Recent Changes For Casual Employees & The Calculation Of Redundancy

A recent decision of the Fair Work Commission (‘FWC’) has changed the way employers calculate redundancy. The decision of the Full Bench of the FWC in AMWU v Donau Pty Limited [2016] FWCFB 3075 (‘Donau’) determined that a casual employee who takes on a permanent position will have that period of casual employment calculated towards any redundancy payment.

It has generally been accepted within the industrial landscape that a casual employee:

• has no guaranteed hours of work (but may work regular hours);
• is only paid for time actually worked;
• does not receive payment for sick or annual leave, for public holidays or carer’s leave but receives a loading (usually 25% but can vary subject to a relevant award);
• can end employment without notice unless notice is required by a registered agreement, award or employment contract.

It has also been the generally accepted practice of employers and the FWC that an employee’s period of service as a casual employee does not count towards the calculation of a redundancy entitlement if an employee subsequently becomes permanent.

This was the reasoning applied by Commissioner Riordan in Donau at first instance.

On appeal however, contrary to the accepted practice and Commissioner Riordan’s decision, the Full Bench determined that a period of service by a regular and systematic casual employee is not specifically identified as one of the excluded periods of service under the Fair Work Act 2009 (Cth) (‘the Act’) and would therefore be deemed to be included.

The rationale of the Full Bench was that as there were no express terms in the relevant enterprise agreement or the Act that excluded any period of regular and systematic casual employment from the calculation of service for the purposes of a redundancy payment. In those circumstances a period of systematic casual employment would be deemed to be included. The decision is quite unusual and the Full Bench even acknowledged that industrial justice would suggest that it is unfair for an employee who has received a casual loading throughout their employment to also then receive the benefit of having that period of employment also count towards the accrual of severance payments.

Despite these concessions from the Full Bench, the decision unfortunately stands.

The decision is however quite clear that a casual employee at the time of termination is not entitled to redundancy pay. The implications of the decision are therefore for those employees who were once casual but have moved to a permanent position with the same employer.

The decision of the FWC has a number of ramifications for employers and particularly those with a longstanding casual workforce. Most pertinently, the decision highlights the need for employers to include express terms in their enterprise agreements excluding periods of casual employment from being included in the calculation of redundancy pay.

The periods of regular and systematic work now cannot be ignored when calculating redundancy pay which may create a large financial impost for businesses.

If you would like to discuss this further please contact our Workplace Relations Team.