Please note this decision has now been overturned by the High Court. Click here for our latest update on this case.
Labour hire company WorkPac has failed to convince the Full Court of the Federal Court that employee Robert Rossato was a casual employee, despite the express reference to casual employment in his six consecutive employment contracts.
After his employment ended, Mr Rossato had sought payment for annual leave, public holidays, compassionate leave and personal leave from WorkPac, on the basis that he was in fact a permanent employee for the duration of his nearly four-year employment with WorkPac.
The proceedings which then followed relating to Mr Rossato’s employment involved similar considerations as the recent decision of WorkPac Pty Ltd v Skene  FCAFC 131 (Skene), in which it was found that Mr Skene, another employee of WorkPac, was not a casual employee within the meaning of the Fair Work Act or under WorkPac’s enterprise agreement. In that case, Mr Skene was awarded back pay of unpaid accrued annual leave.
The Court in Mr Rossato’s case upheld the meaning of a ‘casual employee’ as determined in the Skene case, that is, an employee who has no ‘firm advance commitment’ from their employer to continuing and indefinite work according to an agreed pattern of work. Importantly, a ‘firm advance commitment’ does not need to be a contractual term.
There were a number of factors which led the Court to determine that Mr Rossato had a ’firm advance commitment’ of ongoing employment with WorkPac, and therefore finding he was a permanent employee. These included that:
- Mr Rossato had regular and predictable employment – his contractual hours were 38 hours per week, he was allocated pre-programmed work well in advance (up to 12 months in advance) under for the most part a 7/7 alternating shift roster, and that roster was stable and organised based on the requirements of Glencore as the host employer;
- WorkPac failed to properly establish the casual nature of his employment in his contracts of employment – while the terms and conditions varied slightly between each of the contracts, some of the contracts did not clearly identify that Mr Rossato was paid a casual loading, and did not allocate any part of the rate of pay to a casual loading or as monies in lieu of paid annual leave;
- there was an expectation that Mr Rossato would be available on an ongoing basis – he had no choice in the daily working arrangements during the course of his employment and had no practical basis on which to accept or decline shifts; and
- the work was not subject to significant fluctuation from one fortnight to the next – the hours of work were regular and certain as he worked the same hours each fortnight.
Importantly, the Court found that it was necessary to consider the employment relationship as a whole (that is, the references to ‘casual’ in the employment contracts were relevant but not conclusive considerations.
Based on these findings, the Court held that Mr Rossato was entitled to paid annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays.
WorkPac could not set-off casual loading
WorkPac sought to argue that the casual loading paid to Mr Rossato should be set-off against the payments in lieu of leave entitlements he was due as a result of the finding that he was in fact a permanent employee.
However, the Court said WorkPac was not entitled to set-off the casual loading for a number of reasons, including that the contracts did not sufficiently identify the casual loading, and also because the casual loading was not intended to be paid as a substitution for, or in lieu of, an employee having the right to enjoy paid leave.
WorkPac additionally sought to rely on the new Fair Work Regulations, which were introduced in response to the Skene decision to prevent double dipping of casual loading and permanent leave entitlements by allowing a set-off when there is a claim ‘in lieu of entitlements’. However, the Court found that the Regulations had no application, as Mr Rossato was not seeking to be paid an amount ‘in lieu of’ such entitlements.
Implications and lessons for employers
There is no doubt that the decision could have significant implications for Australian employers that engage casual employees and this has been received with widespread concern by employers.
There have been calls for parliament to intervene to provide certainty as to the definition of a ‘casual employee’ and to prohibit the double dipping by casuals receiving both the casual loading and paid leave entitlements. This is particularly relevant because the Rossato decision seems to suggest that the Regulations made by the Government in the wake of Skene will not have their intended effect.
It appears that parliament may in fact respond to these calls to intervene, with Prime Minister Scott Morrison announcing this week that casual employment will be one of the matters on the agenda for the proposed working groups on industrial relations reform.
In saying this, it is important to emphasise the circumstances of both Skene and Rossato were distinctive in that the employees in both cases had firm advance commitments to in effect full-time hours of work on a continued basis. This will not be the case for casuals across different industries with different employers. Each casual employment relationship should be considered in its own circumstances.
In the meantime, we suggest employers give consideration to the following:
- Avoid where practicable providing casuals with a ‘firm advance commitment’ of ongoing and indefinite work by ensuring that:
- casual employees are not rostered well in advance;
- casual employees can elect whether or not to work when work is offered to them; and
- there is fluctuation in the employee’s days and hours of work.
- Ensure that the employment contracts accurately reflect the casual nature of the employment and provide:
- that there is a casual loading and that the loading compensates for permanent entitlements such as paid annual leave and personal leave, notice of termination and redundancy (and the casual loading should be reflected on payslips);
- a mechanism pursuant to which the employee can accept or reject shifts;
- that should an employee be found to be engaged on a permanent basis, the employee is required to repay to the employer the casual loading component of wages previously paid to them.
- Employment relationships can evolve over time and the nature of the employment may change. Employers are encouraged to conduct regular reviews of existing casuals and to consider the reality of the employment at the review time (which may be different to when the employment commenced).
- If employees would be more appropriately engaged as permanent employees (i.e. if there is that advance commitment to ongoing and indefinite work), consider converting their employment from casual to permanent. Most modern awards and enterprise agreements give casual employees the right to elect to convert after a certain period (however, in practice, often employees eligible for conversion do not request to do so, which is often considered to be due to the preference of receiving the 25% casual loading).
- If an employee rejects the offer of conversion to permanent employment, keep a record of this, and monitor the relationship on an ongoing basis (that is, it may be appropriate to offer permanent employment on further occasions, particularly for long term regular casuals).
Based on these developments, it is more important than ever to ensure that onboarding processes for casual employees, including written employment contracts, firmly establish the casual status and entitlements. It is not too late to reconsider this after the employment is on foot.
Finally, it is important for employers to remember that long term casuals already receive other protections and benefits of their permanent counterparts – such as protection from unfair dismissal and long service leave. As such, the practice of widespread, ongoing casual employment is unlikely to provide the lower risk and more flexible solution for workplaces and employers should tread carefully in doing so.