Australia: Statutory entitlements for casual employees: another WorkPac decision

The Full Court of the Federal Court recently handed down a decision confirming that employees categorised and paid as "casuals" with regular and systematic working patterns might be entitled to receive the paid leave entitlements of a permanent employee.

This decision, WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato), closely follows the decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene) where similar facts and issues were raised, and about which we wrote the article 'Casual Employment: the new rules of engagement' (here). If Skene was a movie, Rossato would be the less surprising and dramatic sequel.

Both Rossato and Skene highlight the real prospect that many employees, who have a firm advance commitment from their employer for continuing and indefinite work, are currently being miscategorised as causal employees. As a consequence, those employees may have valid claims to receive the same entitlements as permanent employees.

Further, Rossato shows that an employer may not be able to claim back the casual loading rates paid to a miscategorised casual employee. The employee might be able to "double dip". This is in spite of the regulation intended post-Skene to address this very issue.

Background

In Rossato, Mr Rossato was employed by labour hire company WorkPac Pty Ltd (WorkPac) between 28 July 2014 and 9 April 2018 to work as a production employee at two Queensland coal mines operated by the Glencore group (Glencore).

During this employment, Mr Rossato was engaged under six consecutive contracts which, although containing minor differences, all purported to provide a casual employment arrangement.

Pursuant to each contract, Mr Rossato was to be paid a casual loading of 25% in accordance with the applicable enterprise agreement. The casual loading was in lieu of the entitlements provided to permanent employees, such as annual leave, personal leave, redundancy pay and notice of termination.

During his employment, Mr Rossato worked alongside a number of permanent Glencore employees. Mr Rossato worked full time hours (as well as additional hours) and did not take any day or part-day off due to personal illness or injury. He worked every shift that he was rostered on (save for Christmas shutdown periods, periods of inclement weather when his labour was not required, an occasion where he was approved to take rest and recreation, and one occasion when he left work to support his wife who had been taken to hospital).

Three of the employment contracts required Ms Rossato to work in accordance with the relevant Glencore rosters, some of which were allocated seven months in advance. These rosters were on a drive-in, drive-out basis for which Glencore provided Mr Rossato and other employees accommodation during each block of rostered shifts.

Despite Mr Rossato's written engagement as a casual employee, after his retirement in April 2018, Mr Rossato's lawyers sought payment on his behalf from WorkPac for annual leave not taken by Mr Rossato during his employment.

WorkPac rejected this claim and sought a declaration from the Federal Court that:

Casual employment defined

Following the decision in Skene, Bromberg J in Rossato noted that "a casual employee is 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" (at [31]). Notably, the Court in Skene had identified "irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work" as the "key indicators" of the absence of a firm advance commitment.

Upon review of the relevant authorities, White J formulated the following propositions relevant in determining the existence of a "firm advance commitment" (at [444]):

The Court considered these propositions in relation to the employment arrangement of Mr Rossato.

Among a number of factors, it was noted that Mr Rossato worked hours full-time and overtime hours in accordance with Glencore's long-term shift rosters. Mr Rossato's hours were as regular and as predictable as Glencore's full-time employees, and the employment contracts did not suggest that shifts would be irregular or intermittent.

The employment contracts between Mr Rossato and WorkPac did not provide that the shifts allocated to Mr Rossato would be an offer which he could freely accept and reject as he saw fit. Rather, pecuniary penalties could be imposed where shifts were rejected. Indeed, the fact that Mr Rossato was provided free accommodation by Glencore during each block of rostered shifts emphasised that it would have been unlikely that Mr Rossato was able to freely accept or reject shifts in practice.

Ultimately, the Court held that Mr Rossato's employment included a firm advance commitment from WorkPac to continuing and indefinite work. As such, Mr Rossato was not considered a casual employee for the purposes of the Act and the applicable enterprise agreement. He was therefore entitled to receive the same paid leave entitlements as a permanent employee under the Act.

Double Dipping: set-off and restitution claims

WorkPac submitted that, as Mr Rossato had been miscategorised as a casual employee, he had already received a 25 percent casual loading on his ordinary rate of pay in lieu of receiving paid leave entitlements.

As such, WorkPac claimed that Mr Rossato should not be permitted to "double dip" in this respect - that is, retain the 25 percent loading he received for being a casual under the applicable enterprise agreement and also be paid the statutory entitlements afforded to permanent employees.

WorkPac raised a number of arguments in this regard, including a claim for restitution, set off and regulation 2.03A of the Fair Work Regulations (the Regulations) (which was introduced by the government after Skene to address "double dipping" from casual employees).

For a set off claim, the general common law position provides that a payment made for a contractual purpose cannot be used to satisfy an award obligation, unless there is a close correlation between the contractual purpose and the award obligation. (Notably, there was no set off clause in the relevant employment contracts in Rossato which displaced the common law position.) Ultimately, the Court found that a close correlation did not exist in the present situation, and therefore WorkPac could not seek to set off their obligation to provide paid leave entitlements against the 25 percent casual loading provided to Mr Rossato.

With respect to the restitution claim, Workpac submitted that it should be able to claim back the casual loading amounts paid to Mr Rossato, as those amounts had been paid to Mr Rossato on the mistaken belief that he was a casual employee. The Court also rejected this argument on the basis that there was no relevant mistake, and no failure of consideration which would support restitutionary relief. Even where casual loading is an identifiable amount, the Court did not consider it a severable portion of a payment for which restitution could be sought.

The Court also found that WorkPac's reliance on reg 2.03 of the Regulations was misplaced. One reason for this was that reg 2.03 provides a connection between the set off with claims "in lieu of" entitlements under the National Employment System (NES). In Rossato, Mr Rossato's claims were not considered "in lieu of" the NES entitlements; rather, he was claiming the actual NES entitlements. The efficacy of this regulation must now be in significant doubt.

What does this mean for your business?

The decision in Rossato confirms the approach undertaken by the Court in Skene; that is, that just because an employee is engaged and classified as a "casual" and is paid as a casual does not necessarily mean they will be, in substance, a casual. The result of a finding of miscategorisation is that the employee will be entitled to the various statutory entitlements afforded to permanent employees, such as annual leave and personal leave. Furthermore, an employer may not necessarily be able to claim back or set off any casual loading paid to an employee miscategorised as a casual.

This decision has understandably caused considerable concern among many employers. The decision in Rossato, like Skene, is from the Full Court of the Federal Court of Australia. It was expected that WorkPac would have appealed Skene to the High Court of Australia, though ultimately no appeal was pursued. There is an expectation, however, that the Rossato decision will be appealed. This would mean that there is potential for the High Court to overturn this decision and the case will no longer be considered good law. Of course, the fact the decision might be deeply problematic for some businesses does not mean it is not legally sound. Two Federal Court appeal benches have reached the same conclusions.

It is possible that the Government will intervene and legislate to prevent such claims being made by employees. The Commonwealth Attorney-General has indicated he is concerned about the Rossato decision, and business groups are calling for the Government to immediately address the issue. Unsurprisingly, the Unions and Labor opposition do not support that view.

In the meantime, employers will need to watch this space closely. Employers should regularly review their employment contracts and carefully assess engagement of casuals in practice. Following the factors identified in Rossato and Skene (and the authorities those cases relied on), employers will need to ensure that their casual employees are truly engaged on a casual basis; that is, there will need to be the absence of a firm advance directive. This may be demonstrated through evidence of irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.

For further information please contact:

Michael Byrnes
Phone: +61 2 9233 5544
Email: mjb@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.