The decision of the Full Court of the Federal Court in WorkPac Pty Ltd v Rossato  FCAFC 84 throws into sharp focus some of the potential pitfalls associated with engaging employees on what purport to be casual arrangements but which subsequently turn out to be permanent employment. As such it has important financial, legal and industrial implications for many Australian businesses.
Between July 2014 and April 2018 Mr Robert Rossato was engaged by WorkPac Pty Ltd to work at two coal mines in Queensland.
Over that period he was engaged under a series of six separate employment contracts. Some of these contracts differed as to matters of detail but all purported to create a relationship of casual employment. This was reflected in the fact that Mr Rossato was paid a ‘casual loading’ of 25% in accordance with the relevant industrial instruments.
The casual loading was expressed to be in lieu of Mr Rossato’s entitlements in relation to annual leave, personal leave, notice of termination and redundancy pay. It also included a payment in recognition of the ‘itinerant nature of casual work’.
Mr Rossato worked on the basis of rosters provided by his employer and utilised at the mine, worked on a ‘drive-in-drive-out’ basis and, whilst at the various mine sites, lived in free accommodation provided by the mine operator.
Mr Rossato retired from work in April 2018. Several months’ later lawyers acting on his behalf wrote to WorkPac claiming payment in respect of annual leave which he had not taken over the period of his employment with the Company, together with periods of personal and compassionate leave that had been taken by him over that period.
WorkPac rejected these claims and initiated proceedings in the Federal Court. Unusually, the matter was heard by a three-member Bench.
The issues before the Court
In the Federal Court, WorkPac’s principal line of argument was that Mr Rossato was a casual employee and had received the casual loading in lieu of the claimed entitlements. Failing that, WorkPac argued that it could either the recover the money it had paid to Mr Rossato on the mistaken assumption that he was a casual employee, or that it could apply the money it had paid to Mr Rossato by way of casual loading against any sums owing in respect of annual leave, personal leave and compassionate leave.
WorkPac argued that it could do this on a number of grounds, including that:
- the loading had been paid on the basis of a mistake as to the character of Mr Rossato’s employment;
- it had not received contractual ‘consideration’ for the payment of the loading;
- the loading could be ‘setoff’ against the entitlements being sought by Mr Rossato because it had been paid in lieu of those entitlements; and
- the payment of the loading could be applied and offset against any claims Mr Rossato might have under the National Employment Standards by force of regulations that had been introduced in response to an earlier Federal Court decision – also involving WorkPac - on the same issue.
Mr Rossato not a casual employee
All three members of the Court agreed that Mr Rossato was not a casual employee in the requisite sense.
Essentially this was because WorkPac was unable to show that there was no ‘firm advance commitment’ to continuing employment for Mr Rossato. To show that would have required that there be ‘irregularity, uncertainty, unpredictability, intermittency and discontinuity in the pattern of work’. These elements were not present in Mr Rossato’s case. Indeed on all five counts, the opposite was the case.
Loading could not be offset
All three members of the Court also rejected all of WorkPac’s arguments to the effect that it could re-apply the money it had paid to Mr Rossato by way of casual loading against any sums owing in respect of annual leave, personal leave and compassionate leave. It also rejected WorkPac’s arguments that it was entitled to restitution on grounds of mistake or a failure of consideration for the loading paid.
The reasons for these findings were somewhat technical in character but in essence they turned on the fact that there was no ‘mistake’ in the legal sense of that term, nor evidence of mistake being the cause of the payments it made.
The arguments relating to the application of the funds failed because the purpose for which the loading was paid was different in character from the purposes for which WorkPac sought to apply the funds.
The regulation introduced to address the issue of ‘double dipping’ was ineffective for that purpose as it only addresses payment in lieu of an entitlement under the NES, whereas what was claimed in the proceedings was the actual entitlement under the NES (i.e. payment of leave on termination), and did not seek to alter the existing principles of ‘set off’ in any event.
What does it all mean?
The decision of the Full Court has been greeted with consternation by many business groups and media commentators. There have been calls for effective legislative change to prevent ‘double dipping’ by workers who receive a casual loading and the entitlements for which that loading is meant to be a substitute.
There is no doubt that the decision in Rossato has potentially significant adverse implications for employers in many sectors of the economy.
It can confidently be assumed, for example, that litigation funders, plaintiff law firms and/or trade unions will be carefully weighing up the possibility of pursuing class actions against employers who have significant numbers of employees who have worked regular and systematic patterns of hours over extended periods, despite their being characterised and paid as casuals.
Furthermore, none of the members of the Court provided any clear guidance as to how WorkPac, and any other employer in a similar position, could re-arrange matters so as to ‘set off’ or ‘re-apply’ loading already paid against leave and other entitlements under the Fair Work Act and/or relevant awards and agreements.
It must also be recognised that there may not be any quick and easy legislative ‘fix’ to the problem highlighted by Rossato – especially in relation to loadings already paid and entitlements already accrued. This is partly for political reasons, and potentially also because of constitutional restrictions on acquisition of property without compensation.
That said, it is important to keep the matter in perspective. In particular:
- It should not necessarily be assumed that all employees who have been categorised as casuals on a long-term basis will be able to establish that they are in fact continuing employees, rather than ‘true’ casuals. As the members of the Court in Rossato were at pains to point out, this is a question that will turn on the fact of each case and not all ‘fact-situations’ will be as clear-cut as in Rossato; and
- employers who wish to engage employees on a casual basis moving forward can do so by organising their workforce in such a way that employees who are characterised as casuals truly are casuals rather than continuing employees. The former are entitled to a casual loading in lieu of leave entitlements etc, whilst the latter are entitled to accrue leave entitlements but not to receive a casual loading.
Finally, it is also worth noting that the decision was handed down at a time when there is a sharp ‘compliance’ focus on the workplace practices of employers. Accordingly, it would be prudent for businesses to undertake a review of their model for engaging casual employees in light of the ruling and develop options for mitigating any ongoing legal and industrial risks, whilst keeping a close watch on external developments in the Parliament and the Courts.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.