Under the Fair Work Act, and under various Modern Awards, “casual” employees are not entitled to paid annual leave, compassionate leave, personal/carer’s leave and public holiday pay. The Full Federal Court has recently handed down a landmark decision on the entitlements of some workers who were labeled by their employer, and paid by their employer, as “casual” employees, to those benefits. It is clear from the decision that merely calling an employee a “casual” and paying the employee the casual loading is not determinative of the proper classification, and that some so-called “casual” employees are entitled to the benefits of leave and pay that apply to employees other than casual employees. In its decision, WorkPac Pty Ltd v Rossato, the Full Federal Court upheld an earlier judgment involving the same employer but a different employee (WorkPac Pty Ltd v Skene (“Skene”)), which determined that a casual employee is an employee who has “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.” The latest decision overturns the widely held belief that payment of the casual loading justifies the absence of these leave entitlements.

Mr Rossato was employed by WorkPac as a casual employee over a period of three and a half years. Mr Rossato claimed that he was not truly a casual employee despite being employed as and being paid as a casual employee, relying on the previous Federal Court judgment in Skene. Mr Rossato claimed that he was entitled to paid annual leave, paid personal/carer’s leave, paid compassionate leave and public holiday pay entitlements pursuant to both the Fair Work Act 2009 (Cth) (“FW Act”) and the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (“the Enterprise Agreement”). In response to his claim, WorkPac brought an action in the Federal Court for a declaration that Mr Rossato was a casual employee for the purposes of the FW Act and the Enterprise Agreement and therefore not entitled to such benefits. The Full Court unanimously held that Workpac was not entitled to the declaration and that Mr Rossato was entitled to his claimed benefits, and that he did not have to offset those benefits by the amount of the casual loading he had been paid over the course of his employment.

Mr Rossato had been employed pursuant to six separate contracts of employment, all of which had stipulated that he was a casual employee. The Full Court confirmed the definition of a casual employee espoused in Skene, as an employee “who has no firm advance commitment from her or his employer to continuing and indefinite work according to an agreed pattern of work”. WorkPac contended that the assessment of whether an employee was a casual employee should be primarily based on the construction of express contractual terms, while Mr Rossato contended that the contract between himself and WorkPac was not wholly in writing, and the question must be answered by a process of “characterisation of all of the features or facts of his employment”. The Full Court agreed with Mr Rossato’s submission, finding that an employment relationship is dynamic and a worker’s casual status must be ascertained by examining the course of dealing between employee and employer.

In defining a “firm advance commitment”, the Court noted that the commitment is reciprocal. An employee must have “continuing and indefinite availability for the performance of work according to an agreed pattern of work”, whilst an employer must have “continuing and indefinite work according to an agreed pattern of work”. The Court also noted that a firm advance commitment may be express or implied.

The Full Court held that where there are irregular work patterns, discontinuity of work, unpredictability of work, work dependent on specific demand and intermittency of work, it is likely that there is an absence of a firm advance commitment and an employee is a casual worker. Further, an employee’s capacity to elect as to whether she or he will work a certain shift suggests an absence of a firm advance commitment. A short notice period may also indicate irregular employment and the absence of a firm advance commitment.

In all six contracts, the Full Court determined that there was no indication that Mr Rossato was advised by his employer before each period of shifts what days he was required to work, nor was he required to frequently check for changes in the roster. The Full Court did find it significant that the system of work operated by his employer involved planning shifts weeks in advance which created a continuous pattern of work for Mr Rossato. Although Mr Rossato had the ability to cancel shifts, the Full Court noted that this ability was not unconstrained, as Mr Rossato would be liable for damages under his contract. The default position was that Mr Rossato would perform the agreed shift arrangements. Although the Court found that the presence of the term “casual” in the contract is a relevant factor in deciding whether there was a firm advance commitment, it was not determinative.

As such, the Full Court concluded that Mr Rossato was neither a casual under the Fair Work Act, nor a “casual field team member” under the Enterprise Agreement,  but rather a permanent field team member. As a result, Mr Rossato was entitled to be paid annual leave, personal/carer’s leave, compassionate leave and public holiday pay pursuant to the National Employment Standards in Part 2-2 of the FW Act as well as under the Enterprise Agreement.

In relation to WorkPac’s contention that Mr Rossato was compensated for his lack of leave entitlements with a 25% casual loading, the Full Court noted that an obligation to provide leave entitlements is not discharged by providing a substitute. The Full Court held that a failure to provide these entitlements would contravene both the FW Act and the terms of the Enterprise Agreement, even if Mr Rossato had accepted the substitute of 25% casual loading. The Full Court also rejected WorkPac’s argument that Mr Rossato’s weekly payments “set-off” the debts WorkPac owed to Mr Rossato in regard to his leave entitlements, noting that the casual loading payment could not be seen as lawfully discharging these entitlements.

WorkPac also made a claim to restitution of the loading, seeking a declaration that it was entitled to the difference paid between the casual rate it paid to Mr Rossato and the permanent rate paid to permanent field team members, or in the alternative, the casual loading applied to Mr Rossato’s hourly rate. Although the Full Court found that the casual loading was identifiable, they found that it could not be regarded as severable because it was subsumed into the rate WorkPac paid Mr Rossato. The Full Court also determined that the casual loading was not paid under a mistake, noting that if there was any mistake made, it was WorkPac’s mistake to frame Mr Rossato’s employment as casual. Thus, WorkPac’s claim for restitution failed.

The Morrison Government and the Attorney-General have signalled that they will consider legislative options in light of this decision. There had been an amended Regulation (2.03A Claims to offset certain amounts) introduced following the earlier Skene decision, but it is clear from the decision in Rossato that the Regulation is not effective to deal with the issue. As the law currently stands, employers must be cautious with classifying their employees as casuals even if it is the term stipulated on their contract. Employers must look beyond the classification given in the contract and enquire as to whether there is a firm advance commitment by both the employee and employer to a continuous and indefinite pattern of work. If so, the person will not be a “casual” employee and employers must ensure they account for relevant leave entitlements or be in breach of civil penalty provisions of the FW Act. With some threatened class actions already foreshadowed, an employer who employs any employees on the basis that those employees are “casual” employees should take urgent steps to review the historical position and their contracts of employment for future employees so as to avoid being caught up in significant claims seeking penalties for breaches of the Act and any relevant Award, as well as claims for underpayment of wages.

If you employ casual employees, this decision may have implications for your business. Please contact our Harmers team on +61 2 9267 4322 if you require legal advice.