Federal Court rules on ‘casual’ employment with potential implications for group life cover
- Newsletter Article
- Published 15.07.2020
In group policies where benefit levels are determined by an insured’s formal employment classification, the term ‘casual employment’ is often a critical (but often undefined) concept.
In the absence of a clear and complete definition of ‘casual employment’ in the relevant policy, this FCA decision indicates that employment type (and consequently cover type) will be determined having regard to the true nature and characteristics of the employment rather than its stated title. Consequently, a much broader class of insureds may be entitled to more expansive levels of cover under group policies which still rely on employment type to determine the level of cover.
Between 28 July 2014 and 9 April 2018, the employer, WorkPac (a labour hire company) employed Mr Rossato (a production employee in the mining industry) and supplied his labour to various mining companies. The three and a half years of Mr Rossato’s employment was performed pursuant to six separate contracts of employment. The contracts were in writing and included a document entitled ‘Casual or Maximum Term Employee Terms & Conditions of Employment – Employee Declaration’ signed by Mr Rossato.
The employer considered Mr Rossato to be a casual employee and did not pay him any leave entitlements. During his employment, Mr Rossato worked 38 hours per week in shifts pursuant to a roster, save for where the mine was shut down over Christmas or occasions where his crew was not required to work due to inclement weather, for example.
On 2 October 2018, Mr Rossato claimed from the employer outstanding entitlements to be paid annual leave, personal/carer’s leave, compassionate leave and public holiday pay under the Fair Work Act 2009 (Cth) (FW Act) and the enterprise agreement made under the FW Act (EA). The employer denied any such entitlement on the basis that Mr Rossato was a casual employee within the meaning of s86, s95 and s106 of the FW Act and a ‘Casual Field Team Member’ under the EA. The employer commenced proceedings in the FCA and sought declarations to that effect.
The Court found that Mr Rossato was ‘other than a casual employee’ for the purposes of the FW Act and a Permanent (not Casual) Field Team Member under the EA. Mr Rossato was therefore entitled to payment of all his leave entitlements.
In considering the question of whether Mr Rossato was a casual employee, the Court confirmed that casual employment (as opposed to full-time or part-time employment) is generally characterised by the absence of a ‘firm advance commitment’ from either the employer or the employee to continuing and indefinite work according to an agreed pattern of work. WorkPac contended that without an express term in the employment contract (which was in writing), no such commitment can exist and the employment must be casual. The Court rejected such a narrow focus on the contract. Bromberg J noted that the dynamic nature of employment relationships which evolve over time, means that the indicia which characterise the type of employment are often found in the dealings between the parties, rather than in the written contract alone. Similarly, White J held that a firm advance commitment does not have to be express but can be discerned from the employment arrangement as a whole. The Court adopted the approach of the FCA in WorkPac Pty Ltd v Skene (FCA 2018):
‘…whether any particular employee is a casual employee depends upon an objective characterisation of the nature of the particular employment as a matter of fact and law having regard to all of the circumstances.’
Noting that continuity of service alone is not a defining characteristic of non-casual employment (a casual employee may be engaged on a long term basis), the Court confirmed that the indicia of casual employment include the following:
- irregular, intermittent, uncertain, discontinuous and unpredictable work patterns;
- the employer’s ability to elect whether or not to offer work on a particular day and an employee’s ability to elect whether or not to work;
- where an employee works only on demand or as required;
- a short notice period.
The Court ultimately concluded that Mr Rossato’s employment, other than having a short notice period (which is relevant but not determinative), did not bear any of the above hallmarks of casual employment. It did so on the basis that the employment contracts showed a ‘firm advance commitment’ with the parties having agreed on employment of indefinite duration which was stable, regular and predictable. Significantly, the contract provided that work would be allocated to Mr Rossato via a roster and performed in accordance with the pattern of work required by a ‘standard work week’ and ‘ordinary hours’ of 38 hours per week. The contract anticipated that Mr Rossato’s service would be utilised on a continued and pre-programmed basis and there was no provision for either party to elect whether or not to offer or accept the work, or for Mr Rossato to be notified of availability of work on a regular basis.
The Court rejected arguments that an hourly rate of pay, payment of a casual loading and the requirement to submit timesheets indicated that the work was irregular. Rate of pay, unless it indicates employment on an hourly basis, was found to be of little or no significance to the type of employment. Similarly, the requirement of timesheets was not an indicator of irregular work as its purpose was to confirm the hours worked in order to calculate pay.
Importantly, when considering the various types of employment referred to in the FW Act – full-time, part-time, shift work and casual – White J noted that not all work types are mutually exclusive. For example, an employee may be casual but work 38 hours per week and a shift worker may be full-time, part-time or casual. This he found, limits the implications to be drawn from the various work categories under the legislation and directs attention to the character of the employment.
Whilst their Honours reached their conclusions based on the written contracts, had the firm advance commitment not been obvious from the contract, the conduct of the parties would have been taken into account to discern the nature of the agreement. In this case, their Honours noted that in addition to the contract, the conduct of the parties also supported the conclusion that Mr Rossato was given a firm advance commitment of employment and was therefore not a casual employee.
Many group life policies still determine the type of TPD cover (‘any occupation’ or ADL) an insured receives based on their prevailing employment classification.
Often in these types of policies, ‘casual employment’ is the trigger for less expansive coverage. Further the term ‘casual employment’ is more often than not, not defined and takes its ordinary meaning as generally understood in the employment context.
Against that background, this widely commented on FCA decision is significant in that it indicates that the formal branding of employment as being ‘casual’ in a contractual/employment document is not determinative of whether such employment is indeed casual.
Rather, where the issue of casual employment is to be determined, such as in the certain group life policies we have mentioned above, the courts will be required to look beyond the label and drill down to see if the true indicia of casual employment is present, being the matters listed above.
Absent some or all of this indicia being present and absent a definitive definition of casual employment in the relevant policy, one would suspect that some or many persons labelled as ‘casual’ employees, probably are not.
Obviously there are wider industrial relations ramifications here but this decision is impactful in group life insurance. Specifically, whilst the industry might be generally moving away from determining benefit levels on the basis of such imprecise concepts as casual employment, there remain many group life products which have this distinctive feature.
It follows that when grappling with this issue, insurers will need to ensure that they look beyond the label an employee might be given in an employment contract, a pro forma claim form or other document, and determine if such employment truly is casual having regard to the indicia identified in this case.