Are your casual employees actually permanent employees – and are they owed leave entitlements?

Earlier this month, the Full Court of the Federal Court handed down its decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84.

The Court found that Mr Rossato, who was employed by the labour hire company WorkPac as a casual, was in fact a permanent employee. Accordingly, Mr Rossato was entitled to annual leave, personal leave, and compassionate leave.

Despite Mr Rossato being paid a casual leave loading “in lieu” of leave entitlements, the Court found that WorkPac:

  1. was not allowed to “set off” leave loading previously paid to Mr Rossato against the unpaid leave he was entitled to as a permanent employee; and
  2. could not claim restitution for the amount of the leave loading, due to either a failure of consideration or a mistake by WorkPac.

Causal vs. Permanent

Mr Rossato was employed by WorkPac for approximately three and a half years. During this time, Mr Rossato:

  1. worked regular shifts (with seven days on and seven days off), and was provided the shift roster approximately seven months in advance;
  2. was employed for an indefinite duration;
  3. used free on-site accommodation when working rostered shifts; and
  4. could not be allocated work on demand or effectively reject an allocated shift.

Given those facts, the Court found that Mr Rossato was a permanent employee. Mr Rossato’s employment was stable, regular and predictable. 

The decision in Rossato confirms that casual employment arises where there is no “firm advance commitment” regarding the duration of an employee’s employment or the days and hours the employee will work. Casual employment is work which is unpredictable, irregular, intermittent, and uncertain.

Leave Entitlements

As the Court found Mr Rossato was “an employee, other than a casual employee”, he was entitled to annual leave, personal leave, and compassionate leave (pursuant to Sections 86, 95 and 106 of the Fair Work Act 2009 (Cth)).

WorkPac, however, was not entitled to either a “set off” or restitution of the casual leave loading paid during Mr Rossato’s employment and, accordingly, WorkPac was obliged to pay Mr Rossato the relevant leave entitlements in full.

The Court rejected WorkPac’s “set off” argument on the basis that the hourly rate Mr Rossato received during his employment did not have a “close correlation” with the leave entitlements Mr Rossato sought to be paid. Furthermore, there was no right under Mr Rossato’s employment contracts which gave give WorkPac the option for a contractual “set-off.”

In relation to WorkPac’s claim for restitution, the Court rejected this argument because there was no relevant mistake made by WorkPac or failure of consideration. The Court held that:

  1. the casual loading could not be severed from Mr Rossato’s total rate of pay, as it was subsumed into the higher rate which WorkPac considered it necessary to pay; and
  2. it could not be concluded that WorkPac’s “mistake” in categorising Mr Rossato as a casual employee was the reason he was paid the higher rate.

Next Steps for Employers

Given the Court’s decision, it may be the case that your company is liable to pay leave entitlements to long-time casual employees, even if those employees have been paid a casual leave loading.

We recommend a full review of your company’s causal employee arrangements (such as the nature of each casual’s roster) and casual employment contracts to reduce the risk of a claim being made by a (presumably) casual employee for unpaid leave entitlements.

Please contact our office if you require legal advice regarding the status of your company’s casual employees or a casual employee is making a claim against you.

Article written by Andrew Herzig.

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