Last week, the Full Court of the Federal Court of Australia handed down the decision in WorkPac Pty Ltd v Rossato  FCAFC 84 dismissing WorkPac's application for a declaration that Mr Rossato was a casual employee and instead finding that Mr Rossato was a permanent employee of the labour hire company. As a result, the Full Federal Court determined that Mr Rossato had entitlements under the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (FW Act) and the relevant Enterprise Agreement; being paid annual leave, paid personal/carer's leave, paid compassionate leave, and payment for public holidays.
This is an important decision for employers who engage casuals, whether directly or as a host employer. Pending any intervention by the Federal Government or appeal to the High Court, employers should now carefully review their casual employment arrangements, update the terms of their casual contracts, and revisit their arrangements with labour hire companies and their workers. In particular:
- Employers should review their casual arrangements with a view to determining whether some other form of engagement is more appropriate - including part time and fixed term/seasonal arrangements.
- Assuming casual engagement is still appropriate, specific attention should be given to the employee's written contract to ensure that the 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.
- We recommend employers include a statement in their casual contracts to the effect that if the employment is subsequently determined not to be casual employment, the employer is entitled to repayment of the casual loading.
- Regular reviews of casual arrangements should be conducted - at least once every 12 months - to assess the likelihood of the employment being a "firm advance commitment" of employment. Many employers are already undertaking such reviews as part of casual conversion requirements in Modern Awards and Enterprise Agreements.
- In respect of casual employees engaged through a labour hire company, clients should review their commercial contracts to ensure they provide sufficient protection from claims from the labour hire company and workers for underpaid amounts. If a labour hire employee could be said to have a "firm advance commitment" of employment, the host employer should review whether an alternate form of engagement should be considered.
"Firm Advance Commitment"
WorkPac submitted that casual employment is found where there is an absence of firm commitment as to the duration of the employee's employment or the days/hours the employee will work. It argued that the presence or absence of such a commitment should be determined by reference to the terms of the written employment contract and without reference to other matters, such as the way the contract operates.
The Full Federal Court assessed each of Mr Rossato's six employment contracts and relied on the following matters in finding that Mr Rossato had a "firm advance commitment" as to the duration of the employment:
- Under the terms of Mr Rossato's first contract (second and third contracts were in similar terms) the "Length of Assignment" was 6 months but the contract also stated "This may vary and is a guide only."
- The extended nature of the employment was also suggested by the term of the first contract, which provided that Mr Rossato would serve a six month minimum qualifying period. On this basis, the Court found that Mr Rossato had not been offered short term temporary employment, "a characteristic which may have supported an absence of a firm advance commitment."
- Mr Rossato's contract provided for work to be allocated to him by a roster and performed in accordance with the pattern of work required by the roster. The roster did not specify the length of each shift, but its continuous alternating day/night shift arrangement was found to be demonstrative of at least 12 hour shifts, an 84 hour shift cycle and a 42 hour working week.
- Mr Rossato was told that a "standard work week" would be 38 hours and that additional hours may be worked under his rostered arrangements.
The Court found that Mr Rossato's working conditions were intended to conform with the maximum weekly hours provided for in the NES. and that when his employment contracts "spoke of ordinary hours and standard work weeks, those documents were referring to the ordinary hours or standard work week of employees working full-time hours.." The working of standard ordinary hours for full time employees in accordance with a pattern of work fixed by a shift roster was found to be a kind of employment which is clearly "other than casual" within the meaning of the NES leave provisions in the FW Act. The Court found that work that is "regular, certain, continuing, constant and predictable" is indicative of a "firm advance commitment."
Other characteristics relied on by the Full Federal Court to find Mr Rossato had "regular, continuing and predictable work" and a "firm advance commitment" included:
- The capacity of WorkPac to stand-down Mr Rossato without pay in circumstances of a strike, breakdown, or any work stoppage for any cause for which WorkPac could not be held reasonably responsible;
- That Mr Rossato could not elect whether or not to perform (without just cause) the shifts allocated to him; and
- That Mr Rossato was paid a flat hourly rate of pay and his contracts, objectively construed, did not provide a separate casual loading. For example, the fifth and sixth contracts provided that the "flat rate of pay may include.casual loading." The fourth contract did not make any reference to a casual loading.
The description given by parties as to the nature of their relationship was found by the Court to be relevant but not conclusive. The Full Federal Court found that WorkPac and Mr Rossato had agreed on employment that had a duration which was indefinite, stable, regular and predictable. As such, a "firm advance commitment" was evident in each of Mr Rossato's six employment contracts and on this basis it determined he was not a casual employee.
WorkPac's claims for restitution
WorkPac sought declarations that, in the event the Full Federal Court found that Mr Rossato was not a casual employee, it was entitled to restitution of the casual loading which was included in the hourly rate paid to Mr Rossato.
WorkPac submitted that it had paid the casual loading to Mr Rossato because he was a casual employee and if this was found not to be the case, it had, as a result been mistaken about the characterisation of the employment. The effect of allowing Mr Rossato to keep the casual loading paid as a result of this mistake would, it submitted, result in Mr Rossato being unjustly enriched. The Court however found by paying Mr Rossato his contracted hourly rate, there was no relevant mistake
In the alternative, WorkPac sought restitution on the basis that the casual loading formed a distinct and severable part of Mr Rossato's wages in respect of which there had been a failure of consideration on his part. The Court however found that the hourly rate appeared to be based on WorkPac's own assessment of the overall amount it had to pay in order to retain Mr Rossato. The casual loading was found to have been "subsumed and lost independent significance," thus WorkPac did not establish an identifiable severable portion of its payments which could found a claim for restitution.
WorkPac submitted that because it had paid Mr Rossato more than what was required by the terms of the relevant Enterprise Agreement with the intention of not then also providing him any entitlement to annual leave, personal leave or compassionate leave or payment for public holidays, it was, at common law, entitled to "set off" those higher amounts against any entitlement Mr Rossato had to paid leave or payment for public holidays.
The Court examined each of Mr Rossato's contracts to consider whether, as is required for either common law or contractual set off, there was a sufficiently close correlation between the agreed purpose of the contractual payments made to Mr Rossato and the nature of the leave obligations. The Court also held that particular NES entitlements were for the taking of leave which meant the entitlement could not be satisfied by substituting the taking of leave with a payment.
Why didn't Regulation 2.03A fix the issue?
Finally WorkPac claimed the amounts paid to Mr Rossato on the basis that he was a casual employee under regulation 2.03A of the Fair Work Regulations 2009 (Cth). Regulation 2.03A was an amendment to the Regulations in 2019 intended to address attempts at "double dipping" by casual employees following the decision in WorkPac v Skene, where Mr Skene's regular predictable working arrangement was held to demonstrate his status as a permanent employee, despite his contractual terms stating otherwise.
In Rossato, the Court found Regulation 2.03A did not apply because Mr Rossato was not making a claim to be paid an amount "in lieu of" one or more of the relevant NES entitlements, rather Mr Rossato wanted payment of the entitlements conferred by the NES.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.