In the high-profile sequel to the Skene decision, another “casual” labour-hire worker has won the right to paid leave entitlements usually reserved for permanent employees.
The Full Bench of the Federal Court handed down its decision in WorkPac Pty Ltd v Rossato on 20 May 2020. WorkPac had launched this case in lieu of an appeal in the 2018 Skene case.
However, the move backfired for the company, since the Court rejected WorkPac’s argument that Ms Rossato was a casual employee. Instead the Court found he was a permanent employee under the NES and his enterprise agreement and was entitled to paid annual leave, paid sick/carer’s leave, paid compassionate leave and payment for public holidays.
The most significant aspect of Rossato, and where it moves the conversation forward from Skene, was the Court’s finding that Workpac could not rely on the 25% casual loading paid to Mr Rossato to set-off the value of the leave entitlements it now owed him.
This decision will have a significant impact on the Australian industrial landscape. Employer associations have warned that 1.6 million casuals could now bring claims for up to $8 million for annual leave alone. There are a number of class actions backed by litigation funders and unions which were stayed pending the decision which will now go ahead. The Morrison Government is considering supporting an appeal and is looking at further legislative reform.
Mr Rossato was employed between 2014 and 2018 by WorkPac who supplied his labour to the Glencore Group in its coal mines in Central Queensland. He worked continually under six employment contracts and showed up to every rostered shift. He never took sick leave, except to care for his partner for a brief period shortly before he retired.
After he retired, Mr Rossato demanded payment of leave entitlements, based on the Skene decision that had just been handed down. WorkPac then brought the matter to the Court seeking declarations to support its argument that Mr Rossato was casual and that it did not owe him paid leave.
The legal arguments
WorkPac argued that that when someone is employed under a written employment contract, the contract must include an express “firm advance commitment as to the duration of the employees employment or the days (or hours) the employee will work” and if it does not, then the contract is for casual employment. It said Mr Rossato’s contracts did not contain the requisite “firm advance commitment”.
On the other hand, Mr Rossato argued that:
- his contracts were not wholly in writing;
- in any event, even if they were, there was a “firm advance commitment” in the form of long set rosters sometimes for up to twelve months;
- to determine if the engagement was casual, it was necessary to assess the conduct of the parties (not just the original contract), to get to “the real substance”, “the practical reality” and “the true nature” of the relationship.
In his judgement, Bromberg J described these positions as raising a “conceptual divide”. He accepted Mr Rossato’s position and concluded that the whole and evolving employment relationship, not just the starting point of the original contract, will determine the nature of the engagement. He stated that “substance” will “trump over form in the search for the reality of what has been created or agreed, even where a contract is wholly in writing”. The other members of the Full Bench also found that the manner in which the contracts were performed pointed against the characterisation of Mr Rossato’s employment as casual.
WorkPac’s employment arrangements with Mr Rossato are distinguishable from the arrangements that some employers have with their casuals on the basis that they were:
- organised, structured, ongoing, regular and predictable (there was a commitment to utilise Mr Rossato’s services on long term rosters; and
- there was no mechanism for Mr Rossato to elect to reject an allocated shift.
WorkPac’s Set-Off Claim
WorkPac’s back-up argument was that, if the Court found that Mr Rossato was a casual, then it had already paid his entitlements through the casual loadings in his weekly payments. The loading should set-off his leave entitlements, since it was paid to him in lieu of them.
The Court rejected this argument, saying there was no correlation between the purpose of the wages paid to Mr Rossato and his leave entitlements. Wheelahan J found that the wages were never meant to compensate for his leave entitlements.
WorkPac sought to rely on changes to the Fair Work Regulations that the Federal Government had made in December 2018 – after the Skene decision – to avoid “double dipping”. The new regulations were supposed to allow an employer to take the loading into account in determining any amount payable to an employee in lieu of NES entitlements such as leave.
In this case, the regulations did not assist WorkPac because the Court said that what WorkPac owed to Mr Rossato was his actual NES entitlements, not an amount in lieu of them.
The Rossato decision has underlined Skene and confirmed how Courts will approach the categorisation of casual employees and when NES and enterprise agreement entitlements are due to employees.
Significantly, it also highlights limitations in the ability to set-off casual loadings against leave entitlements.
The intentions of parties at the beginning of the employment relationship, the content of their written employment contracts, and indeed responses to casual conversion provisions in modern awards, are only some factors among many that determine whether an employee is casual or permanent. Adding to the complexity, employment relationships can evolve over time, so that what starts as “irregular” and “ad hoc” may become “regular and systematic” employment and move from casual to permanent, without planning.
Pending an appeal in this case or legislative reform, employers should carefully review their engagement and rostering practices. They should ask whether the use of casuals really gives them the flexibility they are looking for and reconsider their true exposure to leave entitlements, as well as other costs and risks such as unfair dismissal claims and redundancy payments.
It may be that permanent part-timers, properly rostered and properly consulted and managed, can provide more certainty.
Our team of Employment Law professionals can assist you to ensure your causal employee engagements are best suited to your business needs.