A casual shock to employers - the Rossato decision

The status of a casual employee was again considered in the new decision of WorkPac v Rossato [2020] FCAFC 84, handed down last month.

Rossato decision

WorkPac’s application sought a declaration from the Full Court that Mr Rossato was a casual employee. 

The Full Court however found that the coal mining driver employed by WorkPac on six consecutive employment contracts over a period of almost four years, was not a casual but a permanent employee, because he was not “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".¹

To reach that conclusion, the Full Court analysed each of Mr Rossato’s contracts as well as the conduct of the parties to review the “totality of the relationship”,² and found that Mr Rossato was:

• not actually engaged as a casual employee under his written contract, despite that being the clear intention of WorkPac; and
• not a casual employee, because of the nature of conduct and engagement of the parties after the contracts were signed.

The Full Court was satisfied from the words of the contracts that a firm advance commitment was evident in each of the six contracts, and that the nature of Mr Rossato’s ongoing employment confirmed this commitment.  The Full Court stated:

[212] On the characterisation of the employment, it is not necessary for the firm advance commitment to be a contractual term. A mere subjective expectation of continuing work according to an agreed pattern of work would not be sufficient, but an objectively justified expectation of that kind would ordinarily suffice.

The Full Court therefore ruled that Mr Rossato had, as a permanent employee, entitlements under the National Employment Standards and WorkPac’s enterprise agreement, including paid annual leave, personal/carers leave and compassionate leave, and payment for public holidays during Christmas shutdowns.

Significantly, the Full Court also rejected WorkPac’s argument that if Mr Rossato was found to be a permanent employee, WorkPac was entitled to set off, under each of his six contracts, his 25% casual loading paid to him against any claim for unpaid leave entitlements.  This was rejected because Mr Rossato’s contracts did not adequately connect the casual loading paid to him as being set off against entitlements under the National Employment Standards.

The Full Court also rejected WorkPac’s alternative argument that it was entitled to set off the 25% casual loading pursuant to regulation 2.03A of Fair Work Regulations 2009.  Regulation 2.03A was inserted into the Fair Work Regulations 2009 in December 2018 as a result of the previous decision of WorkPac v Skene [2018] FCAFC 131, and subsequent lobbying from employer and employer associations.  The regulation permits an employer to offset an amount, clearly identifiable as a casual loading, that was paid to a casual employee from any amount claimed to be payable to the casual employee in lieu of National Employment Standards entitlements.  It was inserted to prevent a casual employee from “double dipping” on entitlements by claiming for benefits such as annual leave, on top of also receiving a casual loading.

Implications

While many aspects of the Rossato decision turned on the particular facts of the case, some significant implications arise from it.

Firstly, attempts to set off, or claw back, the usual 25% casual loading could fail unless the employer clearly identifies in the contract what is being set off.

Secondly, the Full Court has significantly limited the impact of regulation 2.03A of the Fair Work Regulations.  The regulation includes a requirement that the aggrieved worker must be making a “claim to be paid an amount in lieu of one or more of the relevant NES entitlements”.  In rejecting WorkPac’s argument, the Full Court held that seeking payment of the entitlements conferred by the NES is not seeking “an amount in lieu” and as such, the regulation did not apply.  It follows that set offs under the regulation could fail if the application of the Rossato decision is applied.

In light of the signficant consequences for not just WorkPac but many Australian businesses, an application for leave to appeal to the High Court has been sought by WorkPac.  Industrial Relations Minister Christian Porter has also confirmed that the Federal Government will intervene, and will also consider legislative options.

Lavan Comment

The Rossato decision has now confirmed the approach about casual employees started in the Skene approach.

Pending a successful appeal to the High Court or Federal Government intervention, employers will need to be alert for the time being, that long term casual employees with an expectation of continuing and indefinite work may potentially be deemed to be permanent employees, even if their employment is consistent with casual employment as defined in an applicable modern award or enterprise agreement.  Such employees may potentially claim entitlements such as annual leave, on top of receiving a casual loading, if they are not engaged with “no firm advance commitment from her or his employer to continuing and indefinite work according to an agreed pattern of work”.

Specific attention should be given by employers to casual employees’ written contracts to ensure that a casual loading is a separately identifiable amount that is stated to be paid as a result of the employee not being entitled to NES or other entitlements peculiar to permanent employment.  Statements that the casual loading is paid "in lieu" of those benefits will not suffice.

If you require your set off clauses to be reviewed or updated, or otherwise have questions about casual employment, please contact Ian Curlewis.