Decision confirms dangers of engaging casual employees on long term, stable, predictable arrangements regardless of loading

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In the uncertain landscape that employers face with the COVID-19 pandemic, the Full Bench of the Federal Court of Australia has limited the circumstances of when casual employees may be engaged before being considered permanent employees.

Last week’s decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 highlights the need for urgent legislative reform in order to provide certainty to Australian businesses with respect to the nature and utilisation of casual working arrangements. Given that casual employees make up about 20% of the Australian workforce, this decision has the potential to have serious ramifications for the Australian economy.

In light of this, there have been calls for the term ‘casual employee’ to be defined in the Fair Work Act, 2009 (Cth) in line with the common definition included in modern awards, that is ‘a casual employee is an employee engaged and paid as such‘.

These calls have been fuelled by the uncertainty and inability of the employer in this case to use the casual loading paid to the employee to set-off its liability against confirmed entitlements under the National Employment Standards, such as annual leave.

What happened and why was Mr Rossato considered a Permanent Employee?

Similar to the facts in the previous decision of WorkPac v Skene [2018] FCAFC 131, Mr Rossato commenced casual employment with WorkPac back in July 2014 until April 2018.

During Mr Rossato’s approximate three and a half years of employment, he engaged in six different casual employment contracts, each one noting his casual loading entitlements of 25% paid in lieu of leave entitlements entitled to permanent employees (i.e. annual leave), as well as his rate of pay and roster of hours.

Despite Mr Rossato’s enagagement as a casual employee and the understanding that he was employed as such, the Full Bench nonetheless held that he was a permanent employee on the basis that Mr Rossato’s employment was for an indefinite duration and was ‘stable, regular and predictable’.

The Full Bench used the test of whether there was ‘a firm advance commitment’ as established in Workpac v Skene [2018] FCAFC 131 and came to the conclusion that there was one, on the basis that Mr Rossato:

  • Was provided a shift roster seven months in advance;
  • Operated on a regular shift roster of 7 days on / 7 days off; and
  • Worked every shift he was rostered to work.

Why is this case important?

This case cements a standard for courts to follow if they deem employees to be a long-term casual, to be entitled to paid leave entitlements that are available to full-time and permanent part-time staff, including but not exclusive to annual, personal/carers and, compassionate leave.

The Full Bench also found that WorkPac was not entitled to set-off any casual loading already paid to Mr Rossato against the amount owed, which potentially creates new liabilities for employers of causal workers, by allowing double dipping to occur.

However, the Full Bench found that had it not been for the language used by WorkPac in their contracts with Mr Rossato to have his casual loading entitlements “in lieu of” NES entitlements, there would have been no such finding, as his entitlements were based on actual NES entitlements.

Implications for Employers

In the meantime, absent a successful appeal or legislative reform, it is imperative that employers review their current workforce arrangements and/or implement changes to ensure their casual employees are truly casual.

The question remains as to what kind of review of employees engaged casually should be performed.

In light of the decision it would be prudent for employers to:

  1. Review and update any casual employment contracts to ensure that there is a suitably worded set-off clause and a clause which permits the employer to re-claim casual loading payments in circumstances where the employee is considered permanent. In particular, within a contract of employment, a breakdown of the components that addresses casual loading (e.g “11% of your loading is paid in lieu of annual leave and leave loading entitlements) will be satisfactory in achieving a set-off clause.
  2. Conduct an audit (going back at least 6 years to determine the potential exposure to annual leave claims) of their casual staff to determine:
    1. What the employment contract states;
    2. Whether there had been discussions about future work and security of the position;
    3. Whether the employee is working regular and systematic shifts;
    4. What is the true nature of the employee’s work; and
    5. Had there been a ‘firm advance commitment’ to the employee about their employment, eg including hours, days of work, and secure employment.
  3. It is also imperative that employers consider the following factors in determining whether the employee fulfils the definition of ‘permanent’:
    1. ‘Regular’ implies a repetitive pattern and does not mean frequent, often, uniform or constant;
    2. ‘Systematic’ requires that the engagement be ‘something that could fairly be called a system, method or plan’; and
    3. If you offered suitable work when it was available at times that the employee had generally made themselves available, and work was offered and accepted regularly enough that it could no longer be regarded as occasional or irregular.
  4. Check whether casual conversion obligations have been complied with and that records have been kept of these offers to employees.
  5. Consider whether part-time or full-time conversion can be offered to employees engaged as casuals.

With the industrial landscape shifting rapidly during these unprecedented times, Mills Oakley is here to assist to navigate these difficulties so please reach out to our team for assistance.

For more information with respect to this case, please see here for a full case summary.

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