The use of ‘permanent casual’ employees has always carried an element of risk for employers.  Last week’s decision of WorkPac Pty Ltd v Rossato [2020] serves as a follow up to the initial warning provided by the Full Federal Court in WorkPac Pty Ltd v Skene (2018) regarding the perils of classifying an employment relationship as ‘casual’ employment, when in reality it is permanent employment.

Please make sure you see Aitken Legal’s top tips for dealing with these developments in casual employment at the end of this update.

WorkPac v Skene

In WorkPac v Skene, a worker employed by WorkPac (a labour hire company), was found not to be a casual employee for the purposes of the Fair Work Act and, as a permanent employee, was found to be entitled to annual leave under the Act.

Skene was initially employed by WorkPac under an alleged casual contract of employment and worked for 3 months at a coal mine operated by Anglo.  The following is a summary of his employment as it operated in practice:

• He was engaged as a dump truck driver
• He worked seven days on, seven days off on a continuous roster arrangement
• He worked 12.5 hour shifts
• It was a ‘drive in, drive out’ arrangement
• He was paid a flat rate of pay for all hours of work.

Skene then applied for a position advertised by WorkPac at a coal mine operated by Rio Tinto.  Skene was successful for the position and was employed under another casual contract of employment.  The following is a summary of that employment as it operated in practice:

• He worked a ‘7 days on, 7 days’ off roster
• He worked 12 hour shifts
• He was subject to a 3 month probationary period
• He was given an undertaking to convert to permanent after successful completion of probationary period
• He was paid a flat rate of pay
• He was subject to two continuous 12 month advance rosters
• He was subject to weekly timesheets and payment of wages

Skene was terminated in 2012 for issues relating to conduct.  Skene commenced an application for alleged accrued annual leave entitlements. The issues to be determined by the Court were the status of Skene’s employment and any subsequent requirement for WorkPac to pay him in lieu of unpaid annual leave entitlements.

The intended and actual definition of ‘casual employee’ was argued at length, with the Court concluding that modern awards, enterprise agreements and contracts of employment do not take precedence over the Fair Work Act in defining casual employment.

The Court determined that the main characteristic to distinguish a casual employee from on-going, full-time or part-time employment was that the employee “has no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work”.  Likewise, an employee provides no advance commitment to the employer, nor does the employee’s employment have any firm commitment as to the days or hours to be worked.   The Court also determined that the absence of a “firm advance commitment” is usually indicative of “irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability”.

The court found the payment of casual loading and acceptance by Skene was consistent with the description of the type of employment contractually agreed upon.  The intention of the parties was to create and continue casual employment.

However, the court stated that in addition to such intention an “objective assessment will need to consider whether that intent has been put into practice and if achieved, has been maintained.”

This meant in practice that the absence of firm advance commitment is to be demonstrated by “irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work”.  Relevant to Skene’s employment, this would require that the availability of work be short-term (not-ongoing) and that any need for future work to be performed was not ‘reasonable predictable’.

The Court found the characteristics of Skene’s employment demonstrated a pattern of work that was “regular and predictable”, “not subject to significant fluctuations” and was arranged in circumstances where there was an expectation of ongoing employment.  Accordingly, Skene was found to be a permanent employee and entitled to annual leave entitlements in accordance with the NES.

WorkPac v Rossato

WorkPac v Rossato was an appeal by WorkPac to obtain a decision from the Court that a casual employee could not claim paid annual leave, paid personal/carer’s leave, and paid compassionate leave entitlements pursuant to the National Employment Standards (NES).  WorkPac also sought a decision that precluded the allegedly casual employee from an entitlement to public holidays.

Relevantly, Rossato was employed by WorkPac on an allegedly casual basis and worked between two mine sites operated by Glencore.  The following was a summary of his employment as it operated in practice:

• He was engaged as a casual Field Team Member performing production operator duties
• It was a ‘drive in, drive out’ position
• He was paid a flat rate of pay for all hours (varying between contracts)
• His shift structure varied between contracts
• He had a deduction of $35.00 for accommodation (which occurred at various times)
• He was allocated work in accordance with Glencore’s work allocation system/crew shift roster
• He was supervised by a Glencore employee
• He had continuous employment for approximately three and a half years

WorkPac claimed that Rossato was a casual employee and argued that the presence or absence of a “firm advance commitment as to the duration of the employee’s employment or days / hours the employee will work” should be established by reference to the written contract of employment that the parties agreed upon, rather than how the relationship operated in practice.

WorkPac also argued in the alternative, that if Rossato was not a casual employee, WorkPac should be entitled to restitution (repayment) of the casual loading (which WorkPac claimed was included in the employee’s hourly rate).  The argument for restitution was based on an argument that if Rossato was not a casual employee, then casual loading had been paid to him by mistake.  In the alternative, WorkPac argued that if Rossato was not a casual employee, then there had been a partial failure of consideration (meaning that the basis for Workpac’s payment of the casual loading had failed).

In a further alternative, WorkPac argued that in the event Rossato was not a casual employee, WorkPac was entitled to offset the payments of remuneration that it had made to the employee based on the alleged casual employment status, against any entitlement that Rossato had to NES entitlements.

WorkPac was successful in expanding the Court’s assessment of “firm advance commitment” to include considering the employment contract as a whole.   The Court accepted the contract should be considered as to whether the contract provides for:

• “regular” or “intermittent” employment;
• an employer election to offer employment on a particular day;
• an employee election whether to work; and
• the duration of the employment.

The Court also acknowledged the description given by the parties as to the nature of the employment (as casual employment) was relevant, but not conclusive.

WorkPac was ultimately unsuccessful in its appeal, as the Court determined that Rossato was not casual for the purposes of the Fair Work Act.  The Court found the parties had agreed on employment of “indefinite duration which was stable, regular and predictable”, and indicative of “firm advance commitment”.

Unlike Skene, the Court found there was an identifiable amount of casual loading in the hourly rates applicable to the base rate.  The Court said that despite the enterprise agreement and contract classification indicating the employment was “casual”, advance rostering and accommodation arrangements demonstrated predictability and the on-going expectation of employment.

Casual Loading

The Court found that WorkPac was not entitled to restitution (repayment) of the casual loading because there was no relevant mistake, or a failure of consideration in this situation.

It is a clear message arising from the decision that casual loading is not paid to a casual employee in satisfaction of leave entitlements owed to permanent employees.  Casual loading is payable to a casual employee because the employee is not entitled to leave entitlements at all.

It is important to note that following the Skene decision, the Federal Government implemented a regulation to deal with a situation where an employee was clearly paid a casual loading, but subsequently made a claim for permanent employee entitlements.  Regulation 2.03A of the Fair Work Regulations provides the ability to offset certain amounts where:

• an employee is employed on the basis that they are a casual employee; and
• the employer pays the employee casual loading that is clearly identifiable as an amount paid to compensate the employee for not having one or more relevant NES entitlements during the employment period.

The Court found that sub regulation 2.03A(d) was not satisfied in Rossato’s circumstances.  This sub-regulation specifically allows for the offset of certain amounts where an employee makes a claim to be paid an amount in lieu of one or more of the relevant NES entitlements.  On this issue, the Court stated:

“None of Mr Rossato’s claims to which WorkPac’s proceedings are directed is a claim to be paid an amount “in lieu of” an NES entitlement. To the contrary, Mr Rossato seeks payment of the entitlements conferred by the NES. In respect of the annual leave, his claim is for the NES entitlement bestowed by s 90(2) of the FW Act. With respect to the paid PC leave, Mr Rossato’s claim is for payment in accordance with the NES for which ss 96 and 99 provide for the leave of that character which he took and for which he did not receive payment. Mr Rossato’s claim for payment for the compassionate leave which he took is of the same character, being a claim for the NES entitlement for which ss 104 and 106 provide. With respect to the payment for the public holidays in which he was rostered off, Mr Rossato’s is for the payment for which the NES in s 116 of the FW Act provides. This character of Mr Rossato’s claims is made clear in the letter of demand from his solicitors of 2 October 2018. WorkPac’s submission that Mr Rossato is making a claim to be paid an amount in lieu of the relevant NES entitlements must be rejected.”

The Court’s interpretation appears to be that the regulation can only apply when a person makes a claim to be paid an amount in lieu of one or more of the relevant NES entitlements.  As Rossato was seeking payment of NES entitlements, not payments in lieu of the NES entitlements, the ability to offset the casual loading is not relevant.

This is a surprising outcome as the regulation was understood to apply where an employee has been classified as a casual employee during all or part of the employment period, and had clearly been paid a casual loading to compensate them for not receiving various NES entitlements.

Take-away

Although an employee may be labelled a casual employee under a contract of employment, where an employee is found to be a permanent employee for the purposes of the Fair Work Act or a relevant industrial instrument, the employee is likely to be entitled to paid leave entitlements in accordance with the Fair Work Act.  This will be the case unless the characterisation of the casual employment can be distinguished from WorkPac.

It is important for employers to remember that employment arrangements may change during the course of employment.  While what is agreed at the commencement of employment is a factor to be considered in the characterisation assessment of casual employment, employers must continually assess to ensure the characteristics do not start to reflect those of an ongoing permanent employee.

Our tips following the Rossato decision

• Immediately undertake an assessment of your casual employment arrangements – in particular, you should be assessing whether your casual employees have regular and predictable arrangements. If you have casual employees that fit this description, or you are unsure whether the relationship has risk, seek advice.
• If you have casual employment contracts, they should be reviewed by an employment law expert to ensure they contain the necessary clauses to mitigate your risk of a similar claim;
• You should seek advice regarding the structure of your pay slips for casual employees;
• Ensure you comply with Award casual conversion clauses (including assessing whether the relationship has risk and obtaining advice).