Federal Court opens door to casual leave claims

It was impossible to miss the headlines following the Full Court of the Federal Court handing down its 273-page judgment in the case WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato). The case was a direct challenge to an earlier judgment of the Court in WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene), which found that another long-standing employee of WorkPac had been incorrectly engaged as a casual, and as such was entitled to accrue paid leave entitlements.

Importantly, the case does not mean that casual employees are now entitled to accrue and be paid leave. However, the case redefines what it means to be a casual and allows employees to challenge their employer when they consider they have been miscategorised.

In this article we breakdown what led to the Court’s decision and the steps you can take to avoid a similar outcome.

 

What happened in Mr Rossato’s case?

Mr Rossato was employed by WorkPac between 28 July 2014 until his retirement on 9 April 2018. As a casual employee, Mr Rossato worked almost continuously for WorkPac over that period, with only a small number of absences which were not dissimilar to instances of annual leave and personal/carer’s leave.

On 2 October 2018, two months after the decision in Skene, Mr Rossato’s lawyers wrote to WorkPac and alleged that he had in fact, not been engaged on a casual basis for the entirety of his employment.

WorkPac argued that Skene had been decided in error, and sought a declaration from the Court that Mr Rossato was still a casual. In the event that WorkPac was incorrect, it also sought that Mr Rossato backpay any casual loading that had been paid in error, as he would not have been entitled this additional 25 per cent paid only to casual employees.

 

What was the Court’s decision?

Many employers are surprised to learn that the term “casual” is not defined in the Fair Work Act 2009. Instead, its definition is drawn from case law that has developed over the course of the last several decades.

In Skene (which was confirmed in Rossato), the Court described a casual employee as one who has “no firm advance commitment” to continuing and indefinite work. The question the Court was asked was how this was able to be assessed.

WorkPac argued that only Mr Rossato’s contract of employment was relevant to determining whether he was a casual employee. Mr Rossato however, argued that what actually happened in practice was also relevant to determining whether Mr Rossato had a “firm advance commitment” of work with WorkPac.

Although the Court noted that a contract of employment would be relevant in making this assessment, it was nonetheless found that the conduct during Mr Rossato’s employment was an important consideration. This decision means that despite both an employee and employer agreeing that someone will be engaged on a casual basis, the Court is able to effectively look beyond this agreement to determine whether someone will be permanent.

It was held that in considering this additional or “post-contractual” conduct, Mr Rossato was not engaged on a casual basis, and was entitled to the benefits of a permanent employee.

 

What features of the employment relationship were relevant to the Court’s findings?

There were several features of Mr Rossato’s employment which led to the Court finding that he was not engaged on a casual basis.

Mr Rossato had six contracts of employment which each required him to work effectively full-time hours. He received his rosters several months in advance, and WorkPac was limited in how it was able to change these rosters after they had been issued. There was also an expectation that Mr Rossato would be available to work his rostered shifts, with limited or no ability to refuse shifts after they had been rostered.

The Court described these arrangements as being “pre-programmed long in advance and fixed by a roster”, compared with the otherwise “on demand” nature of casual employment.

Despite being labelled a casual employee in his contract, the Court found that he had been miscategorised by WorkPac and the nature of his employment was more akin to being permanent.

 

What about casual loading?

An amount of casual loading, which is designed to compensate a casual employee for the fact that they do not accrue paid leave entitlements, was paid to Mr Rossato over the length of his employment. WorkPac argued that in light of the decision this amount had now been paid in error and it was entitled to recover that amount of money from Mr Rossato.

However, Mr Rossato’s remuneration was expressed as a flat hourly rate which was said to be inclusive of any loadings, penalties and allowances. In this case, Mr Rossato’s contract was insufficiently worded to afford WorkPac protection against this eventuality.

After the decision in Skene, the Morrison Government amended the Fair Work Regulations 2009 to close the loophole on casual employees ‘double dipping’ these entitlements. The Court however, found that the changes in this case were ineffective. Because of the way that they were drafted, the changes only allowed casual loading to be ‘set off’ against a claim for unpaid leave entitlements where the person is seeking to be paid in lieu of those entitlements, and not a claim for the entitlements themselves. Because Mr Rossato was not claiming to be paid in lieu of these amounts, WorkPac was unable to rely on this protection.

As such, Mr Rossato was entitled to the benefit of both his much higher hourly rate of pay which was inclusive of casual loading, and paid leave entitlements on termination as a permanent employee.

 

What does this mean moving forward?

There can be no doubt that the case represents a shift in what it means to be a casual employee. It is no longer the case that a contract of employment will definitely point to the existence of a casual employment relationship. However, as the Court noted, the presence of one is a materially relevant factor in making this assessment.

The Court did caveat its decision by saying that not all long-term casual employees will be permanent, however the lines have become increasingly blurred. Now more than ever employers should be mindful of how casual employees are treated, and the expectations imposed on them.

While the process of a casual employee becoming permanent does not happen automatically, the Court’s decision creates precedent for employees in similar situations to apply to the Court for a declaration that they are permanent.

If you are faced with a claim from a casual employee that they are in fact permanent, you should not immediately backpay any leave entitlements. Instead, you should consider how the employee has been treated and obtain independent legal advice on whether they have been miscategorised.

There are also proactive steps you can take to prevent similar claims being made against you moving forward:

• contracts of employment should be carefully drafted with no promise of a guaranteed number of hours and the ability for employees to refuse shifts;
• casual loading should be listed separately and not a combined flat hourly rate;
• rosters should be issued no more than one month in advance and be able to be changed in accordance with any requirements in your modern award or enterprise agreement; and
• if possible, casual employees should not work the same shifts every week and there should be a degree of irregularity built into rostering practices.

With now two decisions of the Full Court of the Federal Court in Skene and Rossato expanding the rights of casual employees who seek to be permanent, it seems only a matter of time for similar claims to be made in other industries.

 

If you have received a claim from a casual employee asking for leave entitlements or require advice about whether your contracts of employment provide the necessary protections, call NRA Legal on 1800 572 679.

 

By Calum Woods and Lindsay Carroll, NRA Legal