Over the last approximate 20 years, Australia has seen a very large growth in “non standard” work. While that state of affairs is due to a number of factors, one significant feature has been the increasing rates of “casualisation” of jobs, writes Peter Punch, Partner, Carroll & O’ Dea Lawyers.

But the writer points out that the recent decision of Williams v MacMahon Mining Services Pty Ltd [2010] FCA 1321 (30 November 2010), the Federal Court of Australia (FCA) held that the parties to an employment contract could not define that relationship as “casual” and expect that characterization to prevail, where a court did not regard the relationship to be truly “casual”.

Mr Williams was employed as a miner by MacMahon Mining Services Pty Ltd at the Argyle mining site in Western Australia. In terms of his letter of employment, Mr Williams was appointed as a “casual miner” and required to work on a “fly-in fly-out” basis according to a roster which saw him work “two weeks on and one week off”. Mr Williams was paid an hourly rate which included a loading in lieu of leave entitlements and the letter of employment stated that the relationship could be terminated by one hour’s notice by either party.

Mr Williams’ contract was terminated approximately a year after his appointment. He was given one hour’s notice as per the letter of employment and did not receive any payment for annual leave on termination.

Justice Barker was required to determine whether Mr Williams had been employed on a casual basis. He upheld an earlier ruling by Federal Magistrate Lucev (Williams v MacMahon Mining Services Pty Ltd [2009] FMCA 511 (29 May 2009)) that Mr Williams was, in fact, not a casual employee despite the clear statement in the contractual document as to the parties’ intention. These were the main reasons for his decision:

• The simple well known principle in Australian employment law that just by calling an employment relationship one thing – ie “casual”(even by agreement) does not make it truly what you have called it – a court will determine on the facts what the true nature of the relationship is.
• The High Court decision of Doyle v Sydney Steel Co Ltd (1936) 56 C.L.R.545 held that the concept of “casual employment” was “ill defined” in Australia, but that its essential essence is “intermittency and irregularity”. This was singularly lacking in Mr Williams arrangements which clearly showed that he was engaged on a roster that gave him regularity of shifts and a degree of permanency in practice even if the contract did not provide it.
• The fact that the contract allowed either party to terminate on one hour’s notice to the other was not in accordance with the totality of the relationship. On the facts, the expectation was that the supply of work would continue until the job was finished or the employer lost its head contract.

Mr Williams was thus entitled on termination of the employment relationship to the monetary value of the annual leave that he had accumulated during his period of employment. Moreover, Barker J ruled that the employer could not have a credit against its liability for annual leave payment because of the “loading” it paid to the supposed “casual” to compensate for absence of annual leave entitlement. That latter aspect of the decision gives rise to its own considerations.

No credit for “casual loading”

The company argued that if the FCA rejected its principal argument that Mr Williams was truly a casual, then any entitlement he had to annual leave pay on termination of employment had to be offset by what the company had paid to him as a “casual loading”.

This argument was rejected at first instance before Federal Magistrate Lucev and then on appeal by Barker J.

The writer considered that that argument always had logical difficulties because the loading was a global percentage calculated to compensate the casual for the absence of a range of benefits, not just the absence of annual leave. But more importantly, the principal reason why the argument was rejected by the FCA was because of the impact of Section 173 of the Workplace Relations Act 1996 (Cth) (WR Act), which relevantly provided as follows:

“A term of a workplace agreement or contract has no effect to the extent to which it purports to exclude the Australian Fair Pay and Conditions Standard.”

Barker J believed there was a real inconsistency between the contractual term about paying a loading in lieu of giving annual leave during the employment and the statutory right to be paid for any untaken annual leave in money form on termination of the employment under the then Australian Fair Pay and Conditions Standard. He said:

“Section 173 reflects a parliamentary intention that a person cannot, by one means or the other, contract out of their entitlement to be paid out annual leave and other leave entitlements at the end of a employment period, save for the particular provisions allowing for sacrifice of annual leave.”…

This decision was given in the context of the then prevailing provisions of the WR Act which has now been superseded by the provisions of the “National Employment Standards” found in Part 2-2 of the Fair Work Act 2009 (Cth) (FW Act). The equivalent provision to Section 173 of the former WR Act in the current FW Act is Section 61 (1) which provides:

“This Part sets minimum standards that apply to the employment of employees which cannot be displaced, even if an enterprise agreement includes terms of the kind referred to in sub section 55 (5)”.

While the words of Section 61 (1) are different to those of Section 173 it seems that the intention is the same and Mr Punch would expect that the same approach as applied by Justice Barker to the meaning of s 173 in the Williams’ case will also be applied to Section 61 (1).

[It is noted however that the standard clause in Modern Awards relating to notice of termination does allow the employer to deduct moneys from an employee’s annual leave entitlement on termination if the employee has failed to give the employer the necessary notice of resignation – see, for example, Clause 13.2 of the Clerks -- Private Sector Award 2010. This is a small change from the prevailing law in at least some state jurisdictions, where annual leave entitlement on termination of employment was sacrosanct from employer deduction for money owing to the employer.]

Implications for employers

So, what does this case mean for all those myriad of casual arrangements that exist in private sector employment throughout Australia? Does it mean, for example, that the established concept of “the regular casual” (common in the hospitality, cleaning and other “fluctuating demand” industries) has to be reassessed? Might such a person now be entitled to bring an unfair dismissal claim even if he or she cannot satisfy the preconditions for casuals bringing such claims, as specified in s 384 (2) of the FW Act? Perhaps, but perhaps the Williams’ case is confined to the peculiarities of the mining industry.

The general lessons for employers from this case are clear: just because you have a written agreement with an employee for “casual” employment (and pay him or her a loading for the casual status) is not enough – if the relationship has regularity, certainty and is expected by both sides to be ongoing then it may not be truly casual (which will mean regular employee benefits such as annual and personal leave and redundancy/ notice entitlements will apply – even though a loading for lack of such entitlements has been paid by the employer).

Cormack Dunn practices as a Senior Associate in the Occupational Health and Safety team at Freehills’ Sydney office. Formerly a WorkCover Inspector, Dunn has both prosecuted and defended OHS matters. He speaks to CCH about the model Work Health and Safety Regulations (WHS Regulations) and what it means for the harmonisation process.

On 7 December 2010, Safe Work Australia released a draft form of the WHS Regulations for a four-month period of public consultation. Safe Work Australia also released a series of priority Codes of Practice and an Issues Paper which provides further details about the WHS Regulations and Codes of Practice. According to Dunn, the timing of the release will mean that most parties will not realistically review the material until late January/ early February which will leave a truncated period to provide feedback to Safe Work Australia by making a formal submission.

“The timeframe for consultation makes it imperative that people don’t delay in appraising themselves of the content of the WHS Regulations and Codes of Practice and considering how these changes will impact on their operations. Very likely this period will be the only the time people have to be heard before the legislation and regulations are enacted.”

The timing of the release of the WHS Regulations and Codes of Practice also presents a challenge for their implementation. According to statements released by Safe Work Australia, the final version of the WHS Regulations will be considered by the Workplace Relations Ministers’ Council meeting in June 2011, which leaves only six months for the Commonwealth, states and territories to implement the Work Health and Safety Act (WHS Act) and WHS Regulations. Dunn points out that while this “ambitious timeframe” is tight, the political will of the participants will ultimately determine whether this deadline is met.

Dunn goes on to state that, “no one should doubt the political will of the federal government to see the OHS harmonisation process proceed according to plan. The speed and resoluteness with which [Julia] Gillard responded to [New South Wales Premier] Keneally’s announcement that NSW would retain key features of its existing OHS regime clearly demonstrates how serious the federal government is about harmonisation.”

Despite the some of the difficulties, Dunn remains a firm supporter of OHS harmonisation, describing the outcomes as a “win-win for everyone.”

“While much has been made of the fact that this new legislation will reduce compliance costs, its real benefit will be a reduction in workplace accidents. This is because the expansion of people who have a duty under the legislation will cause everyone to take a greater interest in safety matters. For this reason alone, it is in the interest of employers and workers alike that this new legislation is passed into law”.

When asked for his views about the content of the WHS Regulations, Dunn describes it as a “watershed moment” for OHS regulation in Australia.

“The WHS Regulations and Codes of Practice reflect an evolution in OHS regulation in Australia. The broader duties contained in the WHS Act are given practical and modern day application in the WHS Regulations and Codes of Practice. This is because the WHS Regulations outline what risks parties need to consider and the Codes of Practice outline what actions parties should take to address these risks.”

Dunn praises the considered approach taken by the drafters of the WHS Regulations and states that “it is clear they have been driven by a vision to make Australian workplaces safer.”

“Over the last 30 years we have gained a much deeper understanding of how safety regulation needs to be structured to produce safer workplaces. History has taught us that detailed and prescriptive legislation often doesn’t work. Instead, every workplace needs to consider what is the most effective way it can protect workers’ safety. It is clear that Safe Work Australia understands the limitations of prescriptive legislation and, via the Regulation and Codes of Practice, is encouraging every workplace to take a risk management approach.”

This is not to say that there isn’t room for improvement. Dunn thinks there are some notable Codes of Practice missing, none more obvious than a Code of Practice which provides further guidance on the new officer’s duty under the WHS Act. Dunn also sees a gap in terms of Code of Practice providing further details about the role and obligations of principal contractors.

Dunn also questions the lack of detail about transitional arrangements. The WHS Regulations do not comprehensively cover all the areas which are regulated at the moment by statute in the various states and territories. Dunn poses the question “does this mean that states and territories will only repeal only part of their existing legislation, leaving a confusing patchwork of OHS legislation behind?”

According to Dunn, these deficiencies highlight the importance of the consultation process.

“I would caution employers against being sceptical of harmonisation. Despite the noises we have heard about particular states reneging on their promise to harmonise their OHS laws, these changes are overwhelmingly supported by the wider community. Accordingly everyone should be proceeding on the basis that the new laws will become operational in January 2012. Scepticism at this stage is dangerous because it will leave you ill-prepared for these changes.”

Perhaps the lasting message for our readers is to take action now so that a watershed moment in OHS regulation doesn’t become a tsunami.

CCH Australia is working with a renowned team of experts including Cormack Dunn (Freehills), Professor Richard Johnstone (Griffith University), Professor Ron McCallum (Sydney University) and Wendy Thompson (Denham Chambers) to release a new version of the Australian Occupational Health and Safety Law service in July 2011.