Australian employees will now have their casual employment calculated towards their redundancy entitlements as a result of a recent Fair Work Commission ruling.

The Commission upheld an appeal made by the Australian Manufacturing Workers’ Union against a decision that allowed engineering and shipbuilding company Forgacs to only calculate the permanent employment period in their redundancy payouts.

“This could potentially affect a large number of completed redundancies where prior service as a casual has not been counted”, said Andrew Jewell, principal lawyer, McDonald Murholme. “This full bench decision could result in a significant number of claims being brought by ex-employees or unions on their behalf,” he said. “Employers will have to be careful with the record-keeping of casual employees and also maintain records for entitlements such as long service leave.

“Furthermore, this may trigger an unintended consequence where employers become reluctant to convert casual employment to permanent employment,” Jewell said. “Casual employees are not entitled to redundancy payouts and thus employers may be more inclined to keep them as casuals especially in industries where redundancies are common.”

The full bench decision was based on the relevant enterprise agreement and their interpretation of the Fair Work Act 2009 (Cth) as various sections of the Act do not exclude regular casual employment in the calculation of severance payments.

In a separate case, Union leaders have been pressing the Fair Work Commission to have new rights established in every industry that would give 2.2 million casuals the ability to convert to permanent status after working “regularly” for six months with one employer.

Business has warned that giving casual workers an “absolute right” to become permanent after six months will increase outsourcing and jeopardise tens of thousands of jobs.

With the hospitality industry now accounting for 1 in 20 jobs in Australia, many of which are casual positions, this ruling could create major changes across the industry.

Final submissions are being heard before the tribunal’s full bench this week.