If an employee is engaged as a long term casual employee, and then, immediately commences a period of permanent employment with the same employer, will that prior service count for the purposes of calculating the extent of notice that is required to be given, and the redundancy payments to be made, on a subsequent redundancy?

According to a recent decision of the Full Bench of the Fair Work Commission in the matter of AMWU v. Donau, the answer is likely to be “yes”.

The Facts

On appeal, a Full Bench of the Commission was required to determine whether the prior contiguous (i.e. together in sequence) casual service of a number of permanent employees counted as service for the purposes of clauses in an enterprise agreement relating to notice of termination and redundancy.

The issue was an important one because if some of those employees had been engaged as casual employees for a lengthy period of time, the amount of notice to be provided by the employer and the amount of any relevant redundancy payments, would likely increase.

The situation arose in circumstances where a large engineering and shipbuilding company was required to make a significant proportion of its workforce redundant after the completion of a contract with the Australian Submarine Corporation. There was no dispute between the parties that the redundancies were genuine, or that the consultation requirements under the relevant enterprise agreement had been met.

While the employer recognised the prior periods of contiguous casual service for the purposes of calculating long service leave entitlements, it did not recognise it for the purposes of calculating notice or redundancy payments under the relevant enterprise agreement.

At first instance, Commissioner Riordan found that these prior periods of service should not count towards the calculation of notice or redundancy payments for these employees.

The majority of the Full Bench on appeal determined that while the decision concerned the proper construction of the relevant enterprise agreement relating to these employees, the issue also turned on the interpretation of the Fair Work Act, as the enterprise agreement incorporated provisions of the National Employment Standards contained within it.

The majority of the Full Bench considered that in examining the terms “service” and “continuous service” in the Fair Work Act, that a period of service by a regular and systematic casual employee is not identified as one of the exclusions from a period of service or continuous service. However, it also concluded that the calculation of “years of continuous service” can only include a period of regular and systematic casual employment from which the employee was being made redundant. Therefore, there could not be any break between the relevant period of casual employment and the transition to permanent employment. Separate earlier periods of employment could not be included.

The Full Bench ultimately upheld the appeal, finding that the relevant earlier periods of long term casual employment should count towards determining the amount of notice and redundancy payments to be made to the employees.

Commissioner Cambridge, dissenting from the majority, considered that there were important ramifications for various parts of the National Employment Standards as a result of the majority’s determination. In particular, the Commissioner considered that the determination could impact upon the calculation of other entitlements such as paid annual leave and paid personal/carer’s (i.e. sick) leave. What this in effect could mean is that an employee’s prior contiguous service as a long term casual employee prior to a period of permanent employment, could count towards the calculation of those entitlements.

The Commissioner went on to find:

“The prospect that a casual employee who became a permanent would have her or his annual leave entitlement calculated from the date of commencement as a casual exposes the folly of the interpretation (of the “service” and “continuous service” provisions of the Fair Work Act), to include any period of casual employment”.

Conclusion

This decision is interesting and may impact upon various employers, particularly in situations when long term casual employees transition to permanent employment.

Commissioner Cambridge raised the issue of whether prior service in these circumstances could count towards the calculation of other entitlements such as paid annual leave and paid personal/carer’s leave. Whether an argument can be raised in these circumstances that the previous payment of casual loadings has already compensated an employee for these entitlements, will remain to be seen.

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

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