** UPDATE: On 4 August 2021, WorkPac was successful in its High Court appear – see WorkPac Pty Ltd v Rossato [2021] HCA 23. Mr Rossato was held to be a casual employee. More details to follow in a future post
Introduction
On 20 May 2020, the Full Court of the Federal Court handed down WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (‘Rossato’), following hot on the heels of WorkPac Pty Ltd v Skene [2018] FCAFC 131 (‘Skene’).
Together, these cases represent a one-two punch against employers who seek to classify employees as casual when they may, in reality, be full-time or part-time and have a right to additional entitlements.
The effects of Rossato may yet be ameliorated, either by a successful appeal to the High Court or by legislative intervention. For the time being however, these cases are likely to be significant for employers who engage ‘casual’ employees on a regular and ongoing basis – and of course for the equivalent employees.
The facts
Workpac is a labour-hire company.
It employed Mr Rossato from 28 July 2014 until his retirement on 9 April 2018 pursuant to six different contracts, all of which stated that Mr Rossato was a casual employee. Mr Rossato did not receive entitlements to which full-time and part-time employees would have been entitled under the NES, being paid annual leave, paid personal/carer’s leave, paid compassionate leave and public holiday pay entitlements.
In Skene, the Court found that, despite his contract saying he was a casual employee, Mr Skene was in fact a full-time employee and consequently entitled to various entitlements under the NES. Mr Rossato relied on Skene and made demand of WorkPac for these entitlements. In response, WorkPac commenced these proceedings, seeking declarations that Mr Rossato was not so entitled.
When is a ‘casual’ employee not a casual employee?
The fact that an employee is described in the employment contract as a ‘casual’ employee is a relevant but not determinative factor. Parties cannot turn something into something else merely by labelling it as such.
There is no legislative definition of ‘casual employment’ or ‘casual employee’ and there has never been a definitive ‘test’ or ‘checklist’ that can be easily applied. Skene and Rossato did however hold that an employee who has no firm advance commitment from her or his employer to continuing and indefinite work according to an agreed pattern of work is likely to be a casual employee.
This necessarily raises the next question of what a “firm advance commitment” is. The Court provided some indicia that usually suggest the absence of a firm advance commitment (thus making it more likely that the employment is casual), including:
- irregular work patterns;
- uncertainty of ongoing employment;
- discontinuity of work;
- intermittency of work;
- unpredictability of shifts and hours;
- the employee only works in response to a specific demand that a specific period of working time be worked;
- an employee can choose whether to work a particular shift or not; and
- a short notice period.
One of the central arguments in Rossato was whether the Court in Skene was correct when it said that the question of whether an employment relationship is one of casual employment requires the Court to look at the totality of the relationship. WorkPac argued, in effect, that where the employment was governed by a written employment contract, the Court should not be entitled to look beyond that contract. WorkPac said that by finding to the contrary in Skene, the Court was ‘plainly wrong’ and that part of the decision should not be followed.
It was not strictly necessary to decide this question because the Court in Rossato held that on the terms of the written employment agreements alone, the employment was not casual – which is to say that despite labelling the employment as ‘casual’, the contractual terms were not consistent with a casual employment relationship. Broadly, this was because:
- the duration of the contracts were specified as being in the order of 6 months;
- the work was required to be performed pursuant to a pre-programmed and pre-allocated roster;
- the employer had the ability to stand Mr Rossato down without pay in circumstances of a strike, breakdown of machinery, or any stoppage of work for any cause for which WorkPac cannot be held reasonably responsible – had he truly been casual, he would simply not have been invited to perform the shift in question; and
- the contracts were inconsistent with any suggestion that Mr Rossato was entitled to choose whether or not to work a particular shift.
It followed that, despite WorkPac and Mr Rossato operating for nearly four years on the basis that he was a casual employee, the Court found that he was not – and consequently, that he was entitled to be paid the entitlements under the NES that he had not received.
But WorkPac had paid casual loading! Or had it?
WorkPac’s next argument, which it had not raised in Skene, was that if Mr Rossato had never been a casual employee, then:
- it should be entitled to recover any amounts paid for casual loading from Mr Rossato on the basis that these payments were made under the mistaken belief that Mr Rossato was a casual employee; and/or
- it should be entitled to ‘set-off’ any entitlements that Mr Rossato was now entitled to against the casual loading it had paid him over the years.
Both of these arguments were rejected.
A problem for WorkPac was that it did not have a ‘set-off’ clause in any of the employment contracts. It also did not state, in specific enough terms, what the ‘casual loading’ was intended to replace. WorkPac argued that common law principles and regulation 2.03A of the Fair Work Regulations 2009 (Cth) allowed them to ‘set-off’ the casual loading it had paid to Mr Rossato against the amounts it owed him, but they were unsuccessful.
It was also noted that Mr Rossato’s leave entitlements could not be satisfied simply by the provision of money. The entitlement to leave is the right to be absent from work for particular reasons and to continue to be paid during that period. Mr Rossato was never afforded this opportunity and hence it could not be said that he had, by the payment of casual loading, in fact already received the entitlements which he was entitled to.
WorkPac were also unable to prove that, had they known Mr Rossato was not a casual employee, it would have reduced his pay by the amount of the casual loading entitlement. He was paid above the minimum casual rates provided by the enterprise agreement, suggesting that his pay was simply that which was necessary to obtain (and then retain) his services at each relevant time.
What does it all mean?
As the law currently stands, employers need to look carefully at those employees they treat as being ‘casual’. If there is a ‘firm advance commitment to continuing and indefinite work according to an agreed pattern of work’, there is a real risk that those employees should be paid, and should always have been paid, the entitlements allowed to full-time or part-time employees. Not only must those employees be paid those entitlements into the future but back-pay may be required.
Employers should review their employment contracts and HR practices generally (for example, as to what is stated on payslips) to ensure that it is clear what casual loading is intended to replace and to include an effective set-off clause.
In the meantime, keep an eye on the news (and our blog) for word of an appeal and/or legislative intervention. If you have any queries with respect to any of the above, please do not hesitate to get in contact.