High Court to clarify casual employment – the next instalment in WorkPac v Rossato

On 26 November 2020, the High Court of Australia granted special leave to WorkPac Pty Ltd (WorkPac) to challenge the Full Federal Court decision in WorkPac v Rossato.[1] Since the Full Federal Court decision, employers have been left confused as to how to treat their casual workforce and how to ensure that they are acting in compliance with that decision. Now WorkPac has a final chance to persuade the High Court to clarify the meaning of casual employment and what entitlements are owed to employees engaged on a casual basis.

Background – Skene and Rossato

It has been a struggle for employers to keep up with the ever evolving position involving casual employees and the series of judgements which have been handed down in matters where WorkPac, a labour-hire business, has been the relevant employer.

In the first case, Mr Skene was employed from 2010 to 2014 as a casual fly-in, fly-out dump-truck operator, at a coal mine operated by Rio Tinto Coal in Central Queensland. Mr Skene worked a seven days on, seven days off, continuous roster, which was regular and predictable work, set by rosters 12 months in advance. Upon the cessation of his employment, Mr Skene claimed that despite that arrangement, he was a permanent full-time employee of WorkPac, and as such he was entitled to annual leave pursuant to sections 87 and 90 of the Fair Work Act 2009 (Cth) (FW Act). WorkPac argued that Mr Skene was a casual employee (as defined in his employment agreement and the relevant transitional industrial agreement), and as a result was not eligible to claim those entitlements.

The Full Federal Court determined that despite being classified as a casual employee by WorkPac, Mr Skene’s work was regular, predictable, continuous and was not subject to significant fluctuation, so that he was not a casual employee at law and therefore was owed entitlements such as annual leave (see our previous article here).

In response to this decision, the Federal Government introduced the Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) (Regulations) in an attempt to ensure that employers were able to offset any future obligation to pay those leave entitlements, as against payments already made to their casual employees such as via the payment of a casual loading (see our article here).

At around this time, a test case was commenced by WorkPac against another employee it had classified as casual, Mr Rossato, in the Federal Court. In that matter WorkPac sought a declaration that Mr Rossato was not entitled to paid leave under the FW Act given his engagement as a casual employee, and that if he was so entitled, WorkPac should be entitled to set off any payments (including casual loading) already made to Mr Rossato against any leave entitlements that may be held to be payable to him.

The Full Federal Court decision of Rossato

The long anticipated decision of Rossato was handed down on 20 May 2020. In this case, Mr Rossato was employed by WorkPac under six separate casual employment contracts from July 2014 until April 2018. During this time, similar to Mr Skene, he worked a shift roster of seven days on, seven days off, set by rosters some seven months in advance.

The Full Federal Court found that Mr Rossato was a permanent employee at law. This meant that Mr Rossato was entitled to entitlements such as annual leave, personal leave and compassionate leave. Like Mr Skene, the fact that Mr Rossato had rosters set well in advance for long periods demonstrated a firm commitment to his employment, which was indicative of the fact that he was a permanent employee at law.

The Court also ruled that WorkPac was not entitled to set off any payments made to Mr Rossato despite having paid him a 25% casual loading during his employment. Essentially, this determination was based on numerous factors such as the fact that the loading is not a substitute for taking actual time off, as well as in light of the cashing out restrictions imposed by the FW Act. The Court said that an entitlement to paid time off is not just a monetary entitlement, but rather an entitlement to be absent from work without the loss of pay. This purpose is further supported by section 92 of the FW Act, which prohibits the cashing out of annual leave in certain circumstances.

In light of the Court’s determination that Mr Rossato was entitled to leave entitlements, WorkPac sought to rely on the Regulations to prevent double-dipping by Mr Rossato, given that he had already been paid a casual loading. This argument was also rejected by the Court. This was because Mr Rossato’s claim was specifically for entitlements under the National Employment Standards (NES) (e.g. payment for personal leave already taken but not paid), whereas the language of the Regulations only allows protection for claims for a payment in lieu of a NES entitlement. Additionally, the loading was paid at a time where the liability to pay entitlements such as annual leave under the FW Act had not yet arisen. Given that entitlements such as annual leave and personal leave accrue progressively according to an employee’s hours of work, payments of casual loading that were made by WorkPac prior to any entitlement arising were found to be ineffective in setting off against any entitlements under the NES that Mr Rossato later claimed.

Next steps

The Full Federal Court decision of Rossato has cemented the view that engaging casual employees and paying them a casual loading will not be enough alone for them to be considered a true casual at law. The courts in both Rossato and Skene have confirmed that long term casuals who work regular and systematic hours are likely to be considered permanent employees, who in turn may be able to make a claim for entitlements normally reserved for only full time and part-time employees. However, the High Court has now granted WorkPac special leave to appeal the Rossato decision. It is anticipated that the High Court will be hearing the appeal sometime in 2021.

In addition, the Federal government has now flagged that it will seek to amend the FW Act to include a new statutory definition of casual employment and again seek to address the ‘double dipping’ issue which the Regulations have not properly remedied.

While awaiting that decision and any legislative reform to come, employers are encouraged to constantly review their casual workforce in line with the recent decision in Rossato and ensure well drafted employment contracts with detailed set-off clauses are implemented.

If your business requires assistance in navigating this area, please contact our Employment Advisory Team.

Authored by:

Brett Feltham, Partner
Sera Park, Associate

[1] [2020] FCAFC 84.