- In the recent, highly anticipated decision in Workpac Pty Ltd v Rossato, the Full Federal Court of Australia has confirmed the test for a casual employee is a ‘firm advance commitment’ as to the duration of employment or work.
- The employer in this case was unsuccessful in recovering the casual loading paid to the employee. In addition to the casual loading, the employer was also obliged to provide leave and public holiday entitlements that would ordinarily only be available to continuing employees.
- All eyes now turn to the application for special leave to appeal to the High Court, and the Government to provide a legislative fix.
In a decision with far reaching implications for many Australian businesses, the Full Court of the Federal Court in WorkPac Pty Limited v Rossato  FCAFC 84 has determined that an employee (Mr Rossato) who had worked a regular roster for his employer (‘WorkPac‘) over a number of years was not a casual employee, despite the fact that he was formally characterised as such and had been paid a casual loading throughout the entire period of his employment.
The finding had the consequence that WorkPac was obliged to provide Mr Rossato with certain leave and public holiday entitlements that in the normal course would be available only to continuing employees.
Significantly, the Court also rejected WorkPac’s arguments that it should be permitted to apply the casual loading it paid to Mr Rossato against those entitlements.
In common parlance, the Court’s decision meant that Mr Rossato could ‘double dip’ by receiving the casual loading as well as the leave entitlements for which the casual loading was meant to compensate.
Background to proceedings
WorkPac had earlier been involved in Federal Court proceedings concerning another employee – Mr Skene – who had similar factual circumstances. Mr Skene had ostensibly been engaged on a casual basis but was subsequently found by the Full Court in fact to be a permanent employee (See: de Flamingh and Kiley, ‘Another casual conundrum: substance over form prevails (again)’, 49 Law Society of NSW Journal, Oct 2018, 72-74; Cage and de Flamingh, ‘The aftermath of the casual conundrum: “double-dipping” and class actions’, 52 Law Society of NSW Journal, Feb 2019, 84-86).
The Court in the WorkPac Pty Limited v Skene  FCAFC 131 decision expressly left open the question of an employer’s ability to ‘set off’ the liability for leave or other benefits against the casual loading, where such loading is clearly expressed as an identifiable amount. That issue then fell to be determined in Rossato.
The Rossato proceedings had a number of unusual features:
- Workpac obtained a declaration that the matter should be heard by a Full Court in the first instance, and that the matter would be expedited.
- Consistent with an expedited hearing, the evidence comprised a Statement of Agreed Facts as between WorkPac and Mr Rossato, plus some additional documents tendered by the CFMMEU.
- Given the significance of the proceedings, the Federal Minister for Jobs and Industrial Relations, the CFMMEU, and the applicant in a separate class action brought against WorkPac, were granted leave to intervene in the proceedings.
- WorkPac, as the applicant, was seeking the relief and therefore bore the onus of proof.
- WorkPac agreed to pay Mr Rossato’s costs and, in the event that he was successful, to pay his entitlements without his needing to commence a cross claim.
Mr Rossato had been engaged by WorkPac at various coal mine sites in Queensland for a nearly unbroken period from July 2014 until he retired in April 2018.
He was a ‘drive in, drive out’ employee who stayed at accommodation provided by the mine operator during each of his ‘swings.’ Rosters were set by the mine operator and Mr Rossato was placed at the mine sites by WorkPac to supplement existing labour directly employed by the mine operator. Mr Rossato was employed under the terms of an enterprise agreement which provided for a 25 per cent casual loading that was stated to be in lieu of all leave entitlements (other than long service leave). The enterprise agreement specifically identified the leave attributable to the 25 per cent loading as follows:
- 11 per cent being payment in lieu of annual leave and leave loading entitlements;
- 5 per cent being payment in lieu of personal leave entitlements;
- 4 per cent being payment in lieu of notice of termination requirements;
- 5 per cent being payment in recognition of the itinerant nature of casual work; and
- 5 per cent being payment in lieu of redundancy entitlements.
Mr Rossato was also engaged under six separate contracts of employment during his employment, each of which described him as a casual employee, and was paid above the hourly rates required by the enterprise agreement.
Was Mr Rossato a casual employee?
In approaching the question of whether Mr Rossato was a casual employee, the parties accepted the correct legal approach was that adopted in Skene, namely that a casual employee is one who ‘has no firm advance commitment from her or his employer to continuing and indefinite work according to an agreed pattern of work’.
The key difference, here, however, was WorkPac contended that an assessment of whether there is a ‘firm advance commitment’ is determined solely by the contractual terms with Mr Rossato which they said were wholly in writing. WorkPac submitted the contracts clearly stated he had been engaged as a casual employee, and did not contain a ‘firm advance commitment’ that would mean he would be a permanent employee.
The Court disagreed and found the terms of the contracts themselves evidenced a ‘firm advance commitment’ of ongoing work that was inconsistent with the intermittent, irregular nature of true casual employment. Relevantly, the terms of the contracts provided:
- Mr Rossato was to work for the duration of a specific assignment which he was to complete once it had been accepted.
- If Mr Rossato did not complete an assignment once it had been accepted, WorkPac had the right to recover any costs from Mr Rossato associated with bringing the assignment to an end.
- Mr Rossato was required to work the roster he was provided at the time of entering the contract, or additional or replacement shifts or rosters.
- The roster provided to Mr Rossato on the commencement of his employment reflected an established shift structure and rostered crews six months in advance.
- The contractual terms permitted the mine operator to issue Mr Rossato with instructions and Mr Rossato was to follow those instructions. Those instructions could include replacement rosters that would also extend into the future.
- Mr Rossato’s timesheets were pre-populated by WorkPac, having regard to the rosters that were in place and reflected an agreed pattern of work.
- There was no indication that Mr Rossato would be told at the start of each shift or each ‘swing’ whether or not he would be required to work. The expectation was that he would continue to report for work in accordance with the rosters provided to him.
- Mr Rossato was provided with free accommodation by the mine operator for the duration of each ‘swing’.
- The Court also rejected WorkPac’s arguments concerning the appropriateness of post-contractual conduct. The Court noted that the ‘parol evidence rule’ did not constrain the use of post-contractual conduct for purposes of ascertaining the terms upon which the parties had agreed, as opposed to ascertaining the meaning of those terms.
Restitution not available
In the event Mr Rossato was not found to be a casual employee, WorkPac first argued it was entitled to recover the 25 per cent loading it had paid him under the law of restitution. This was on the basis that:
- the loading had been mistakenly paid to him on the incorrect basis that he was a casual employee; or
- there was a total failure of consideration for the payment of the loading.
The Court held there was no basis to find there had been a mistake that would entitle WorkPac to restitution. The Court considered that the test was whether the payment had been made ‘voluntarily’ (in the sense of being aware of a basis not to make the payment). This required an assessment of the state of mind of the payer. However, there was no evidence of a mistake in the relevant sense, and the Court did not accept that WorkPac would be operating under a mistaken belief of law (in the relevant sense) up until 24 November 2016 when the first instance judgment in Skene was delivered.
Further, Workpac could not demonstrate the necessary link between the mistake and the alleged overpayment. There was no evidence to demonstrate why particular payments had or had not been made. The ‘strong impression’ was that Mr Rossato was paid a ‘market’ or ‘prevailing’ rate to attract him to the position.
These factors also led to the Court finding that WorkPac could not recover the loading on the basis of failure of consideration.
Set off not available
Workpac also argued that it could set off the value of the casual loading (or parts of it) against any monetary claims Mr Rossato had to employment related entitlements.
The Court examined the case law on ‘set off’ and highlighted that the focus is on the purpose of the payment. If it arises out of the same purpose as the obligation it is seeking to discharge, it can be ‘set off’.
While the reasons of each judge differed, the Full Court held Workpac was unable to rely on a form of set off to apply the 25 per cent loading paid to Mr Rossato against his various claims for leave related entitlements. This turned, in part, on the terms of the contracts. However, the various grounds upon which the set off argument was rejected included:
- There was a ‘conceptual difficulty’ in designating a monetary payment to satisfy a non-monetary entitlement. The entitlement to leave provided the dual benefits of rights to be absent (such as for rest and recreation when taking annual leave) and payment for that absence. A payment in lieu of that entitlement does not compensate for the right to have been absent that was given up.
- Payment of the 25 per cent loading could not have lawfully discharged certain entitlements under the National Employment Standards (‘NES’). There are prohibitions on the cashing out of those entitlements – subject only to limited exceptions – none of which were engaged.
- Payment of the 25 per cent loading was made from the commencement of Mr Rossato’s employment before any leave entitlements had been accrued. It was difficult to attribute the payment of leave loading to a legal obligation, such as paid leave, when the legal obligation to paid leave had not yet arisen.
- The casual loading was a payment made for the absence of leave entitlements. The purpose of the casual loading, therefore, could not be to satisfy the liability for those leave entitlements because the parties agreed such liability never existed.
The possibility for an express term enabling the set off of entitlements was left open, with the Court observing the payment of annual leave on termination of employment, for example, is a possibility capable of being expressly addressed in a contract.
‘Double dipping’ regulation
The Court rejected WorkPac’s contention that it could rely on regulation 2.03A of the Fair Work Regulations 2009 (Cth) which had been introduced in response to Skene. Instead, the Court held:
- The regulation only applied when a person made a claim to be paid an amount in lieu of one or more of the NES entitlements. Mr Rossato’s claims were not in lieu of such entitlements, instead he sought the actual entitlement under the NES or the enterprise agreement.
- A number of Mr Rossato’s claims arose under the enterprise agreement and not the NES. The regulation was not engaged in respect of these claims.
- The regulation was never intended to alter the substantive law when determining an employer’s claim to take into account casual loading in lieu of the NES entitlements.
Casual employment after Rossato
Despite the real significance of the decision in Rossato, it is important to bear in mind that the outcome in this case, and in others that may follow, depends very much on their specific facts.
The circumstances of Mr Rossato’s employment were consistent with the typical understanding of what constitutes continuing employment, notwithstanding the characterisation of the relationship in the contracts and the payment and acceptance of the casual loading. The facts did not support some of the grounds put forward by WorkPac and WorkPac had limited grounds to move in this regard given the proceedings were run on an agreed statement of facts.
The decision in Rossato is best seen as part of a continuing national conversation about casual employment, particularly with casual employment the focus of one of five new industrial relations groups recently established by the Federal Government. These groups have been tasked with ‘finding ways to urgently regrow jobs lost as a result of COVID-19’ with the goal of forming a consensus reform position by September 2020.
In the meantime, we await the outcome of WorkPac’s application for special leave to appeal to the High Court.