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With a 1025 paragraph judgement and an appeal imminent, the Full Bench of the Federal Court of Australia have recently published their reasons for judgement in the matter of WorkPac Pty Ltd v Rossato  FCAFC 84 (“WorkPac v Rossato“). The decision – considered controversial by many – has employers concerned about their accountability to employees if they are found to have misclassified their employment as “casual”. If you are an employer with casual employees, or are considering taking on casual employees in the future, it is crucial to understand what was decided in this case and how it could impact the way you engage your employees.
Rossato was employed by WorkPac, a labour hire company that focuses on the provision of employees in the mining industry. Between 2014 and 2018, Rossato worked as a “Casual [Field Team Member]” under six consecutive employment agreements at two mines in the northern part of the Queensland Bowen Basin.
Rossato sought to prove that although he was employed by WorkPac on a “casual” basis, he was actually a permanent employee during his employment and could therefore claim unpaid permanent employee entitlements (such as annual leave) (“Permanent Entitlements”).
What are the Considerations for Determining if an Employee is Casual?
The predominant consideration used to determine that Rossato was not a “casual” employee was the “firm advanced commitment” test. This test asks: does the employee have a firm advance commitment from their employer to “continuing and indefinite work according to an agreed pattern of work”? If they do, their employment is not “causal”.
What was Decided in Workpac V Rossato?
Briefly, it was decided in WorkPac v Rossato that:
- Despite Rossato’s classification and treatment as a “casual” employee by WorkPac for the duration of his employment, he was:
- an employee “other than [a] casual employee” for the purposes of the paid annual, carer’s and compassionate leave, and public holiday pay provisions of the FairWork Act 2009;
- a “Permanent [Fulltime Team Member]” for the purposes of the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (being the relevant enterprise agreement) (“the Enterprise Agreement”); and
- entitled to restitution for the relevant unpaid Permanent Entitlements.
- WorkPac was not entitled to “set-off” extra payments made to Rossato throughout his employment (amounts they claimed were “casual loading” or extra payments made to Rossato in lieu of Permanent Entitlements) against the amounts the court found to be owing to Rossato for unpaid Permanent Entitlements.
- WorkPac was not entitled to claim the “set-off” amount mentioned in point two above through the contractual concepts of “failure of consideration” or “mistake”.
The Double-Dip Effect
Point two above is the most concerning for employers, creating what appears to be a “double-dip” effect for employees claiming Permanent Entitlements for being misclassified as “casual” during their employment. This is because the purpose of “casual loading” payments is to compensate causal employees for not being able to claim Permanent Entitlements. Therefore, an employee being awarded Permanent Entitlements whilst simultaneously being allowed to keep any causal loading payments previously provided by an employer is seemingly a “double-dip”.
In this case, Rossato was able to successfully claim against WorkPac for unpaid Permanent Entitlements without the court taking into consideration any extra payments claimed to be made to Rossato on account of being a casual employee.
Why Workpac was Not Able to “Set-Off” Any Extra Payments?
WorkPac sought to rely on the concept of “set-off”. In some circumstances, this concept has allowed employers to have the amount they owe an employee for unpaid permanent employee entitlements reduced by taking into account casual loading payments the employee was receiving during their employment. However, it must be clear that the extra amount paid to an employee was in lieu of an award obligation (such as Permanent Entitlements).
So why did the court not accept WorkPac’s claim to have Rossato’s casual loading set-off against his award of Permanent Entitlements? Although not the only reasons provided, the following were notable in the judgement:
- The Enterprise Agreement was the only instrument related to Rossato’s employment that dealt with the allocation of casual loading for those employees who were classed as a “Casual [Field Team Member]”. Rossato was previously found not to be a “Casual [Field Team Member]” under the Enterprise Agreement. Therefore, the court found that no part of Rossato’s previous earnings were specifically allocated to casual loading and WorkPac had no basis for setting off any part of Rossato’s previous earnings against his award of Permanent Entitlements.
- Rossato’s pay slip did not show any separate amount being paid to him in lieu of Permanent Entitlements.
- The casual loading payments were not made to Rossato at the times his Permanent Entitlements would be owing. For example, leave entitlements only become due and payable when an employee uses their leave or have unused leave at the end of their employment. The extra amounts paid to Rossato (that WorkPac claimed were “casual loading” payments) were actually paid systematically as an increase in Rossato’s pay.
- Regulation 2.03A of the FairWork Regulations 2009 (which is the legislative source of the concept of “set-off”) does not apply because Rossato was seeking payment of his actual Permanent Entitlements, and not an amount “in lieu” of these entitlements. This regulation provides that the employee must be claiming an amount “in lieu” of their Permanent Entitlements for their employer to have “casual loading” payments taken into consideration. The application of this regulation in WorkPac v Rossato has brought into question the utility of this regulation and has increased the call from employer groups for reform.
What does this Decision Mean for Employers?
Even though WorkPac has confirmed it will be seeking to appeal this decision to the High Court of Australia, employers should not be complacent. WorkPac v Rossato has made it clear that employers are not always protected by the concept of “set-off” if they mis-classify a permanent employee as “casual”.
The consequences for employers (even if the misclassification was unintentional) can be costly, with the Australia Industry Group predicting that employers could be exposed to approximately $14.2 billion in similar claims should the decision stand. Given the current financial hardship many employers are experiencing due to COVID-19, employers should act fast in reviewing their current arrangements with casual employees. For the time being, employers’ concerned about this decision should review how the concept of “casual loading” is expressed in their employee’s relevant award/enterprise agreement and whether their employment contracts require amending to ensure certainty with the allocation of “casual loading” amounts.
It is important to seek specific advice regarding your circumstances as this fact sheet provides general information only and does not constitute legal advice.
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