The recent Federal Court case of Workpac v Rossato has further strengthened the position of casual workers seeking entitlements usually applied only to permanent employees.
Casual employment and the risks associated with incorrect classification have been well documented over the past few years as a result of the decision Skene v WorkPac Pty Ltd (the WorkPac Decision) whereby Mr Skene, who was supposedly employed on a casual basis, was found to be employed on a permanent full-time basis and was entitled to an annual leave payment upon termination of his employment (further information on this decision can be found here).
On 20 May 2020, the full Federal Court of Australia handed down a further decision pertaining to the classification of a “casual” WorkPac employee – WorkPac Pty Ltd v Rossato [2020] FCAFC 84.
Facts
Mr Rossato was employed by WorkPac on a casual basis between the period of July 2014 and April 2018 under six consecutive employment contracts. Upon the cessation of his employment, Mr Rossato sought declarations from the Court that his employment was akin to a permanent employee and therefore that he was entitled to additional entitlements.
WorkPac sought declarations, amongst others, that Mr Rossato could not make claims with respect to paid annual leave, personal/carer’s leave, and compassionate leave entitlements under the National Employment Standards as he was a casual employee within the meaning of sections 86, 95 and 106 of the Fair Work Act 2009 (Cth).
If this argument was to fail, WorkPac alternatively sought declarations that if Mr Rossato was found to be a permanent employee, that they could offset any entitlements against what Mr Rossato had received by way of casual loading on the basis of mistake and/or partial failure of consideration.
Outcome
After considering the pertinent facts, the Court found that Mr Rossato was actually a permanent employee and therefore should have been afforded a number of additional entitlements throughout the course of his employment with WorkPac. The Court found that the parties had agreed on employment for an indefinite duration which was stable and regular which was evident in each of Mr Rossato’s six contracts.
The Court also found that WorkPac was not entitled to offset any entitlements against Mr Rossato’s hourly rate as there was no relevant:
- mistake or failure of consideration; and/or
- connection between the payment received by Mr Rossato and the entitlements that he was now seeking.
Accordingly, the Court ordered that Mr Rossato was entitled to payment for annual leave, personal/carer’s leave, compassionate leave and payment for public holidays in addition to any casual loading he had previously received.
Regulation 2.03A of the Fair Work Regulations
After the WorkPac Decision, Regulation 2.03A was introduced by the Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) which commenced on 18 December 2018 (the Regulation).
In essence, the Regulation provides that in certain circumstances, an employer is able to offset entitlements against a payment of casual loading. The pre-requisites to be satisfied in order to rely on this Regulation include:
- a person is employed as a casual employee; and
- the employer pays the person casual loading that is clearly identifiable as an amount paid to compensate the person for not having one or more relevant NES entitlements; and
- during all or some of the employment period, the person was in fact an employee other than a casual employee for the purposes of the National Employment Standards (i.e. a permanent employee); and
- the person makes a claim to be paid an amount in lieu of one or more of the relevant NES entitlements.
The Court determined the Regulation did not apply in Mr Rossato’s case as “none of Mr Rossato’s claims to which WorkPac’s proceedings are directed is a claim to be paid an amount “in lieu of” an NES entitlement. To the contrary, Mr Rossato seeks payment of the entitlements conferred by the NES.”
Takeaways
As demonstrated in both of the WorkPac decisions, the task of correctly classifying employment can be a difficult and costly one for an employer.
Accordingly, we would recommend that employers:
- undertake an urgent assessment of employment contracts and payment arrangements to ensure there is a clear connection between the casual loading paid to casual employees and the entitlements being offset due to the potential to rely on the Regulation; and
- undertake an analysis of potential underpayments to identify risk and take steps now to mitigate that risk (if any).
If you have any questions or concerns regarding the classification of your employees, or the classification of your own employment, please do not hesitate to reach out to our Workplace Team.
WorkPac Pty Ltd v Rossato [2020] FCAFC 84, at 944.
The $55 million mistake! Decision highlights need for strict drafting compliance