ABLA's Luis Izzo explains everything you need to know about the Federal Court’s latest decision on casual workers
The Full Federal Court has reconfirmed that casual employees working regular and systematic hours with “predictable periods of working time” are likely to be considered permanent employees, regardless of what their contract says and regardless of the payment of a casual loading.
As a result of the judgement in WorkPac Pty Ltd v Rossato [2020] FCAFC 84, Workpac has been ordered to pay Mr Rossato unpaid annual leave, personal leave, compassionate leave and public holiday payments which are owing on the basis that he was a permanent employee of Workpac (notwithstanding that he was engaged as a casual).
The decision continues to put at risk the status of Australia’s 2 million casual employees, more than 60% of which have been engaged for more than 6 months on a regular and systematic basis.
Key facts considered in Workpac v Rossato
Mr Rossato was engaged by Workpac under 6 separate casual contracts of employment (at various locations) over the course of 3½ years.
The contracts expressly identified that Mr Rossato was a casual and a number of the contracts referred to the payment of a casual loading being incorporated into Mr Rossato’s flat rate of pay. One of the contracts in fact expressly spelt out each proportion of the 25% casual loading that were paid in lieu of leave, notice and redundancy entitlements.
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Mr Rossato was also covered by an enterprise agreement which provided for the engagement of casual employees and the payment of a 25% casual loading in lieu of leave entitlements.
From the commencement of his engagements, Mr Rossato was worked under rosters, often operating on a 7 days on/7 days off basis. The rosters extended for substantial periods beyond his contract commencement date. By way of example, Mr Rossato’s roster when he was engaged on his first contract operated for almost 7 months after his start date.
He was also often engaged on a ‘drive in-drive out’ basis, with accommodation provided by Workpac’s clients.
The Full Court’s findings
Each justice delivered separate judgments in the case.
However, the justices uniformly adopted the previous Federal Court decision in Skene v Workpac, endorsing the principles that:
Justice Bromberg went further, finding that the Court could have reference to conduct that took place after the formation of the contract to determine whether the engagement was intended to be casual or permanent. That is, a Court could look at what takes place after the contract is formed to retrospectively redefine the nature of the relationship.
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The other justices did not express a view on whether post-contractual conduct could change how the engagement is characterised from its inception.
However, all justices noted that post-contractual conduct could vary the nature of the engagement. That is, the engagement might transition from casual to permanent at some point in time, based on the subsequent conduct of the parties.
Having regard to a number of factors including the regularity and predictability of Mr Rossato’s hours, the long term and advance rostering that was present from his first contract and the provision of accommodation facilities so that he could work his rostered hours, the Court unanimously found Mr Rossato to be a permanent, as opposed to casual, employee.
This meant that Mr Rossato was owed unpaid annual leave, personal leave, compassionate leave and public holiday entitlements, notwithstanding that Mr Rossato was paid a casual loading in lieu of such entitlements.
Claim for set-off against leave entitlements fails
As Mr Rossato was claiming unpaid annual leave, personal leave, compassionate leave and public holiday pay (usually paid to permanents), Workpac claimed that it should be able to set-off the casual loading it had to Mr Rossato against these unpaid entitlements.
All justices rejected this claim.
They primarily found that, given the casual loading was expressed to be paid “in lieu” of leave entitlements (which is how casual loadings are often described), the loading could not be said to have been intended to satisfy leave entitlements. Paying “in lieu” means the loading was paid instead of such entitlements.
The justices further found that the loading was paid in many cases before the leave entitlements accrued and as wages with respect to hours worked. Accordingly, the loading could not be utilised to reduce the amounts owing with respect to leave entitlements or public holidays.
Claim to recover mistaken payments also fails
Workpac additionally sought the repayment of the casual loading on the basis that the loading was paid in error, if the Court ultimately found Mr Rossato to be a permanent.
All justices rejected this claim.
Whilst the casual loading was separately identifiable, Justices Bromberg and Wheelahan both found that Workpac agreed to pay a casual loading in its contract with Mr Rossato and “assumed the risk” that the flat hourly rate Workpac paid to Mr Rossato satisfied Workpac’s statutory obligations.
There was no provision in the contract requiring repayment of the casual loading in case Mr Rossato was not a casual and accordingly no obligation to repay the monies arises.
Where to from here?
Given the ramifications of the judgement for employers in all industries, the judgement will likely be appealed to the High Court.
Furthermore, employer groups including the Australian Chamber and Business NSW (both of whom ABLA represents) have been lobbying the Federal Government to change the Fair Work Act to expressly address the uncertainty caused by Workpac v Skene and (now) Workpac v Rossato.
In the interim, for those employers engaging casuals on a regular basis, our team of workplace experts would be happy discuss what measures can be put in place to limit exposure to the types of leave, public holiday and overtime backpay claims that can arise from these latest Federal Court judgements. For assistance simply call ABLA on 1300 565 846.
Luis Izzo, Managing Director (Sydney Workplace), Australian Business Lawyers and Advisors (ABLA)
