“A Firm, Advance Commitment” – Casual employment in a post-WorkPac Australia

Following the decision of WorkPac Pty Ltd V Rossato employers are encouraged to review existing casual employment contracts

On 20 May 2020, the Full Court handed down its decision in WorkPac Pty Ltd v Rossato [2020], finding that Mr Rossato, an employee labelled as a casual under six consecutive contracts with WorkPac Pty Ltd (WorkPac) was in fact an employee “other than a casual” for the purposes of the Fair Work Act 2009 (Cth) (the FW Act) and entitled to the benefits under the National Employment Standards and relevant enterprise agreement.

The Court further held that WorkPac was not entitled to set-off any increased wages it had paid to Mr Rossato under the assumption that he was a casual, and was likewise not entitled to any claim of restitution for those payments.

Key Principles

A summary of the key principles of the judgment is set out below –

  1. Whether an employee is a casual employee involves an examination of all features of the employment relationship. In other words, courts will look beyond the written terms of an employment contract.
  2. The essence of a casual employment relationship is the absence of a “firm advance commitment” between an employer and employee. This is discussed in more detail below.
  3. In the absence of clear express contractual provisions allowing for set-off payments, employers who have paid employees leave loading on the assumption the employee was a casual employee are not entitled to set-off those payments against that employee’s leave entitlements.
  4. Entitlements under the FW Act and enterprise agreements are given special significance. Employers who do not perform the obligations under the FW Act and enterprise agreements remain exposed to the civil remedy/penalty provisions under the FW Act.

Background

WorkPac, a labour hire company, employed Mr Rossato to act as a “product operator” at various mining sites of its host company Glencore. Mr Rossato’s employment with WorkPac ran from April 2014 to July 2018, during which time he signed six consecutive employment contracts. Mr Rossato was characterised under each of these contracts as a casual employee and WorkPac treated Mr Rossato’s employment as casual employment.

Mr Rossato received as part of his wage on average a 25% loading payment above the minimum pay payable under the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (the Enterprise Agreement). Mr Rossato was required to work in accordance with an allocated shift roster, with some shifts being assigned 7-months in advance.

On 2 October 2018, Mr Rossato wrote to WorkPac claiming that throughout his employment he was not a casual employee and was therefore entitled to payment for outstanding entitlements under the FW Act and the Enterprise Agreement. WorkPac applied to the Federal Court seeking declaration that, amongst other things, Mr Rossato was a casual employee.

The Court made several significant findings, each of which is considered below.

Casual employment under the FW Act – a “Firm Advance Commitment”

The Full Court in WorkPac re-affirmed that the decisive characteristic of casual employment is the absence of a firm advance commitment between employer and employee. This was described as the “essence of casualness”.

Put simply, if it can be shown that a firm advance commitment of employment exists between an employer and employee, that relationship will be described as “other than casual” for the purposes of the FW Act. Correspondingly, an absence of such a firm advance commitment will indicate a casual employment relationship. In determining this, courts will look at both the contractual terms and factual background of the relationship. The most relevant contractual terms being those dealing with employment duration and patterns or periods of work.

The key indicators of a presence or absence of a firm advance commitment are as follows –

i) Presence of a firm advance commitment

– Commitment to an agreed pattern of work
– Predictable working periods
– A roster of shifts allocated in advance.

ii) Absence of a firm advance commitment

– Irregular work patterns – (short notice periods are considered indicative of irregular work patterns)
– Uncertainty, discontinuity and intermittency of work
– Capacity of an employee to choose whether or not to work a shift requested by the employer
– A unilateral power of the employer to vary day-by-day the daily standard or ordinary hours that an employee would be allocated
– Offers of short-term, temporary employment.

WorkPac’s principal submission was that no firm advance commitment existed between it and Mr Rossato, and that because of this, Mr Rossato was a casual employee and unable to access the entitlements under the FW Act and Enterprise Agreement. The Court dismissed this claim instead finding that, on both the terms of the contract and the post-contractual conduct of the parties, a firm advance commitment did in fact exist. Factors most influential to this finding were that the Mr Rossato’s employment was subject to set ordinary hours according to a pre-determined roster, both of which indicated certainty and consistency of employment.

Set-Off Claim

WorkPac also ran a set-off claim. It argued that, because it had paid Mr Rossato roughly 25% above what he was entitled to under the Enterprise Agreement (the Loading Payments), it should be permitted to “set-off” those payments against any entitlement Mr Rossato was subsequently found to have.

In the absence of an express contract term giving WorkPac a right to set-off the Loading Payments, WorkPac relied on the general law principles to argue that the purpose of the Loading Payments were “closely correlated” with Mr Rossato’s entitlements under the Enterprise Agreement. This claim was dismissed, primarily because it would be inconsistent with the terms of the Enterprise Agreement which did not contemplate such an arrangement.

The Court further stated that, even if such an agreement was found to exist between the parties, WorkPac would nonetheless be in breach of the FW Act and exposed to the FW Act’s civil penalty provisions. The reason being that pre-payment of entitlements relating to annual leave and personal/carer’s leave are prohibited under the FW Act.

Restitution

Alternatively, WorkPac also submitted that it was entitled to compensation for the money it paid to Mr Rossato under the Loading Payments because, in part, those payments were made under a mistake. That mistake being that WorkPac misunderstood the true nature of Mr Rossato’s employment (i.e. that he was not a casual), and if it had known he was not a casual, it would never have made the Loading Payments.

This claim failed on two fronts. Firstly, because WorkPac could not show that it made identifiable and severable casual loading payments to Mr Rossato. And secondly, because WorkPac could not establish that the only reason it paid Mr Rossato the Loading Payments was because it understood him to be a casual. On this point, the Court found that, on the evidence it could also be said that the Loading Payments were made to attract and retain Mr Rossato as an employee. In other words, there was more than one reason why Mr Rossato was paid the Loading Payments.

FW Act Regulations

As a last resort, WorkPac sought to rely upon Regulation 2.03A of the Fair Work Regulations. This regulation was created as a means to prevent employees who were mistakenly assumed to be casual employees and paid a casual wage, from also seeking payment in lieu of the entitlements under the FW Act. This was held to have no application in the circumstances because Mr Rossato was not seeking payment “in lieu” of an NES entitlement.

Recommended Steps

The judgment will likely have far-reaching economic consequences for employers who engage casuals, particularly those businesses involved in the labour hire industry and/or those who perform work for host companies. Employers are encouraged to –

– Review current casual employment relationships and consider offering permanent positions to any casuals who have a predictable, certain and ongoing pattern of work.

– Speak to their lawyers about including an express term in contracts for casual employment stating the employee is to repay a specific portion of their agreed remuneration should the employer make an error in characterising the basis of the employment as casual.

– If an employee is to be paid a wage that incorporates leave loading, make it an express term in the contract of employment that the loading amount is paid as a result of the employee not receiving the entitlements under the National Employment Standards of the FW Act and the relevant enterprise agreement. This term should also be included on any wage slip the employee receives.

Author: James Remington