Are you properly paying your Casual Employees?

By May 26, 2020 blogs, Employment, Legislation

May 2020

Are you properly paying your Casual Employees?  They may be entitled to sick leave, holiday leave and other entitlements.

Last week the full bench of the Federal Court of Australia handed down a decision confirming that if a casual employee is truly a permanent employee, then that employee is entitled to the same employee entitlements as a permanent employee.

Key Takeaways

  • Whether an employee is casual or not is determined by the employer’s continuing or on-going employment commitment (which the Court called the firm advance commitment).
  • The ‘firm advance commitment’ is assessed not only by the terms of the employment contract but also by all relevant facts surrounding the employment. The Court looks to the conduct of the parties and the substance of the relationship.
  • Even if you call an employee a causal, they may in fact be a permanent employee and entitled to sick leave, holiday leave and other employee entitlements.
  • Unless you properly record the payment you make to the employee for loading (based on classing them as a casual), you may not be able to off-set it against entitlements you owe that employee, if it is later found that they are in fact a permanent employee.
  • If a casual employee is receiving loading in lieu of the employment benefits, it must be clearly and separately recorded under the employment contract and separately identified in the payslip.

Overview of the Case

WorkPac Pty Ltd v Rossato [2020] FCAFC 84

Mr Robert Rossato was an employee of Workpac Pty Ltd (WorkPac) over the period from 28 July 2014 until 9 April 2018.  Mr Rossato claimed that he was not a casual employee and that WorkPac owed him unpaid employee benefits, such as annual leave, personal/carer’s leave, compassionate leave and public holiday pay entitlements under the Fair Work Act 2009 (Cth) (FW Act), and under an enterprise agreement made in accordance with the FW Act (known as the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (Enterprise Agreement)).

WorkPac commenced proceedings in the Federal Court of Australia seeking declarations that Mr Rossato was a casual employee under a written contract and at common law.  Alternatively, if Mr Rossato was not a casual employee, his salary included a casual loading of 25% in lieu of his entitlements under the FW Act or the Enterprise Agreement.  WorkPac also sought repayment of the casual loading paid to Mr Rossato as a payment by mistake or by way of set-off of the casual loading against Mr Rossato’s claim for employee entitlements.

The three members of the Federal Court gave separate judgements.  However, they all agreed that:

  • Mr Rossato was not a casual employee and was entitled to the employment benefits under the FW Act and the Enterprise Agreement;
  • WorkPac was not entitled to a repayment of any amount that it paid to Mr Rossato, even if his salary included casual loading; and
  • WorkPac was not entitled to set-off any amount for casual loading against any of the employee entitlements to which Mr Rossato was entitled, as a permanent employee.

Meaning of Casual Employee

The Court confirmed its decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene) that the test for classing an employee as a ‘casual employee’ must include a finding that the employee has no ‘firm advance commitment’ from the employer for any agreed pattern of work.  Additionally, the Court defined ‘firm advance commitment’ as an employer’s commitment to the employee for continuing or on-going indefinite employment.   The ‘firm advance commitment’ is to be assessed objectively, having regard not only to the terms of the employment contract, but also to all relevant circumstances surrounding the employment relationship as a whole, including the manner in which the relationship worked in practice.

In finding that Mr Rossato was not a casual employee, the Court considered the following:

  • the predetermined and regular patterns of work through long-term rosters;
  • no mechanism to effectuate an election to reject an allocated shift;
  • the fact that if Mr Rossato elected not to complete his roster, WorkPac reserved the right to recover costs against Mr Rossato;
  • the language in the contract and various employment arrangements indicating the requirement to work;
  • the use of on-site accommodation during the roster indicating the requirement to work as rostered; and
  • the dealings between the parties showing the mutual assumption that Mr Rossato would have continuity of employment.

Casual Loading

WorkPac argued that Mr Rossato’s salary included a 25% casual loading amount.

The Court did not accept that casual loading was included in the hourly rate, or that it was paid by mistake by WorkPac, or that there was no consideration given for the casual loading.  The reason for this was because the employment contract did not separately record that Mr Rossato’s hourly rate included casual loading, his payslips did not separately show any payment was in made in relation to employee entitlements, and if the casual loading was included in Mr Rossato’s hourly rate, then if the loading was subtracted from his hourly rate, his hourly rate would be less than the minimum hourly rate under the Enterprise Agreement.

In addition, the Court noted that there is a restriction under the FW Act against paying out annual leave and personal/carer’s leave during employment, because those employee benefits are provided to protect against loss of earnings at the time the employee needs to take leave from work.  Accordingly, paying out any loading in lieu of the employee entitlements for a permanent employee is an offence under the FW Act.

Implication of the Case

This case highlights the well established approach of Courts of characterising a legal relationship by reference to the substance of the relationship, rather than being constrained by what the parties themselves call the relationship.  The approach in characterising employment as either casual or permanent involves having regard to the overall relationship, including the conduct of the parties and the real substance and nature of the relationship.

This decision could have a massive impact on between 1.6 to 2.2 million regular casual workers, and could expose businesses to a liability of up to $8 billion.  If you are a business whose casual employees have “regular, certain, continuing, constant and predictable” employment, then those casual employees may now be entitled to the same employee entitlements as permanent employees, even if you call them ‘casual’ under their employment contract.

However, the Federal Government is considering whether it should change the law and could back any appeal to the decision to prevent what some people are calling “double-dipping” of entitlements.

CONTACT US

If you need further information or assistance with your employment disputes, please contact Craig Higginbotham at chigginbotham@teneolaw.com.au or on his mobile at 0402 126 222.

Craig Higginbotham and Richen Mojica

26 May 2020

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