Workpac decision confirms casual employees can double dip by receiving casual loading and paid annual and personal leave

In what is being described as employees ‘double dipping’, the Full Federal Court’s recent decision in Workpac v Rossato confirms that an employee who is paid a casual loading on the misunderstanding that they are a casual employee, may also claim permanent entitlements such as paid annual leave and personal leave.

Introduction

Businesses around Australia are reeling after the Full Federal Court’s recent decision in Workpac v Rossato [2020] FCAFC 84. The case highlights the issues facing employers who engage employees as casuals, when in fact they are permanent employees at law who are entitled to permanent benefits.

The decision emphasises the importance of:

• properly characterising an employee’s employment status at the commencement of their employment, and during employment if the employment arrangements change
• carefully drafting employment contracts to minimise the cost to employers if a casual employee is found to be entitled to permanent benefits.

Workpac sought declarations

In this case Workpac, a labour hire company, sought a declaration from the Court that Mr Rossato was a casual employee. It did this in response to the landmark ruling in Workpac v Skene in 2018, where it was held that another Workpac employee, Mr Skene was a permanent employee entitled to permanent benefits despite being engaged by Workpac as a casual employee and receiving a casual loading.

Mr Rossato’s employment

Mr Rossato was employed by Workpac under six consecutive employment contracts between 28 July 2014 and 9 April 2018. He was classified under the applicable Enterprise Agreement (EA) as a Casual Field Team Member and each of the six employment contracts purported to create a casual employment relationship between him and Workpac.

Mr Rossato was paid a flat hourly rate, which included a 25% casual loading in accordance with the EA and Fair Work Act 2009 (Cth). Payment of the casual loading was expressed by Workpac to be in lieu of entitlements, including paid annual leave, paid personal leave, notice of termination, redundancy pay and public holiday pay.

After his retirement in April 2018, Mr Rossato wrote to Workpac stating that he was incorrectly classified as a casual employee and claiming payment for:

• accrued annual leave
• periods of personal and compassionate leave taken during his employment
• public holidays.

The case before the Full Federal Court

Workpac rejected Mr Rossato’s claims and initiated proceedings seeking a declaration that he was a casual employee and had received casual loading in lieu of paid annual, personal and compassionate leave.

In the event that the Court did not grant such a declaration, Workpac claimed it had mistakenly paid the casual loading to Mr Rossato under the wrongful assumption that his employment was casual and was entitled to claim back the casual loading already paid to him. Workpac also claimed that it was entitled to ‘setoff’ any amount owing to Mr Rossato against the casual loading in accordance with the Fair Work Regulation 2.03A.

Was Mr Rossato’s employment casual?

The Court unanimously held that Mr Rossato was not a casual employee because there was a firm advance commitment between the parties as to the duration of his employment and the days or hours he would work. This was assessed at the time each employment contract was entered into and during the periods of employment. In making this determination, the Court considered not only the terms of the six employment contracts and the applicable EA, but also the way in which the employment was undertaken from a practical perspective. This included consideration of:

• whether the employment was regular or intermittent
• whether the employment was predicable or unpredictable
• whether Workpac could elect to offer work on any given day
• whether Mr Rossato could elect not to work on any given day
• the duration of the employment
• the period of notice of termination.

Could the casual loading be offset?

The Court rejected Workpac’s various claims to offset the amount Mr Rossato was seeking for paid leave and public holidays against the casual loading already paid to him. It also dismissed Workpac’s reliance on Regulation 2.03A of the Fair Work Act to offset the casual loading against the claimed entitlements.

The Court held that the Regulation will only apply where a person makes a claim to be paid an amount in lieu of one or more NES entitlements. In this case, the Court found that Mr Rossato had claimed payment for his entitlements, not in lieu of them.

It also noted that the Fair Work Act does not allow employers to make cash payments to employees in lieu of paid leave (subject to the limited circumstances of cashing out annual leave) and that the casual loading paid to employees is compensation for the absence of paid leave, not in lieu of it.

Many will argue that this interpretation of the Regulation goes against the intention of the legislators, who introduced the Regulation in response to the Skene decision to prevent employees double dipping by receiving a casual loading and permanent employee benefits, the very outcome of this decision.

What does this mean for employers?

The decision in Rossato has a significant impact on employers with a casual workforce. Many casual employees are already making claims to their current and former employers to be paid permanent benefits. This is despite receiving a casual loading, and, in many cases, despite choosing casual employment when permanent employment is offered, given the higher hourly rate of pay.

We expect the Morrison government will seek to introduce legislative change to resolve the issue of double dipping, but this process will be challenging, and it may not receive the necessary support. Workpac may also appeal the decision to the High Court. However, this would take some time.

It is vital that employers act now and conduct a review of their casual workforce and their working arrangements to identify the risk to the business of double dipping claims. It is also vital that casual employment contracts are drafted in a way to minimise the risk to employers.

The workplace relations and safety team at Cooper Grace Ward are running a free webinar on this topic on June 23. Register here.

If you would like some assistance and advice from us in relation to this issue please contact Belinda Winter or Annie Smeaton.