21 May 2020

Permanent confusion about casuals

This article was written by Jamie Wells and Seone Woolf.

Uncertainty continues to haunt casual employment after WorkPac lost its bid to have the Federal Court reconsider the Court’s earlier Skene decision[1], viewed through the lens of a different labour hire worker.

Despite WorkPac’s efforts to distinguish the work arrangements applying to workers Skene and Rossato, the Court came up with the same answer in Rossato[2].

WorkPac’s Case

WorkPac had previously lost Skene on the basis that the parties in that case had a firm, advance commitment to continuing, indefinite work. While the means of establishing the commitment are not closed, the absence of a firm, advance commitment might be apparent when there is evidence of irregularity, uncertainty, discontinuity and intermittency of work or work patterns.

It was not in dispute that the requisite commitment existed in relation to Mr Skene making it impossible for WorkPac to maintain its argument that Mr Skene was a casual.

Given the significance of casual employment in the economy, Skene set the cat among the pigeons with concerns that employers would be exposed to massive liabilities under the National Employment Standards (NES) and enterprise agreements, despite employers acting in accordance with well-entrenched custom and practice.

Rossato was an attempt to have the issue reconsidered, with the benefit of different facts and legal argument. As with Skene, Rossato involved a dispute over the application of the NES and the applicable enterprise agreement. No concession was made this time, in relation to any firm, advance commitment to continuing, indefinite work. The case was put differently by WorkPac, on the basis that the worker’s status had to be determined at the time the written employment contract was made, and not through the prism of how the contract was ultimately performed over time.

Additionally, WorkPac argued that if Mr Rossato was a casual employee, WorkPac was entitled to restitution of that part of the hourly rate attributable to a casual loading, or to set off that casual loading against Mr Rossato’s entitlement to annual leave, personal leave, compassionate leave and public holiday pay.

What did the Full Federal Court say in Rossato?

The members of the Court gave separate judgments. There was general agreement on the outcome, to the effect that:

  • Mr Rossato, like Mr Skene, was not a casual employee and was therefore entitled to the various employment benefits under the NES and the applicable enterprise agreement;
  • WorkPac was not entitled to restitution of any amount paid to Mr Rossato, even if the rate included a casual loading;
  • WorkPac could not set off that loading against any of those employee entitlements.

However, there still appear to be differing opinions on the key issues, making it difficult to extract a clear, consistent approach on which employers and employees can rely. 

Casual v Permanent

The approach taken in Skene suggested that the assessment could consider the way the employment played out over time, as well as the contract terms agreed at the outset. WorkPac argued that this was not the correct approach, and that the question should be decided by characterising the contract from inception.

Ultimately, this distinction was not critical, as the Court decided that even on the contractual assessment, Mr Rossato was not a casual. However, it seems likely that the Court would not have limited its assessment to the contracts, had that exercise told a different story. In that respect, it seems unlikely that employers will be able to assume the manner of performance of the contract will be ignored in any future dispute. The Court appeared open to the view that:

  • later events might in fact demonstrate a variation of the contract; or
  • later events were relevant, because the assessment was not strictly about the contract, but about the wider employment relationship.

In finding that Mr Rossato was not a casual, the Court was impressed by a range of significant matters, including:

  • a regular pattern of work without any meaningful mechanisms for Mr Rossato to accept or reject shifts at will;
  • pre-determined hours and patterns of work through long-term rosters;
  • use of free on-site accommodation by Mr Rossato during a roster cycle, suggesting he was expected to work as rostered;
  • language indicating a requirement to work was referenced in various parts of the employment arrangements;
  • dealings between the parties, over the course of a number of contracts and locations, suggested mutual assumptions of continuity.

Ultimately, Rossato does not shed much light on how the test will be applied in other situations. The factual matrix in each case will be decisive, and each employer’s challenge will be to identify features which distinguish their scenario from Skene and Rossato.   

Restitution

The Court refused to accept that the casual loading, included in the hourly rate, was paid by WorkPac by mistake, or as consideration which had totally failed.

The Court approached the restitution issue from different perspectives, including the challenge of proving that the rate of pay was fixed on the mistaken premise Mr Rossato was a casual. The Court could not rule out that the hourly rate merely reflected the market rate for guaranteeing Mr Rossato’s service. This might be an issue to resurface in other cases, where it is clear that the rate was set with a casual loading included for the specific purpose of addressing entitlements not enjoyed by casual employees. No direct evidence led by WorkPac on the point.

Set off

Similarly, set off was denied under the extremely narrow and restricted principles which have evolved in relation to the appropriation of payments to employees in the context of award or statutory entitlements.

In reality, the claim is not truly based on set off; rather, it is based on receiving credit for payments which have already been made by the employer towards a certain obligation.  As the argument goes, the employer should get credit for casual loading paid as compensation for various leave entitlements now being claimed by the employee as a permanent employee.

The Court declined to give WorkPac credit for the casual loading, for a range of reasons. However, at the heart of the Court’s concern was the notion that casual loading is not paid to employees towards or in satisfaction of those entitlements.  Rather, the loading is paid because the employee is clearly understood not to be entitled to those things. Additionally, the payment was said to be of a different character, being merely a monetary benefit, while paid leave also includes a right to paid absence from work. It is obvious that cashing out of entitlements by stealth was on the Court’s mind. However, in the end the employee’s claim in relation to those entitlements distils down to a monetary claim. It is difficult to see why this should not be taken into account in the final analysis.   

WorkPac also sought to rely on reg 2.03A of the Fair Work Regulations, a loosely worded mechanism to avoid double dipping in relation to casual loading paid to permanent employees. The Court found reg 2.03A easy to negotiate, and decided it had no application. One reason for rejection was that the language of reg 2.03A links the set off with claims “in lieu of” NES entitlements. Mr Rossato’s claims were said not to be “in lieu of” those entitlements; they were squarely based on the actual NES entitlements. Another reason was the curious language of the Explanatory Statement issued with reg 2.03A, to the effect that reg 2.03A was intended to be declaratory only. In other words, if no set off is available under the general law, reg 2.03A is not meant to create one. This was an unsatisfactory outcome identified by commentators at the time reg 2.03A was made and has now come home to roost.

On this interpretation, it is difficult to see any material application for reg 2.03A, applied literally on its express terms.

What next?

Despite the fact that Rossato involved a scenario similar to Skene, the Court delivered three separate judgments, with the reasons running for 1025 paragraphs (over 272 pages). While the members of Court were generally in agreement about the result, the underlying reasoning diverges on important issues.

As different fact patterns emerge in other scenarios, different conclusions may be reached as to an employee’s status. It is clear that, unless taken to the High Court, the framework for this issue to be resolved is now locked in. Unless the features of a particular relationship undermine the notion of a firm, advance commitment to continuing, indefinite work, it will be difficult for an employer to get a different result.

What also seems clear is that it will be difficult to run defences based on set off and restitution, given the comprehensive challenges set by the Court in Rossato.



[1] WorkPac Pty Ltd v Skene [2018] FCAFC 131

[2] WorkPac Pty Ltd v Rossato [2020] FCAFC 84

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