The National Employment Standards (NES) contained in the Fair Work Act 2009 (Cth) (FW Act) provide minimum entitlements to notice periods and redundancy pay based on an employee's service.

The Act defines a period of service as a period during which the employee is employed by the employer, but does not include:

  • any period of unauthorised absence
  • any period of unpaid leave or unpaid authorised absence (except community service leave or stand down).

In a recent decision (AMWU v Donau Pty Ltd - [2016] FWCFB 3075), the Fair Work Commission (FWC) considered whether a period of regular and systematic casual employment counts as service for the purposes of notice of termination and redundancy pay.

A number of permanent employees in a shipyard being retrenched had prior contiguous periods of service as casuals, working on a regular and systematic basis, with no break between the casual and permanent periods of service. During their casual employment these employees received a 25% casual loading. The question was whether this prior casual employment was to be counted with the period of permanent employment when calculating redundancy pay and notice entitlements.

A casual employee does not have any entitlement to redundancy pay or notice. The FWC noted that industrial justice might suggest it is unfair for an employee who has received a casual loading for a period of employment to have that period of employment also count towards the accrual of severance payments.

However the FWC noted 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 in the FW Act.

Therefore, according to the FWC, a period of continuous service as defined by the FW Act includes a period of regular and systematic casual employment.

Implications for employers

This ruling is highly contentious and likely to be appealed to a Court by employer groups. The Full Bench who issued the ruling was split 2-1. Some of the difficult consequences flowing from the decision were identified by Commissioner Cambridge in his dissenting decision as a member of the Full Bench.

For instance, the ruling was based on agreement between the parties that the prior casual employment was regular and systematic basis, with no break between the casual and permanent periods of service. However what if the casual employment was irregular? Following this decision, it is arguable irregular service would still need to be counted so long as the irregularity was authorised by the employer. The prior service might include irregular casual service or regular casual employment of, say, one day a week.

Furthermore, if service includes prior casual service for the purposes of redundancy pay and notice, then it will also count towards for annual leave and personal/carer's leave. A casual employee who became a permanent would instantly have paid leave accrual based on the date of commencement as a casual.

There is a 12 month service prerequisite for an employee to have the right to request flexible working arrangements or to take unpaid parental leave. If the employee is a casual on the day of making the request for the flexible working arrangement or the date of birth, or the expected date of birth, the employee needs to have at least 12 months of regular and systematic casual employment to access these entitlements. However if they become a permanent employee the day before the day of making the request or the birth, then based on the above FWC ruling any prior contiguous casual service counts towards the qualifying period - regardless of regularity.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.