The Case

Donau, a Newcastle shipbuilder, had a large number of employees who had been employed on a regular and systematic casual basis. During their employment, these casuals were converted to permanent employment. Donau then made a decision to make some of these positions redundant.

The Australian Manufacturing Workers’ Union, on behalf of the employees, commenced proceedings in the Fair Work Commission (FWC), claiming that the employees’ redundancy pay should be calculated to include their casual service period.

The Verdict

The Full Bench of the FWC held that the employees’ period of casual employment counted as continuous service for redundancy purposes. It found the meaning of ‘continuous service’ in section 22 of the Fair Work Act 2009 (Cth) (FW Act) does not exclude any period of regular and systematic casual employment, and it should not be limited in that way.

Commissioner Cambridge disagreed, stating the decision of the Full Bench majority was unfair given casual employees received a casual loading during their engagement and that severance pay was clearly not intended to be an entitlement received by casuals. As such, he held the casual period of service should not be included.

The Lesson

Up until now it has been widely accepted that ‘service’ within the meaning of the FW Act encompassed a period of permanent employment for the purposes of calculating redundancy pay, not a period of casual engagement.

While the decision is likely to be appealed, for the moment, long-term casual employees have an entitlement to a greater severance payment based on the inclusion of their casual years of service. Employers need to carefully consider this potential when making the decision to convert casual staff to permanent employees.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.