When is a casual employee not a casual?

When is a casual employee not a casual?

The Full Court of the Federal Court of Australia (“the Court”) has confirmed its somewhat controversial decision that an employee engaged as a casual employee may still be considered a permanent employee despite a classification noted in the casual’s employment contract.

In WorkPac Pty Ltd v Rossato [2020] FCAFC 84, the Court found that despite employment contracts identifying Mr Rossato as a casual employee and WorkPac paying him as such, Mr Rossato was in fact a permanent employee and therefore was owed leave entitlements despite having been paid a 25% casual loading in lieu of such entitlements. This decision was similar to the decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 and potentially has significance for the large number of casual employees in Australia.

A recent Household, Income and Labour Dynamics in Australia (HILDA) survey found that 60% of Australia’s more than 2 million casual employees had been engaged for more than 6 months on a “regular and systemic basis”. The study further found that over 28% of casual employees had been employed for more than 3 years.

Brief Background of the Proceedings

Mr Rossato, an employee of WorkPac (a labor hire company that employs more than 6,000 workers), brought proceedings before the Court alleging that he had not been engaged as a casual employee, and that he was entitled to leave entitlements available to permanent employees.

Mr Rossato was engaged by WorkPac as a drive in/drive out production worker at two Queensland mines operated by Glencore Australia. Over the course of almost 4 continuous years (from 28 July 2014 to 9 April 2018), Mr Rossato:

• was employed under 6 separate consecutive employment contracts whereby in each of those contracts his position was stated as casual;
• worked under rosters, often operating on a 7 day on/7 day off cycle;
• the rosters covered significant periods of time, with one roster allocating shifts 7 months in advance;
• received a casual loading and was paid over and above his entitlement pursuant to the WorkPac Enterprise Agreement.

In response to the proceedings, WorkPac sought a declaration that:

• Mr Rossato had been a casual employee for the duration of his employment; and
• in the event that it was held Mr Rossato was a permanent employee, WorkPac claimed that the casual loading paid to Mr Rossato be used to set-off any leave entitlements that had accrued to him and/or that they should be entitled to restitution of the casual loading mistakenly paid to Mr Rossato.

Casaul or Permanent Employee?

In determining whether Mr Rossato was a casual employee, the Court confirmed the characterisation of a casual employee as noted in WorkPac v Skene [2018] FCAFC 131, namely, that is, “an employee who has no firm advance commitment … to continuing and indefinite work according to an agreed pattern of work.” The Court noted that indicia of a casual employment relationship include, but are not limited to:

• irregular work patterns;
• unpredictability;
• uncertainty.

Furthermore, all the features of the employment relationship are to be considered when characterising the relationship. Self-characterisation of the employment relationship, in this case as “casual”, will not be determinative.

Having considered the various features of the employment relationship, the Court concluded that Mr Rossato was in fact a permanent employee based on:

• the regularity and predictability of his hours;
• the long-term and advance nature of his rosters;
• the implication that Mr Rossato was required to work the shifts allocated to him (for example, there was no mechanism to effectuate a rejection of a shift);
• dealings between the parties evidencing a mutual assumption as to continuity of employment; and
• the provision of accommodation to facilitate the working of his rostered hours.

Set-Off Claim and/or Restitution: Was it successful?

The Court dismissed WorkPac’s claim that the casual loading paid to Mr Rossato could be used to set-off the leave entitlements which had accrued to him on the basis that:

• there was no express set off provision included in Mr Rossato’s employment contract;
• WorkPac could not satisfy the common law principle, that if a payment is made for a contractual purpose it cannot be used to satisfy an award obligation, unless there is a close correlation between the contractual purpose and the award obligation. By way of example, if a payment is made to an employee as wages for work performed, an employer cannot seek to use that payment to satisfy the payment of leave entitlements;
• wages paid to an employee could not be used to set off leave entitlements as the Fair Work Act prohibits the pre-payment of these leave entitlements.

The Court also rejected WorkPac’s claim for restitution of the casual loading payments which had been mistakenly paid to Mr Rossato. It held that:

• WorkPac had assumed the risk that the flat hourly rate paid to Mr Rossato did not satisfy their statutory obligations;
• there was no provision in the contract which required restitution of casual loading in the case that Mr Rossato was not actually a casual employee; and
• it was not sufficiently certain that it was WorkPac’s mistake in identifying Mr Rossato as a casual which led to his rate of pay (for example, the casual loading paid was not separately identifiable nor was it severable and therefore the Court was unable to find that there was a separate portion of Mr Rossato’s wage that WorkPac paid by mistake).

What now?

The decisions in WorkPac v Skene and WorkPac v Rossato indicate that employers may be exposed to claims for unpaid leave entitlements from existing and former long-term casual employees who work regular and systematic hours.

Some measures which may assist in limiting any potential liability for employers include:

• reviewing your casual workforce to understand which employees are truly casual;
• reviewing the hiring and administration of casuals, including varying shifts and avoiding long term rosters;
• separately identifying any casual loading in pay slips;
• review casual employment contracts to include terms relating to the restitution of casual loading in the event that an employee is held to be other than casual;
• establishing a process to transition long term casuals to permanent roles where applicable.

If you are an employer and have any questions regarding your potential liability, or if you are a casual employee who may fall within the charactisation of a permanent employee, please do not hesitate to contact our office for further assistance.