FWC ruling sets troubling precedent for employers of casuals and casual contracts

• Casual employee entitled to claim payments for annual leave, personal/carer’s leave, compassionate leave, and public holidays.
• Employer not entitled to restitution or to “set off” the claim.
• The Regulation introduced to prevent double dipping proves ineffective. 

The Full Court of the Federal Court in WorkPac v Rossato [2020] FAFC 83 (Rossato) found that despite being engaged as a casual and paid a loading, employment of indefinite duration which was stable, regular and predictable such that a firm advance commitment was present, entitled the employee to paid annual leave, personal/carer’s leave, compassionate leave and public holidays.

This decision reinforces the earlier decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene). We recommend that you read our previous articles on Skene and Regulation 2.03A of the Fair Work Regulations 2009 (Regulation) for additional context.

Summary of Facts

Mr Rossato was employed by WorkPac between 28 July 2014 until 9 April 2018 under 6 consecutive ‘casual’ contracts.

Following the decision in Skene, Mr Rossato claimed that he was not a casual employee and outstanding entitlements to paid annual leave, personal/carer’s leave, compassionate leave and public holidays under the Fair Work Act 2009 (FW Act) and the applicable enterprise agreement (EA).

In response, WorkPac commenced proceedings seeking declarations that:

• Mr Rossato was a casual employee and not entitled to paid entitlements under the FW Act or EA.
• Alternatively, Mr Rossato’s pay included a casual loading which was in part paid in lieu of the entitlements and WorkPac was entitled to “set-off” any amount owed to Mr Rossato in respect of those entitlements.
• Alternatively, WorkPac was entitled to restitution of the casual loading paid or the amount paid in excess of the permanent entitlements under the EA.

Decision

The Full Court of the Federal Court concluded that:

• Mr Rossato was not a casual employee and was entitled to the paid annual leave, personal/carer’s leave, compassionate leave and public holidays claimed.
• WorkPac had not made payments to Mr Rossato in discharge of his outstanding entitlements to paid annual leave, personal/carer’s leave, compassionate leave or public holidays and is not entitled to the “set-off” it claims.
• WorkPac was not entitled to restitution of the monies it claims, either on the basis of a failure of consideration or mistake.

Not a casual

While Mr Rossato was employed and paid as a casual, a range of factors (including stable, regular, and predictable work) indicated a firm advance commitment. 

Set-off

Regarding the “set-off” claim, it was held that payments made to Mr Rossato were for hours of work performed and not on account of any entitlements to leave or public holidays.

Relevantly Justice Bloomberg stated at [230]:

There is a superficial attraction to the notion that something given in substitution of an entitlement has an equivalent value to the entitlement itself and is therefore of the same character.  However, an obligation to provide a particular entitlement will not ordinarily be discharged by not providing the entitlement and by instead providing a substitute. WorkPac’s statutory obligation was to provide Mr Rossato with entitlements to paid annual leave, paid personal/carer’s leave and paid compassionate leave in accordance with the terms of the FW Act and the Enterprise Agreement, which provided not only for paid leave but also as to when the leave may be taken and when the accompanying payment must be made.  A failure to provide those entitlements in accordance with the terms of the FW Act and the terms of the Enterprise Agreement would contravene the FW Act and subject WorkPac to the civil penalty provisions of that Act (ss 44 and 50 of the FW Act).  That would be so even if Mr Rossato had agreed to accept something else in lieu of or in substitution of the entitlements because WorkPac and Mr Rossato cannot contract out of those entitlements or the timing and manner of their provision: Josephson v Walker (1914) 18 CLR 691 at 696 (Griffith CJ), at 700 (Isaacs J); Metropolitan Health Service Board v Australian Nursing Federation (2000) 99 FCR 95 at [17]-[20] (French J).  Furthermore, for the reasons already given, with limited exception, the FW Act does not permit the substitution of paid annual leave and paid personal/carer’s leave for money.

Restitution

The Full Court held that WorkPac was not entitled to restitution because the casual loading was not paid by mistake. Instead, WorkPac had a contractual obligation to pay Mr Rossato the agreed flat hourly rate and there was no term in the contracts providing for an adjustment should the assumption that the employee was casual be incorrect.

Regulation 2.03A

The Full Court found that Regulation 2.03A did not apply because Mr Rossato was not claiming to be paid an amount “in lieu of the entitlements” (which is one of the conditions specified in Regulation 2.03A) but was seeking payment of the actual entitlement.  

As a result, Regulation 2.03A had no effect and appears to have failed to achieve its purpose to prevent double dipping in this context.

What does this mean

The decision in Rossato is controversial and interested parties are calling for legislative change to clarify the meaning of casual employee and to prevent double dipping. In the meantime, the decision in Rossato remains the current authority.

According to the current authority, indicators for casual employment and the absence of a firm advance commitment (i.e. as to the duration of the employee’s employment or days/hours of work) include irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability. Contrastingly, regular, continuing, and predictable work may indicate the existence of a firm advance commitment.

The presence of a firm advance commitment will likely result in the conclusion that the employee is not a casual and therefore entitled to paid entitlements for permanent employees under the FW Act (or under the applicable award or enterprise agreements) despite being labelled as a casual employee and/or paid a casual loading.

Key takeaways

Employers should take the Skene and Rossato decision as a warning of the potential consequences of incorrectly classifying permanent employees as casuals.

It is prudent for employers to review the current employment status of their employees to ensure that they have not mistakenly classified any of their employees as casual. Further, employers should implement appropriate systems to ensure that the status of their employees is reviewed systematically (e.g. bi-annually).

If a casual employee has been working regular and predictable hours on a continuous basis, the employer should consider offering permanent employment. In any event, the employer may be required to notify the employee that they can elect to convert to full time or part time employment in accordance with the applicable award.

Employers should also review and update any written terms of employment to ensure that the casual loading is clearly identified and any contractual set-off and restitution clauses are sufficiently worded.

Need assistance?

Employer Assist can assist employers with reviewing their employment contracts, provide advice on classifying their employees and assist with converting employees to permanent positions if required. Employer Assist can also provide representation in the event of a claim. If you require assistance, we encourage you to contact Employer Assist on 07 3376 6266 or hvia@employerassist.com.au.

This article is intended for information purposes only and should not be regarded as legal advice. Please contact Employer Assist for specific advice.