Civil Law

By Stefan Russell-Uren


Casual Employment in the Hospitality Sector

Working for a restaurant is a rite of passage for students. I haven’t met a young professional who didn’t work in the industry at one point or another. The reason that most students work in the field is because its flexible. Few work in the kitchen and most work in front of house or on dishes. They are not motivated by a love of the industry. They are motivated by the convenience of the work and the community which comes with it.

When most restaurateurs talk about industrial relations or the Restaurant Industry Award 2010 penalty rates are front and centre of the conversation. This misses the most substantial threat to the viability of the industry and each and every business in the sector. The biggest threat to every business is the failure to correctly classify employees as part time or casual. The significance of this threat was realised by a seminal decision by the Full Court of the Federal Court of Australia.

The Court delivered its decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 in mid-August. The decision deals with casual employment and explains who is and is not a casual. In summary Mr Skene was a casual employee who sued Workpac for failing to provide him with the benefit of annual leave.

The essence of the decision is that a casual employee is a worker who is engaged intermittently, who has irregular work patterns and for whom there is uncertainty as to the engagement. The decision makes it clear that if an employee is engaged on a regular basis with predictable shifts and an expectation of ongoing employment they are not a casual employee.

Before the decision in WorkPac the accepted legal position on casual employment was that a worker is casual if the employer says they are casual. This was at least the case under most awards including the Restaurant Industry Award 2010. The consequence of that position is that most restaurants engage the entirety of their front of house staff and kitchen hands on a casual basis – whether or not they have a regular work pattern.

If an employee is classified as a casual but at law are not there may be significant consequences for the employer. WorkPac was ordered to compensate Mr Skene in the order of $27,789.72 for a failure to provide annual leave. WorkPac was not ordered to pay a civil penalty but it is unlikely that any future business would be accorded the same mercy by the Court. Civil penalties can be in the hundreds of thousands. Any business, especially a restaurant, which has not turned its mind to the classification of its employees should do so now.

It is far better to avoid an issue before it arises than seek to fix it after. Restaurants (and Hotels) are better poised to avoid liability for mis-classifying casual than most businesses. In January 2018 the Fair Work Commission changed the definition of part time employment in the Award to encourage employers to reclassify their workforces. Part time employment has never been more flexible or well-suited to the needs of the industry as a result of the changes.

In essence, the Restaurant Industry Award 2010 allows employers to reach an agreement with a part time employee. Under the agreement the employee can say which days they are available for and the employer has to guarantee at least eight hours per week. If employees time is worked on the days nominated then the standard rate is payable – less the 25%. That agreement can be changed with the consent of the employee as often as needed (the changes would probably coincide with University semesters).

Shifting part of the workforce to part time employment is critical to avoiding future claims from employees who allege that they have been underpaid. It is also important to avoid costly prosecutions by the Fair Work Ombudsman. But more than anything else – it’s cheaper.

The casual loading compensates for carer’s leave, sick leave and compassionate leave as well as annual leave. While annual leave is paid out at the end of employment these other entitlements are not. Unnecessarily classifying employees as casuals means that a business incurs these costs which would otherwise go to profit.

If the casual component of a workforce which is engaged regularly is not transferred to part time employment at the business’ initiative the transfer might be brought about by the workforce. On 1 October 2018 the Fair Work Commission gave regular casuals the right to seek conversion to part time employment (“casual conversion”).

The right to casual conversion means that a casual who has been engaged for 12 months, on a regular basis can request to shift to permeant employment (full time or part time). That request must be in writing. A business must respond to the request in writing and can only deny the request on reasonable business grounds which are known and can only respond to the request after consulting with the employee.

The process of responding to a request for casual conversion is technical. It needs to be strictly complied with because a failure to comply with the process or a denial of the request on grounds which are not reasonable could breach the Award. Breaching the terms of the award generates a substantial business risk. The best course forward for any business with a substantial casual workforce is to seek advice on transitioning some of the workforce into flexible part time employment to ensure that the workers transferred are the right workers.

If you have any questions about whether a particular employee is casual or the issues raised in this blog please get in contact.