Paid leave ruling for casuals could result in $40B back-payment

Employers in Australia are at risk of back-paying nearly $40bn if the High Court upholds a ruling that allows casual workers to claim six years of accrued paid holiday leave.

A recent analysis from the office of Attorney-General Christian Porter shows how the Federal Court’s decision in WorkPac v Rossato could leave employers paying anywhere between $18bn and $39.4bn.

Read more: Court finds some casual workers are entitled to paid leave

The study, which was led by Thomas Hehir, Porter’s deputy secretary of industrial relations, examined data from the Australian Bureau of Statistics concerning three sets of casuals:

• Cohort 1: casuals with regular work and tenure of 12 months
• Cohort 2: casuals with regular work and tenure of six to 12 months
• Cohort 3: casuals with “somewhat” regular work and tenure of 12 months

If only Cohort 1 casual employees were to be back-paid, Hehir estimates the potential liabilities could run up to about $18.5bn for liabilities accrued in the six years to August 2019.

But a broader approach, which back-pays all relevant casual employees, could cost businesses up to about $39.4bn for liabilities accrued over the same period.

“That is, approximately $5bn to $7bn per year over that six-year period,” Hehir said.

Australia has about 1.35 million casual workers who fall into the first category and 2.6 million casuals in total. The pressure to grant them paid leave could spell a massive repayment bill for employers.

In May, the Federal Court decided that casuals – who are rostered to work regular shifts, paid 25% loading and have a “firm advance commitment” to continue in their assignment – are entitled to paid leave. At the time, the court ruled in favour of casual worker Robert Rossato who was seeking paid leave entitlements from his employer, mining labour hire WorkPac.

Read more: Federal Court doubles down on casuals double dipping

But the attorney-general, who also serves as industrial relations minister, questioned the ruling and is now asking the High Court to reverse the decision.

“The economic effect of the decision in Rossato is to sanction a process of ‘double-dipping,’ which undoubtedly must be a matter of real concern to Australian employers in the current economic climate,” Porter said, as reported by The Sydney Morning Herald.

Casual employment in Australia often entails work that is “irregular, temporary or unpredictable in nature,” but some casuals are hired to do regular work. These workers have additional protections over “irregular casuals,” wrote Cilla Robinson and associates, from the Sydney law firm Clayton Utz.

But some employers “have fallen into lazy HR practices,” they said.

These include “not critically assessing their model for engaging casual employees” or reviewing arrangements to determine whether some casuals are more appropriately classified as permanent staff or whether it actually makes sense to hire casuals over permanents.

“This carefree approach of systemic casualisation must end with Rossato,” they said.