Double dipping: employers must now include casual service when calculating redundancy payments

In August a Full Bench of the Fair Work Commission upheld the Australian Manufacturing Workers’ Union’s (AMWU) appeal in a decision that will have an impact on workplaces nationwide.¹

The majority of a three-member Full Bench considered the redundancy pay entitlements of permanent employees whose service with their employer included a period of work as a casual employee. The Full Bench majority held that when making such an employee redundant, any period of service as a casual employee during which they worked on a regular and systematic basis immediately before becoming a permanent employee will be counted for the purposes of calculating their notice period and redundancy pay.

A casual employee may be working on a “regular and systematic basis” where they:

• are offered work regularly and generally accept that work
• can expect to be offered work each week
• have an established pattern or system of working (eg they are offered work regularly when there were client demands)
• work as part of a regular crew and have a reasonable expectation of the days that they will work.

The view of the dissenting member of the Full Bench (Commissioner Cambridge)  was that service should be limited to service as a permanent employee. The Commissioner further warned that if service is interpreted in the manner the Full Bench majority held then it has to potential to create unexpected outcomes. For example, a casual employee engaged one day a week for 7 years may be treated as having 7 years’ service for redundancy pay purposes. The Commissioner also went on to set out how the majority’s interpretation may affect other entitlements such as annual leave and paid personal/carer’s leave.

This decision has already been criticised by commentators including on the basis that it leads to ‘double-dipping’, in that casual employees are paid a casual loading while still accruing service for the purpose of notice periods and severance payments. Historically, casual loading was in many cases intended to compensate casual employees for these sorts of entitlements.

Also relevant to this decision is the 4 Yearly Review – Casual and Part-time employment Case currently being heard by a Full Bench of the Fair Work Commission. Before the Full Bench hearing this award review case, unions have made submissions in support of the recognition of casual service for a range of employment entitlements, while employer groups have made submissions to the contrary. The outcome of this case may be a statement from the Full Bench on the correct position to take with regard to whether casual service is to be included when calculating employment entitlements.

What does this mean for employers?

When considering redundancy payments, employers will now have to take into account any service where an employee was employed as a casual employee and was working on a “regular and systematic” basis.

¹AMWU v Donau Pty Ltd [2016] FWCFB 3075