A full bench of the FWC has handed down a landmark decision which has changed the previously accepted interpretation of ‘service’ under the FWA and, in effect, turned upside-down the way in which redundancy payments are usually calculated.

Following the decision in AMWU v Donau[1], a permanent employee’s initial period of regular and systematic casual employment with the same employer will now count towards their period of continuous service used to calculate redundancy pay. Whilst many employees will be rejoicing with this news, the decision holds considerable and far-reaching ramifications for employers who will have to pay the price.

The case involved Donau, a Newcastle engineering and ship-building company, who commenced a large scale redundancy process. Initially, the company did not include prior continuous service by casuals in their redundancy pay calculations. The AMWU argued that this was in breach of their enterprise agreement, which specified that redundancy pay is to be calculated according to periods of continuous employment. The dispute then turned its discussion towards the definition of ‘service’ under the FWA.

The majority acknowledged the suggestion that it would be unfair for an employee who has already been received a casual loading to also use that period of service when calculating redundancy. Nevertheless, the majority adopted a broad interpretation of the definition of “continuous service” and found that the FWA did not exclude regular and systematic casual employment from the definition. In his dissent, Commissioner Cambridge argued that the majority had adopted an erroneous interpretation of the definition of service and that the decision would have an impractical effect upon other NES entitlements such as annual leave and personal/carer’s leave.

While the decision sets a precedent in relation to period of service for redundancy, it is unclear whether it will extend to an employee’s entitlements on termination such as long service leave and other accrued entitlements. It seems likely the decision will lead to an appeal, but in the meantime, employers should consider when to include regular and systematic casual hours in redundancy pay calculations.

Lessons for Employers

• Employers should ensure they seek advice if there is any uncertainty about an employee’s entitlements, particularly where an employee previously performed casual work for the employer.
• Useful indicators of “regular and systematic hours” include whether there is a clear system or pattern, an expectation that work will be regularly offered and accepted, the number of hours worked and whether there are small gaps between the days worked.
• Consider whether your workers are covered by awards or other instruments with casual conversion clauses. Extra caution will need to be taken when there is a change in employment status.
• As always, ensure all employment records are well-managed and kept up to date.

Summary:

The FWC have handed down a landmark decision where previously worked casual hours with the same employer will now count towards a permanent employee’s period of continuous service used to calculate redundancy pay.