19 September, 2016
Australian Manufacturing Workers' Union v Donau Pty Ltd [2016] FWCFB 3075
Casual conversion clauses and casual entitlements
- Employers may be faced with the inclusion of casual conversion clauses in nearly 102 modern awards if an ACTU application is successful, as part of the 4-yearly modern award review process.
- Casual conversion clauses would provide an avenue for casual employees who have been employed for at least 6 months to request a transfer to permanent full-time or part-time employment. Currently, such clauses are included in only a limited number of awards such as the Building and Construction General On-site Award 2010, the Electrical, Electronic and Communications Contracting Award 2010, the Manufacturing and Associated Industries and Occupations Award 2010 and the Vehicle Manufacturing, Repair, Services and Retail Award 2010.
- The ACTU's application has been opposed by employer groups, for reasons including that labour flexibility benefits to employers and casual employees would be reduced.
- A two member majority of a Full Bench of the Fair Work Commission in Australian Manufacturing Workers' Union v Donau Pty Ltd [2016] FWCFB 3075 has recently considered the operation of a casual conversion clause. The majority decided that for a casual employee who had "converted" to permanent employment under such a clause and is then made redundant, the employee's prior continuous service as a casual counts as "service" for the purpose of determining termination and redundancy payments. The Full Bench made clear that its decision does not entitle a casual employee to redundancy pay.
- This case was closely divided. A dissenting member of the Full Bench, and the Commissioner at first instance, both considered that time spent as a casual should not be included as "service" that counts towards service based entitlements. This was for reasons including the effect of "double" payment of redundancy or termination pay, where casual loading has already been paid "in lieu" of this. Given this division, there may be further developments in this area.
What you need to know
Are the entitlements of casual employees affected by the Donau decision?
The Donau decision does not alter any entitlements of casual employees who remain engaged as casuals. Casual employees are generally not entitled to benefits under the National Employment Standards and other provisions of the Fair Work Act 2009 (Cth). The Act does recognise, however, certain rights of casual employees engaged on a regular and systematic basis, such as the ability to request flexible working arrangements, access to parental leave and access to unfair dismissal.
For casual employees who become permanent, what is the effect of the Donau decision?
The Donau decision equates engagement of a casual employee "engaged on a regular and systematic basis" with the concept of "continuous service". The Full Bench considered that periods of casual service were not expressly excluded from the definition of "service" under the Act, and so should be included. This means that a period of regular and systematic engagement as a casual that immediately flows on to permanent employment is counted towards service.
The decision may be relied upon for other service based entitlements to reflect periods of regular and systematic engagement as a casual, such as annual leave, personal leave and long service leave.
Consider alternative arrangements for engaging casual employees, or managing work currently performed by casuals
If casual employees you engage are covered by a modern award, you should consider the impact of a "casual conversion" clause being inserted into the award. You may wish to consider alternative arrangements to engaging temporary or supplementary labour. You should put in place contingency plans to introduce any alternative arrangements, and carefully consider how they will be implemented.
Stay up-to-date on the progress of the modern award review and other developments
Whether casual conversion clauses will be introduced, and which modern awards will be affected, is still to be determined by the FWC as part of the four yearly review. You should monitor developments and review any amendments made to modern awards that apply to your employees, and any other developments that challenge the Donau decision.
MAKING THE CASE: Insights from Geoff Giudice
Sections 117(3) and 119(2) of the Fair Work Act give an employee entitlements to notice of termination and redundancy pay based on years of "continuous service" – a term which is not defined in the Act. The Donau decision has provided some clarity in cases where an employee has earlier periods of service as a casual. But this is an important issue and it is to be hoped that, if there is no legislated solution, a Court will give an authoritative ruling on the meaning of the term before too long.
For further information, please contact:
Vince Rogers, Partner, Ashurst
vince.rogers@ashurst.com
