Paid by the hour for 14 years, but he was a permanent employee

What happened

In January 2005 John Cropper, an IT specialist, agreed to help an energy procurement business, Energy Action (Australia) Pty Ltd, with a Microsoft Access database. He came in as a contractor: $50 an hour, invoices with his own ABN, his own computer. Everyone accepted that, at the start, he was an independent contractor.

The work kept growing. In January 2006 he asked the office administrator whether he could be added to the payroll. From then on the company issued monthly pay advices, withheld income tax and paid superannuation, and he soon stopped invoicing. He was given a desk, a computer and a phone, and in 2008 took over the company's IT.

He stayed 14 years, paid only for the hours he worked. He took holidays and sick days, but was never paid for them. In 2017 he was refused a place in an employee share plan because he was a contractor. In February 2020 the company said it no longer needed an Access developer. Its letter, headed ‘Your Contractor Agreement’, offered five weeks' notice pay, 12 weeks' long service leave and 12 weeks' redundancy pay as ‘a gesture of good faith’.

The claim

Mr Cropper sued in the Federal Court under the Fair Work Act 2009 (Cth). He said he had been a permanent employee from January 2006, so he was owed untaken annual leave, pay for public holidays and two absences on personal/carer's leave, and damages for not getting reasonable notice of his dismissal.

Energy Action said he had always been a contractor or, failing that, a casual who built up no paid leave. It also argued his hourly rate was an ‘all-in’ rate that already covered any leave.

First hurdle: was he an employee?

There was no evidence of any express agreement to change the 2005 arrangement. Justice Snaden inferred one: going onto the ‘payroll’ meant joining the wage- or salary-earning staff, and the sudden switch to tax withholding, super and pay slips was ‘realistically consistent with only one conclusion’. From January 2006 Mr Cropper did the work assigned to him with no right to refuse it, and that was a contract of service, the law's term for employment.

Casual or permanent: the legal test

The court applied the definition of casual employee in s 15A of the Fair Work Act as first enacted in 2021, which reached back to earlier jobs. A person was casual only if the employer offered work with ‘no firm advance commitment to continuing and indefinite work according to an agreed pattern’. The court could look only at four things: (a) whether the employer could choose to offer work and the worker to accept or refuse it; (b) whether the worker would work as required by the employer's needs; (c) whether the job was described as casual; and (d) whether there was a casual loading or casual rate.

None pointed to casual work. There was no evidence Mr Cropper could turn work down, nothing called the job casual, and there was no casual rate. It was ‘as good as impossible’ for Energy Action to prove he was casual. He was a permanent employee from 20 January 2006 to 28 February 2020.

What he was owed

The ‘all-in’ argument failed. Mr Cropper accepted in cross-examination that he understood his rate that way, but there was no evidence of what the company intended, and nobody had ever turned their mind to leave entitlements. The wages could not be treated as having paid for them.

With no agreed hours, his ordinary hours for annual leave were worked out under s 20 from his last four weeks: 25.0625 hours a week. His 54.97 weeks of untaken annual leave came to $91,129.22. Public holiday pay for 44 public holidays within the six-year limitation period came to $20,176.85, and his two absences on personal/carer's leave to $628.39.

His contract said nothing about ending it, so the law implied a term requiring reasonable notice. For a tertiary-educated professional of about 70, with some 14 years' service and earning around $130,000 a year, that was three months. After deducting the notice pay already paid, damages were $18,764.14. The redundancy payment could not be deducted, because he was separately entitled to it under s 119.

In August 2025 the court entered judgment for $130,698.60 plus interest. In December 2025 it added $29,925 in penalties: the company genuinely, if wrongly, believed he was a contractor, but no employer can escape penalty ‘merely through inadvertence’.

What this means for you

If you are paid by the hour and your hours vary, it is worth checking whether you are really a casual. What matters is what was agreed and how the job works, not the label HR uses. It is also worth keeping your own record of your hours; Mr Cropper's time records became key evidence.

The court applied the 2021 definition because that governed Mr Cropper's employment. For jobs today it has been replaced: since 26 August 2024 a casual is someone whose employment lacks a firm advance commitment to continuing and indefinite work, judged on the real substance, practical reality and true nature of the relationship, and who is entitled to a casual loading or casual rate. Court claims for unpaid entitlements generally must be brought within six years, so consider getting advice early.