In brief - Court concludes in WorkPac v Rossato that stable, regular and predictable work will represent a "firm advance commitment" and the payment of casual loadings and the express terms of a contract will not be sufficient to reverse such a conclusion
The controversial decision of the Full Court of the Federal Court in WorkPac Pty Ltd v Rossato  FCAFC 84 represents the current legal position on the definition of casual employment in Australia.
Employer groups are calling for urgent legislative change in response to the decision, to prevent double-dipping claims by casuals who had been paid 25% extra remuneration in lieu of the entitlements of permanent employees.
Legislative change is a possibility, with the Attorney-General, Christian Porter, announcing the decision "has immediate practical implications for the bottom line of many Australian businesses at a time when so many have taken a huge hit from the COVID-19 pandemic... Given the potential for this decision to further weaken the economy at a time when so many Australians have lost their jobs, it may also be necessary to consider legislative options."
Between 28 July 2014 and 9 April 2018, WorkPac Pty Ltd (WorkPac) employed Mr Rossato and supplied his labour to companies within the Glencore Group. Mr Rossato was employed under six consecutive contracts, during which WorkPac treated each employment as a casual employment and Mr Rossato as a casual employee.
WorkPac sought declarations in the Federal Court that Mr Rossato not be entitled to paid annual leave, personal/carer's leave, and compassionate leave entitlements under the National Employment Standards because he was a casual employee within the meaning of sections 86, 95 and 106 of the Fair Work Act 2009 (Cth) (the FW Act) or, as a casual employee, claim payment for public holidays under section 116 of that Act.
WorkPac also sought declarations that Mr Rossato could not claim corresponding entitlements under the applicable enterprise agreement (the 2012 EA) because he was a "Casual Field Team Member" (casual FTM).
WorkPac alleged Mr Rossato was a casual employee on that basis that a person is a casual when there is an absence of a "firm advance commitment as to the duration of the employee's employment or the days/ hours the employee will work."
Alternatively, if the Court concluded that Mr Rossato was not a casual employee and not a casual FTM, WorkPac:
- sought declarations that it was entitled to restitution of the casual loading which it claimed was included in the hourly rate it had paid to Mr Rossato. It sought that restitution on the basis of mistake and/or partial failure of consideration, or
- claimed it was entitled to set off the amounts of overpayment paid to Mr Rossato under the false belief that he was a casual, against any entitlements which Mr Rossato may be found to have become entitled
What was the outcome?
As the Federal Court observed in WorkPac Pty Ltd v Skene  FCAFC 131 (Skene), the central question to whether a casual employment relationship exists, is the absence of a "firm advance commitment", characterised by irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.
The Court concluded that the presence or absence of the "firm advance commitment" may be assessed by regard to the employment contract as a whole, including by considering:
- whether it provided for the employment to be regular or intermittent
- whether it permitted the employer to elect whether to offer employment on a particular day
- whether it permitted the employee to elect whether to work
- the duration of the employment
- the employee's capacity to be stood down without pay in circumstances of a strike, breakdown of machinery, or any stoppage of work
- the period of notice of termination of the employment contract
The Court found that WorkPac and Mr Rossato had agreed on employment of indefinite duration which was stable, regular and predictable such that the "firm advance commitment" was evident in each of his six contracts. Therefore, Mr Rossato under each of the contracts, was "other than casual" for the purposes of the FW Act and not a casual FTM under the 2012 EA.
The Court also held that WorkPac was not entitled to restitution of the casual loading which it claimed was included in the hourly rate it had paid to Mr Rossato.
Lastly, the Court did not find in favour of WorkPac setting off its overpayment to Mr Rossato, against the entitlements claimed by Mr Rossato as a permanent employee. This is because WorkPac failed to prove the existence of a close correlation between the agreed purpose of the contractual wage payments and the nature of the award obligation.
What is the line between casual and permanent employment?
In reaching its findings, the Court provided some guidance on the distinction between casual and permanent employment:
- As was the case in Skene (albeit under slightly different circumstances), the absence of a firm advance commitment as to the duration of an employee's employment or the days (or hours) of work is the essence of casualness.
- The key indicia of casual employment includes irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.
- Payment of casual employees on an hourly basis, will be of less significance in determining the presence/absence of a firm advance commitment, if all the employees are paid on an hourly basis.
- Despite mechanisms existing in a contract which contemplate some variability as to the actual hours of work to be allocated to an employee, where an arrangement can be construed as being an offer of continuing work to be performed according to an agreed pattern of full-time hours of work, together with an ambiguous or indefinite contract duration, it is indicative of a "permanent" employment relationship.
- Shorter notice is not traditionally consistent with regular or permanent employment.
- Contractual machinery, which provides an employee a right to refuse or choose between shifts, or gives an employee an opportunity to provide her or his service in response to a specific demand, is consistent with a casual employment relationship.
- The key indicators of a casual arrangement will commonly reflect the fact that, whilst employed, the availability of work for the employee is short-term and not-ongoing and that the employer's need for further work to be performed by the employee in the future is not reasonably predictable.
- Whether an employee is paid a casual loading is a relevant consideration. To effectively identify the loading, contracts of employment should specify which component of the rate of pay is allocated to a casual loading or monies in lieu of paid annual leave. However, these references will not be sufficient, if in reality the employment is for an indefinite duration with stable, regular and predictable work.
In such circumstances, an employee will not only be entitled to this casual loading, but also, annual leave, personal/carer's leave, and compassionate leave under the FW Act, or industrial instrument. Put simply, a "casual loading" is not sufficient to substitute a permanent employee's entitlements.
What should employers do in light of the WorkPac decision?
Unless overruled by the High Court or corrected by legislative change, the WorkPac decision represents the current legal position on the definition of casual employment in Australia for the purposes of certain entitlements.
Employers are encouraged to consider at least the following:
- Review your casual cohort: Regularly review your workforce to consider whether any long-term casuals are more appropriately classified as permanent employees. This may mean applying the casual conversion clauses already in modern awards or enterprise agreements.
- Educate internal HR and recruitment: Ensure those responsible for hiring staff within your organisation are aware of the casual employment indicia and the factors that would influence a genuine casual employee morphing into a permanent employee.
- Ensure enterprise agreements and contracts are clear about casuals: To reduce the risk of employees claiming they are not casuals, ensure contracts or enterprise agreements include a detailed definition of "casual employee".
- Separately identify the casual loading: Casual loadings should be separately identified in employment contracts and payslips and expressly stated that to be paid in lieu of paid annual leave and other entitlements.
- Set-off clauses: Review set-off clauses in contracts to endeavour to ensure they meet the specific needs in this complex area of law to increase the chance that casual loadings can be claimed back in the event of a challenge.
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.