On 20 May 2020, the Federal Court of Australia made a decision that solidifies and upholds the key principles enunciated in the landmark case of WorkPac Pty Ltd v Skene [2018] FCAFC 131.

This case again highlights the importance for employers to monitor the work patterns of casual employees to ensure their work hours are sufficiently uncertain that they do not become entitled to the paid annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays.

Facts

Mr Rossato was a qualified and experienced production employee in the open cut black coal mining industry. WorkPac is a labour hire company. WorkPac engages workers and provides their services to its clients who require labour. WorkPac specialises in the provision of labour in particular industries including in the black coal mining industry.

Between 28 July 2014 and 9 April 2018, Workpac Pty Ltd (“Workpac”) employed Mr Rossato (“Rossato”) and supplied his labour to companies within the Glencore Group. During this period, Rossato was employed under six (6) consecutive contracts.

Throughout his employments with WorkPac, Rossato worked as part of the production workforce at either the Collinsville Mine or the Newlands Mine. Like many other employees of WorkPac, his service was provided by WorkPac to Glencore to meet Glencore’s requirement for production workers at those coal mines.

Rossato’s contract provided for work to be allocated to him by a roster and performed in accordance with the pattern of work required by the roster. The roster did not specify the length of each shift, but its continuous alternating day/night shift arrangement was found to be demonstrative of at least 12 hour shifts, an 84 hour shift cycle and a 42 hour working week. And, for a significant period he worked a “7 days on and 7 days off” roster.

The Decision

In these proceedings, WorkPac sought declarations that Rossato was not entitled to make claims for paid annual leave, personal/carer’s leave and/or compassionate leave under the National Employment Standards because he was a casual employee within the meaning of and for the purposes of sections 86, 95 and 106 of the Fair Work Act 2009 (Cth) (“the FW Act”). Further, that, as a casual employee, he was not entitled to claim payment for public holidays under section 116 of the FW Act.

In the event that it was unsuccessful obtaining the above orders, Workpac submitted that it should be entitled to restitution of the casual loading it claimed was included in the hourly rate paid to Rossato which it contended were paid on the basis that it covered the taking of unpaid leave and was therefore paid on the basis of mistake and/or a partial failure of consideration.

In the further alternative, Workpac claimed that assessments of the entitlements claimed by Rossato should being into account payments of remuneration it has paid to Rossato on the basis that he was a casual employee.

The Court heard this case only a few months after the Federal Court of Australia delivered a judgment in another claim involving an employee of Workpac, Mr Skene who was employed in circumstances similar to that of Rossato. For a summary of the decision Workpac Pty Ltd v Skene [2018] FCAFC 131 please click here.

In its submissions to the Court, Workpac argued that Rossato was a casual employee on the basis that a casual employment arrangement is one where there was an absence of a “firm advance commitment as to the duration of the employee’s employment or the days/hours the employee will work”. Workpac’s position was that the only way to determine whether such an advance commitment is in existence is by reference to the written contract of employment and regard should not be had to other materials, for example, how the contract was performed in practice.

The Court rejected this interpretation finding that when assessing whether there is a “firm advance commitment” regard is to be had to the employment contract as a whole, inclusive of factors that give effect to the employment contract such as whether the employment offered was regular or intermittent.

“Firm Advance Commitment”

One of the key issues for the Court to determine was whether, for the purposes of the FW Act and the Enterprise Agreement, Rossato was or was not a casual employee. A key aspect to be decided was whether there was a “firm advance commitment” and how this is to be assessed.

The Court found that Rossato was not a casual employee for the purposes of the FW Act. Parties had agreed on an employment of an indefinite duration and the employment offered was stable, regular and predicable such that it postulated a firm advance commitment.

In making this decision the Court noted that Rossato’s working conditions intended to conform with the National Employment Standards in respect of the his maximum work hours and each employment contract spoke of ordinary hours and standard work weeks which were referenced against the ordinary hours or standard work week of employees working full time hours.

This, coupled with the patterns of regular, certain work such as, fixed shifts that continued to be offered on a regular basis, and were constant and predictable indicated firm advance commitment. Further, there was no distinction between his “flat rate” and “casual loading” which was referred to in some of his contracts and not in others.

Restitution

Workpac contended that it included the casual loading in the hourly rate paid to Rossato. However, the Court did not accept the submissions of Workpac that this casual loading was paid by WorkPac by mistake, or as consideration which had partially failed.

The Court found that there was insufficient evidence to support the case that the rate of pay was fixed on the mistaken assumption that Rossato was a casual employee and would otherwise have been lower, so as not to include the casual loading if Workpac had known Rossato was not a casual employee. Further the Court could not rule out that the hourly rate paid to Rossato did not simply reflected the market rate required to be paid to secure Rossato’s services

Therefore, the Court did not award Workpac restitution for any casual loading paid as there was no direct evidence to suggest that a specific amount of casual loading had been included in Rossato’s pay to address the entitlements he did not receive by virtue of being a casual employee.

Set Off

Workpac argued that it was entitled to credit for casual loading payments as compensation for leave entitlements not afforded to the casual employee and for which the employee is now claiming compensation. This submission was made on the grounds that because Workpac paid Rossato an amount higher than required in the Enterprise Agreement on the assumption that this included payments for leave he was not entitled to payment for, that it could set off this higher amount against any entitlement Rossato now has to claim paid.

In summary, the Court held that for a set off clause to be effective, it needs to clearly identify what is being set off and there must be more than a casual connection between the agreed purpose of the contractual payments made to Rossato and the nature of the leave obligations. The Court also found that particular entitlements claimed were for the taking of leave which meant the entitlement could not be satisfied by substituting this taking of leave with payment.

Regulation 2.03A of the Fair Work Regulations 2009 (Cth)

Following the Court’s decision in Workpac v Skene the Fair Work Regulations 2009 (Cth) were amended to include provision 2.03A. This regulation applies to employees who have been mistakenly classified as casual and their employer has paid the employee an amount (the casual loading amount) that is clearly identifiable as an amount paid to compensate the employee for not having one or more relevant National Employment Standards entitlements during a period of their employment. This regulation sought to address attempts by employees at “double dipping” when the above applies and a person makes a claim to be paid an amount in lieu of one or more of the relevant National Employment Standards entitlements. In these circumstances an employer can make a claim to have the loading amount taken into account in determining any amount payable by the employer to the person in lieu of one or more relevant entitlements.

In this case, the Court found Regulation 2.03A did not apply because Rossato was not making a claim to be paid an amount “in lieu of” one or more of the relevant National Employment Standards entitlements, rather Rossato wanted payment of the entitlements conferred by the National Employment Standards. Further, the casual loading amount was not clear.

My Business Utilises Casual Employees – How can I Ensure my Business is Protected?

This decision significantly affects employers who engage casual employees. As a result of this decision and that of Workpac v Skene, we suggest employers carefully review all casual employment contracts and the practical implementation of these arrangements to ensure casual employment is still the most appropriate form of arrangement.

Employers should also review these agreements to ensure these clearly distinguish between the hourly rate and the casual loading being applied as a separately identifiable amount paid as a result of the employee not being entitled to national Employment Standards Entitlements.

All casual employment agreements should now be reviewed on a more regular basis. Employers also have the option to included clauses that permit the clawing back of loading if an employee is deemed not to be a casual employee.

If your business engages casual employees and you would like us to review your contacts and provide advice in light of this decision, please do not hesitate to contact Heath Adams or Amelia Hatton of our employment law team on 02 9635 3404. 

Written by Amelia Hatton.

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