standards (NES) because they were not “true casuals” at law.

At first instance, the Commissioner agreed with the CFMEU, stating that the employees were not “casual as a matter of fact” and that “a proper characterisation of the CFMEU’s members that are the subject of this application is that their employment status is not casual”. In making this determination, the Commissioner had regard to a range of general law considerations, including the length of the employee’s service with the employer and whether there is an expectation of continuing work.

On Appeal, the Full Bench (Lawler VP, Richards SDP and Lewin C) overturned the first instance decision. The Full Bench held that, on the proper construction of the FW Act, the reference to “casual employee” throughout that Act is a reference to “an employee who is a casual employee for the purposes of the Federal instrument that applies to the employee”.

This means that, when considering whether an employee is a casual for the purposes of the FW Act and relevant entitlements under the NES, regard must be had to the definition of “casual employee” in the applicable enterprise agreement or modern award. The source of the definition should come first from the enterprise agreement – in this case, a Greenfields agreement covering civil works in Queensland. If no such agreement applied, then the source of the definition will be the applicable modern award.

Most modern awards define casual employees simply as employees who are engaged and paid as such – in other words, casual employees are employees who are labelled casuals and paid a casual loading. According to the Full Bench in Telum, whether or not these casuals work regular and systematic hours on a long term basis, or any of the other indicia of casual employment found at general law, will not impact on the characterisation of employment for the purposes of the FW Act.

The Full Bench pointed to the fact that, if the common law definition of casual was adopted for the purposes of the FW Act, then casual employees (who were not “true casuals” at law) could essentially “double dip” by receiving a casual loading – designed to compensate employees for the entitlements they are excluded from – as well as receiving those same service based entitlements under the NES.

In light of the above, the Full Bench upheld the Appeal, finding that Telum was not required to pay redundancy for the terminated employees as they were properly characterised as casual employees for the purposes of the FW Act and excluded from redundancy pay under section 123(1)(c) of the FW Act.

While Telum has potentially far-reaching and positive implications for employers, caution should be adopted when applying this ‘black and white’ approach to ‘casual’ employees, as it is likely that the CFMEU will appeal the decision. Further, because the Commission is not a Court and would not determine enforcement proceedings (i.e. if an employee argued that they were not casual, and should have been entitled to annual leave) it remains an open question as to whether a Court will adopt the same reasoning as the Commission has.