Employment Law Update - May 2020
Federal Court ruling creates grey area for employers that employ casuals: WorkPac Pty Ltd v Rossato [2020] FCAFC 84
On 20 May 2020, the Full Court of the Federal Court handed down a decision that has the potential to instill fear in employers that employ or employed long-term casual employees.
Material facts:
Between 28 July 2014 and 9 April 2018, the applicant (‘WorkPac’) employed the respondent (‘Mr Rossato) to provide labour to companies within the Glencore Group. Mr Rossato was employed under six different contracts during this period.
On 2 October 2018, Mr Rossato sent correspondence to WorkPac stating that he believed he was a permanent employee during his employment and that he should have received leave entitlements. WorkPac subsequently commenced proceedings in the Federal Court seeking certain declarations.
Workpac sought that the Court declare that:
Mr Rossato was a casual employee on the basis that a person is a casual employee, when there is an absence of a ‘firm advance commitment as to the duration of employee’s employment or the days/hours the employee will work’;
in the event that the Court considered Mr Rossato to be a permanent employee, WorkPac should be able to use the 25% casual loading that was paid to Mr Rossato to ‘off-set’ the outstanding leave entitlements contractually and by virtue of reg 2.03A of the Fair Work Regulations, 2009 (Cth) (‘Regulations’); and
that WorkPac should be able to seek reimbursement for the casual loading amounts paid to Mr Rossato.
WorkPac’s back up argument was the offset of the 25% casual loading. WorkPac relied specifically upon reg 2.03A of the Regulations which was inserted in 2018 and states that if an employee is paid the casual loading which is ‘clearly identifiable as an amount paid to compensate the person for not having one or more relevant NES entitlements’.
Decision of the Full Court of the Federal Court:
The Full Court referred to the recent decision in WorkPac Pty Ltd v Skene [2018] FCFCA 131 in which the Court held Mr Skene was not a casual employee for the purposes of the Fair Work Act, 2009 (Cth) (‘Act’) or the enterprise agreement.
In examining the first declaration of Workpac, that is, whether Mr Rossato was a casual employee as there was an absence of a ‘firm advance commitment’ to Mr Rossato’s employment and hours, the Court held that in determining this it should have regard to the employment contract as a whole including the following elements:
whether the employment was regular or intermittent,
whether it permitted the employer to elect to offer employment on a particular day;
whether it permitted the employee to elect to work on a particular day;
the duration of the employment; and
the description provided by the parties as to the relationship, although this was not conclusive (that is, whether it was described as casual or permanent in the contracts).
The Full Court rejected WorkPac’s arguments unanimously and held that Mr Rossato was not a casual employee for the purposes of either the Act or the enterprise agreement. The Full Court further held that the employment of Mr Roassato continued indefinitely and was regular and predictable such that, despite the 6 different contracts, the ‘firm advance commitment’ was evident from the conduct of the parties. The Full Court therefore concluded that Mr Rossato was entitled to paid annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays.
With respect to the ‘set-off’ argument advanced by WorkPac, the Court held that WorkPac was not entitled to either restitution or to offset the casual loading as the 25% loading did not constitute a payment in lieu of the specific entitlements.
When considering the ‘set-off’ argument, the Full Court referred to the High Court decision of Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 which held that the objective purpose of the payments must be known by both parties in the statutory context and must have a close correlation to the obligation under the Act.
The Full Court further held that the payment of the 25% loading did not have a close correlation to the payment of leave entitlements. Rather the additional payment was merely represented as a percentage of the base wage and described in payslips as a total weekly payment with no specific reference to leave or casual loading, only to gross and net payments. Furthermore, the payslips simply showed a ‘nil’ balance for leave entitlements being accrued.
Finally, because the Full Court made the finding that the casual loading was not a payment in lieu of any leave entitlements, reg 2.03A therefore did not apply.
What does the decision mean for employers?
The decision confirms that casual employees who work regular and systematic hours and have a firm advance commitment for work are likely to be considered permanent employees rather than casual employees.
What should you do?
If you have any long term casual employees then this decision highlights the potential exposure that may arise. You should:
undertake a review of the casual employees you engage to identify any risks arising from the long term casual employees including reviewing shift patterns and hours worked by the employees;
review, and where necessary, update the casual employment contract to contain effective offset clauses that are worded appropriately;
review, and where necessary, update the casual employment contracts to include a clause that specifically identifies that the casual loading is a payment in respect of all accrued leave entitlements;
review and amend any future payslips to make it clear that there is a differentiation between the base gross wage and the casual loading.
Workpac has indicated that it intends to appeal the decision to the High Court however it is not clear whether Government intervention will continue if the decision is appealed.
We anticipate the Government will intervene given that the Federal Government announced on 26 May 2020 a proposed complete overhaul of the industrial relations arena including the establishment of five working parties each tasked with examining a particular area - including casual employment. It is certain to be an interesting time for employers moving forward.
Milly Khan & Simon Berry
If you require any further information, please do not hesitate to contact the Hilliard & Berry Solicitors’ office on (02) 8324 7500 asking for the Workplace Relations Team.