0n 20 May 2020, the Full Court of the Federal Court delivered judgment in the WorkPac v Rossato test case, and in doing so, has emphatically asserted the traditional understanding of casual employment, which is inconsistent with classing many long term, stable “casual” engagements as truly casual.

The Court held that Mr Rossato, who was employed by labour hire company WorkPac, ostensibly as a casual mining production employee from 28 July 2014 to 9 April 2018, was not a genuine casual, but was actually a permanent employee, and so was entitled to paid annual leave, personal leave and compassionate leave, despite having being paid a higher rate for every hour worked on the basis that he was a casual employee.

The case followed on from the 2016 case WorkPac v Skene, where the Federal Court found that Mr Skene, another employee of WorkPac ostensibly employed as a casual, was not a genuine casual, but was in fact a permanent employee. This led to a debate about double dipping, where an employee receives a loading or higher rate as a casual, but then challenges their status as a casual employee and claims leave entitlements as well. The Federal Government attempted to address this issue by regulation, and WorkPac presented another case to the Court, in which the payment of a casual loading was clearer than it had been in Mr Skene’s case.

The background

Mr Rossato was a mine-worker employed by agency WorkPac, which supplied his services to a mining company. His employment contract stated he was a casual employee and would be paid a casual loading of 25% as part of his hourly rate of pay, stated in some of his 6 successive contracts to be in lieu of receiving paid leave entitlements. Mr Rossato worked alongside other labour hire workers, and other employees who were permanent workers of the mining company. Often, the duties and hours he worked were the same as those of the permanent employees. Mr Rossato worked on rosters, sometimes created 12 months in advance, and worked full time hours on those rosters.

As in Skene, the Federal Court held that Mr Rossato’s employment was not casual: his hours of employment were “regular and predictable”, “continuous” and “not subject to significant fluctuation”. His employment contract, which stated that he would work to a roster, provided a “firm advance commitment” of future work by WorkPac. The contract of employment, and the actual work pattern, did not have the characteristics of casual employment, being employment with irregular work patterns, uncertainty, discontinuity, intermittency and unpredictability of work, and where the employee was free to choose to either accept or decline the offer of work.

Considerations

WorkPac argued that to determine whether the employment relationship was casual or permanent, the Court should look only at what was written in the employment contract, and how the employee was to be paid – were they paid a casual loading or not? The Court rejected this argument: as employment relationships are fluid and change over time, in deciding the true nature of an employment relationship, it is necessary to look at the entire context of the relationship, including the post-contractual conduct of the parties, and the hours and patterns of work actually worked by the employee.

WorkPac argued that if indeed Mr Rossato was not a casual employee, they should be able to offset his casual loadings against his claim for payment of accrued leave entitlements, which also failed. None of the suggested legal grounds for set-off or restitution because of a mistake were upheld. Mr Rossato was entitled to the leave (or payment of accrued leave at the end of employment), not payments “in lieu of” that entitlement, as some of the contracts phrased it. The entitlement to leave could not be covered by a payment different in nature to the entitlement, that is, payment of money for leave, was different to the right to actually take leave, and the Federal Government’s post-Skene regulation was ineffective to change that outcome.

What does this mean for employers?

Long term casual arrangements which look much like full- or part-time employment carry a substantial risk of the employer being liable for leave and other service-based entitlements such as notice and redundancy, even if an identifiable casual loading has been paid. It seems that even if an employee has been offered casual conversion, and has declined, if the underlying nature of the engagement is permanent and not casual, then leave and other entitlements may well be due on top of the loading paid.

The Federal Government has made noises about legislation to avoid this outcome, but whether that will get through the Senate, and if so, whether it will work, remains to be seen, and in any event could be some time away.

So, employers need to focus on casual arrangements of this kind and decide what to do about them. Casual engagements must be managed, to retain the quality of uncertainty and irregularity essential to casual employment.

Employers should review casual rostering arrangements at least every 6 months, to see what hours are actually being worked, and with what frequency and regularity. Most Modern Awards contain a casual conversion clause which requires employers to provide all casual employees with formal notification of their right to convert from casual employment to permanent employment, after 6 or 12 months engagement (depending on the Award). It is now more important than ever for employers to ensure they are complying with these Award requirements, as they provide particular opportunities to reassess the terms upon which they engage their casual employees. Where employers have casual employees, who are not really casual, then options include insistence on conversion (which may give rise to termination disputes), or acceptance of the risk of owing entitlements and managing that as best as possible.

Employers should also consider revisiting their casual employment contracts and removing or amending clauses that might suggest permanent rather than casual employment (e.g notice of termination, leave entitlements, or guaranteed work).

If you require any assistance with determining whether your workers are contractors or permanent or casual employees, please do not hesitate to contact a member of Coleman Greig’s Employment Law Team, who would be more than happy to assist you today.