In a unanimous, but 272 page, judgment, the Full Court of the Federal Court has shattered what many employers had considered to be the standard position about engaging casual employees. 

An appeal is all but certain. However, as it stands, employers with a casual workforce face an unprecedented risk of employees claiming back-pay, and potentially penalties, for unpaid annual leave, public holidays and personal/carer’s leave entitlements. Claims may also be brought for redundancy and notice of termination.  

The judgment has also made it clear that attempts to set-off, or claw back, the usual 25% casual loading based on traditional clauses will almost always fail.  In a final blow, the Court has effectively sunk the Government’s attempts to use a recent regulation to allow employers to set-off any underpayment against the casual loading.  

What is a casual employee?

Mr Rossato was an employee of WorkPac for nearly eight years. There was no doubt, in WorkPac’s mind, that it had engaged Mr Rossato, through a series of six contracts, as a casual employee.

In this case, neither party sought to challenge the primary finding in the previous case of WorkPac Pty Ltd v Skene (2018) 264 FCR 536 that:

‘a casual employee is an employee who has no firm advance commitment from her or his employer to continuing and indefinite work according to an agreed pattern of work’,

(described as the ‘firm advance commitment’). 

However, in response to Mr Rossato’s claim for back payments lodged after the Skene decision, WorkPac sought to avoid liability, by asserting that the ‘firm advance commitment’ was not given in Mr Rossato’s ‘wholly written’ employment contract.  

This case focused on how the ‘firm advance commitment’ is to be assessed.  WorkPac submitted that the terms of the written contract were determinative. That is, if you’re identified as a casual in the contract, you’re a casual. WorkPac submitted, what happens after the contract is signed is irrelevant. Mr Rossato submitted that it was the conduct of the parties, not just the written words, which determined the employment relationship.

The Full Court meticulously analysed each of the six contracts and the conduct of the parties, before finding that Mr Rossato was:   

  • not actually engaged as a casual employee under his written contract (despite the clear intent of the employer); and
  • not a casual employee, because of the nature of conduct and engagement of the parties after the contracts were signed.

The Court held that ‘employment is not just the contract’, and the Court was entitled to assess, notwithstanding the words on paper, the true intent of the parties. The Court noted that ‘one of the key features of employment contracts is that they tend to be fluid and evolving.’ 

All three judges, looking at the contracts, intent of the parties and the conduct, found that Mr Rossato was not a casual employee and he was therefore entitled to be paid annual leave, personal/carer’s leave, compassionate leave and for public holidays.

Off-set and claw back

WorkPac submitted that, if it was found that Mr Rossato was a casual, it could off-set the casual loading against the unpaid leave entitlements.  This was because:

  • the loading could be ‘off-set’ against the back payment to Mr Rossato; and/or
  • WorkPac was mistaken that Mr Rossato was a casual, when it entered into the contract, and therefore were entitled to be ‘paid back’ the loading.

Both these submissions were rejected by all three judges. In respect of the off-set, the Court held that an ‘off-set’ clause needed to clearly identify what was being off-set, as is the case with similar clauses dealing with Modern Awards. The Court found that the employer could not generally connect the casual loading as being off-set against entitlements under the National Employment Standards (NES).

In terms of the ‘mistake’, the Court was scathing of WorkPac, particularly given its inaction after Skene, finding that:

‘If there was any mistake by WorkPac, its mistake was in framing its offers of employment as being premised on casual employment in circumstances where… Mr Rossato was not a casual employee…’

The regulation

In a final blow, the Court has blasted a hole in the Federal Government’s 2018 regulation[1], which allowed employers to ‘off-set’ the casual loading.  That regulation included a requirement that the aggrieved worker had to be making a ‘claim to be paid an amount in lieu of one or more of the relevant NES entitlements.’  The Court found that seeking payment of the entitlements conferred by the NES, is not seeking ‘an amount in lieu’, and the regulation therefore did not apply.

What’s next?

An appeal by WorkPac is almost certain. If this occurs, the Commonwealth Attorney-General (who stated that the judgment had ‘surprising elements’) has indicated that the Commonwealth will ‘absolutely’ intervene in the appeal. Outside of an appeal, the Attorney-General has committed to an ‘urgent’ review of the legislation. In the interim, employers face unprecedented uncertainty, in an already uncertain market.

Employers should act now to:

1. carefully redraft effective off-set clauses; and

2. consider whether casual employees are an effective engagement for their business.

[1] Regulation 2.03A of the Fair Work Regulations 2009 (Cth).