Does casuals' service count for redundancy pay purposes?

In brief

Further to our Client Update: Beware the risks of converting casuals to permanent employees, a Full Bench of the Fair Work Commission has again considered the issue of whether prior service as a casual or seasonal worker counts as service when calculating redundancy pay, and found that such prior service need not be recognised. Senior Associate Tarsha Gavin and Associate Jessica Light report.

How does it affect you?

• Employers may no longer be liable for increased redundancy payments in circumstances where their employees have converted from casual to permanent status.
• This decision¹ is contrary to an earlier one that considered a similar issue, and so some uncertainty remains. The Full Bench's comment that the interpretation given to the term 'service' in the Fair Work Act 2009 (Cth) will turn on the individual circumstances and wording of the relevant industrial instrument does little to alleviate that uncertainty for employers who find themselves in similar circumstances.

The decision

Five employees were made redundant by their employer, Unilever, in May 2017. The employees were initially engaged on a seasonal basis and were later transferred to being casuals. Each of the five employees then became permanent employees and remained so at the time they were made redundant. The parties were in dispute over whether, when calculating a permanent employee's entitlement to redundancy pay, an earlier period of continuous casual and/or seasonal service was to be counted as service.

The Full Bench determined that the prior casual and seasonal service did not count as service for the purpose of calculating redundancy pay. It referred to the terms of the enterprise agreement that applied to the employees, and excluded casual and seasonal employees from redundancy pay arrangements under the agreement. This differs from a previous decision, AMWU v Donau Pty Ltd [2016] FWCFB 3075, where the majority of the Full Bench decided that for employees in similar circumstances, a period of prior continuous casual employment did count as continuous service for redundancy purposes.

The Full Bench said that this matter turned on its own facts and should 'not be understood as establishing any principle about the application of s22 of the [Fair Work] Act to casual employment, or the approach to calculating service in enterprise agreements'.

Conclusion

Though this decision reflects what many employers understood to be the status quo before the decision in Donau, employers should still consider the risk of such disputes or claims when making decisions about converting casuals to permanent employment. Thought should be given to avoiding or mitigating the risk of claims under the terms offered to the employee at the time their employment status changes, or under the terms of any enterprise agreement during the bargaining process.