by Paul O’Halloran and Michael Russell Colin Biggers & Paisley

Introduction

The High Court of Australia has granted labour hire company WorkPac Pty Ltd special leave to appeal the controversial decision in WorkPac v Rossato in an attempt to correct the confusion around the definition of casual employment.

The High Court has granted a labour hire company special leave to appeal the controversial decision of the Full Court of the Federal Court in WorkPac Pty Ltd v Rossato  [2020] FCAFC 84 (Rossato) which currently represents the legal position on the definition of casual employment in Australia.

What will the High Court be considering in Rossato?

WorkPac submits that the Rossato  decision is of widespread importance because it has the capacity to apply to more than a million employees, in many sectors of the Australian economy, and in doing so alters the legal classification of their employment from casual to permanent, at an enormous cost to the Australian economy of more than $14 billion.

WorkPac will seek to argue before the High Court that Mr Rossato was a genuine casual employee for the purposes of the Fair Work Act 2009 (Cth) and the applicable enterprise agreement that applied to him.

In the alternative, WorkPac seeks an order preventing ‘double-dipping’ by casual employees, allowing the Court to ‘set off’ any leave entitlements owed against the renumeration received which included casual loadings.

The outcome of the High Court is not expected to be delivered until mid 2021.

What is the current legal test?

The current reasoning drawn from Rossato  and an earlier case of WorkPac Pty Ltd v Skene [2018] FCAFC 131 suggests that the “essence of casualness” takes into account the following factors:

  1. The absence of a firm advance commitment as to the duration of an employee’s employment or the days (or hours) of work is the essence of casualness.
  2. The key indicia of casual employment includes irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.
  3. Payment of casual employees on an hourly basis, will be of less significance in determining the presence/absence of a firm advance commitment, if all the employees are paid on an hourly basis.
  4. Despite mechanisms existing in a contract which contemplate some variability as to the actual hours of work to be allocated to an employee, where an arrangement can be construed as being an offer of continuing work to be performed according to an agreed pattern of full-time hours of work, together with an ambiguous or indefinite contract duration, it is indicative of a “permanent” employment relationship.
  5. Shorter notice is not traditionally consistent with regular or permanent employment.
  6. Contractual machinery, which provides an employee a right to refuse or choose between shifts, or gives an employee an opportunity to provide her or his service in response to a specific demand, is consistent with a casual employment relationship.
  7. The key indicators of a casual arrangement will commonly reflect the fact that, whilst employed, the availability of work for the employee is short-term and not-ongoing and that the employer’s need for further work to be performed by the employee in the future is not reasonably predictable.
  8. Whether an employee is paid a casual loading is a relevant consideration. To effectively identify the loading, contracts of employment should specify which component of the rate of pay is allocated to a casual loading or monies in lieu of paid annual leave. However, these references will not be sufficient, if in reality the employment is for an indefinite duration with stable, regular and predictable work.

What should employers do between now and the outcome of the High Court decision?

Until or unless overruled by the High Court later in 2021, the Rossato  decision represents the current legal position on the definition of casual employment in Australia for the purposes of certain entitlements. The outcome may result in further legislative intervention with both employer and employee groups, with the case emphasising the shortfalls and uncertainties in the current legislative framework for casual workers and their employers.

For now and unless overruled, employers are encouraged to consider at least the following:

  1. Review your casual cohort:  Regularly review your workforce to consider whether any long-term casuals are more appropriately classified as permanent employees. This may mean applying the casual conversion clauses already in modern awards or enterprise agreements.
  2. Educate internal HR and recruitment:  Ensure those responsible for hiring staff within your organisation are aware of the casual employment indicia and the factors that would influence a genuine casual employee morphing into a permanent employee.
  3. Ensure enterprise agreements and contracts are clear about casuals: To reduce the risk of employees claiming they are not casuals, ensure contracts or enterprise agreements include a detailed definition of “casual employee”.
  4. Separately identify the casual loading: Casual loadings should be separately identified in employment contracts and payslips and expressly stated that to be paid in lieu of paid annual leave and other entitlements.
  5. Set-off clauses: Review set-off clauses in contracts to endeavour to ensure they meet the specific needs in this complex area of law to increase the chance that casual loadings can be claimed back in the event of a challenge.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Introduction & Background

Labour hire firm Workpac is again in the news in relation to the employment of casual workers, You may recall the Skene decision which the Federal Court deemed that, what Workpac had thought to be a casual employee (Mr Skene), the court ruled that Mr Skene was not a casual.

The feral government were quick to act, implementing a provision in the Fair Work Regulations 2009, to the effect that if you put the wording in an industrial instrument (ie contract, award. EBA), that states that clearly states that the 25% loading is paid instead of leave, etc, then this nullified the Skene decision.

However, last week (20 May 2020) a Full Bench of the Federal Court handed down yet another decision relating to casual employment. Only this time Workpac itself was the progenitor in asking the Court seeking a declaration by the Court that casual employees receiving a casual loading not be entitled to leave payments. This case “used” Mr Rossato, as an example, who like Mr Skene, was on-hired by Workpac to various mine sites.

Summary of Federal Court decision

In summary, all three judges concluded that Mr Rossato was not a casual employee and was there for entitled to leave. In this 272-page judgement, the fact that (as in Skene) there was no actual legal definition of a casual employee other than they are neither a full-time nor part-time employee. Therefore, relying on past case law (precedents), and settling on the term “firm advance commitment” made Mr Rossato and Mr Skene both not casuals.

But most instructional to employers, should be the decision means that just you call someone a casual, does not mean that they are. In my words: “if it has feathers and quacks, it’s a duck”.

So how do we fix the problem?

Through the annuls of industrial relations law, everybody new what a casual employee was, right? Not so, since the expansion of what was once known as being a “temp” (temporary employee), there has been a huge spike in the number of so-called labour hire firms spring into the employment market. Great! Say the employers, which could now grab labour if and when they need it. No pesky paperwork or dealing with poor performance, just labour to do a job.

This in turn has led to, what the unions call, the “casualisation of the Australian workforce”. That is, we now have large tranches of workers who have zero job security. This has been illustrated very clearly with the Jobkeeper payment replicating the unfair dismissal laws of a casual employee only eligible (in this case) JobKeeper payments if they have worked regularly and systematically for an employer for more than 12 months.

My belief is that casual employment should be limited in scope and be the last option of employment. For workers, casual employment should be the icing on the cake, not the whole cake. That is, to supplement a low paying job, as was taxi driving years ago.

Just change the law, right?

Well yes and no.

With the Skene and Rossato decisions, coupled with a huge amount of unfair dismissal case law to draw on, the legislators should not find it too hard to come up with a legal definition of casual employment.

On the other hand, we all know what casuals were before the advent of labour hire firms: a warm body you get in to fill a gap caused by someone pulling a “sickie” or (maybe) short-term leave vacancy.

Temporary or fixed term employment

Which leads to the issues surrounding the employment of temporary or fixed term employment. The employment of such a person may be warranted by an employer to fill short, medium long-term vacancies or maybe a fixed term budget allowance.

Temporary and fixed term employment are treated, by industrial law, as “permanent” or “ongoing” employees for the purpose of the accrual of leave entitlements. That is, you would pay the “temp” as you would a permanent employee (albeit, probably at a lower rate of pay – depending on which Modern Award/EBA in play), but on a pro-rata basis. Annual leave would usually be paid at the end of the assignment.

The problem with such temporary/fixed term arrangements is that the courts have determined that the dates of such employment are set in stone. That is, (except for serious misconduct), to be considered a temporary/fixed term employee, the worker must serve out the entire contracted period (and also not exceed this period, unless a subsequent agreement is put in place).

Put simply, contracts that state “up to X date” (known as “outer limit contracts) have been determined not to be temporary/fixed term employment. This goes without saying, if you wish to shorten the length of the employment.

I believe that to fix this issue, legislation needs to be adopted to provide for “outer limit” contracts.

Permanent Casuals

There is no such animal. You are either “permanent” or “casual”. Not both. End of story.

I know of a number of businesses who adopt this model (hence the limitations imposed under unfair dismissal law). And they complain when an employ does not turn up for work!

For the uninitiated, casual employment is a series of “engagements” (usually a day) and each period of casual employment concluded at the end of each day. So, the “casual” bit works both ways, the employee may say “do not turn up for work tomorrow” and the employee may say “no thanks”.

Some other companies use an initial period of casual employment as a “probationary period”. The reward for becoming so-called “permanent – the taking away of the casual loading, effectively rewarding the employee with a 25% pay cut. Remember, if you are worried about unfair dismissal, employees must be employed for longer than 12 months if you employee fewer than 15 employees or six months if you employ more than 15. This is plenty of time to decide.

Full-time ongoing employment

Notice I did not use the work “permanent”. What employment is permanent these days (perhaps the public service?), but I digress.

Employees who are lucky enough to be employed on a full-time ongoing basis as do part-timers, have the most job security of all employment types. They are entitled to all sorts of leave arrangements, including able to take a holiday. They are also more likely to be able to apply for a mortgage to buy a house.

Nothing to see here. Let us move on.

Part-time ongoing employment

Everybody knows that a “permanent part-time” (see my previous comments) is less than the hours of a full-time employee; usually but not always 38 hours per week.

Under most (if not all) Modern Awards, a part-time employee must:

  • Be advised (in writing) on which day of week they will work, and the hours on each day to be worked. I get this. This restriction is put in place to stop unscrupulous employers from changing a part-timer’s days to avoid paying public holidays. You usually work on a Monday, “not this week mate. Public holiday on Monday we will move you to Tuesday”. Simple.
  • If the agreed hours (remember, in writing) are exceeded on any day, then overtime is payable.

And it is the overtime bit that gets on my client’s (and my) nerves. This is a fairly recent event in industrial relations terms, creeping into all awards.

It is my strong belief that the payment of overtime for anything less than the full weekly hours (again, usually 38) is not helpful to the employee, who may otherwise benefit from additional hours, or the employer who will be reluctant to offer further hours due the cost imposition (or ignore this requirement altogether).

The answer is simple. Overtime should only be paid after working 38 hours (or average of) a full-time worker.

Summary and Conclusion

Casuals

  • A definition should be legislated and placed in the Fair Work Act.
  • Casuals should be a hire of last resort – not a business model.

Permanent casuals

  • No such thing. Move on.

Temporary/Fixed term

  • Again, the definition should be refined to allow for “outer limits” of employment, therefore allowing for greater flexibility in employment.

Part-time

  • Remove restrictive overtime provisions and align with full-time hours for the purposes of overtime.

Full-time

  • The holy grail. If the business has the capacity, then this should be the first option.

Unfair dismissals

On a final note, employers have been critical of this legislation since its inception. I agree. It has developed its own $multi-billion industry – especially in the No-win, no-fee space.

However, the spectre of an unfair dismissal should not be used as a business model. If you want happy, productive workers – treat them with respect and be on the look-out for toxic employees and/or poor behaviour and address these issues in a professional manner treating each case in a consistent and but fair manner.