In the recent Full Federal Court case Workpac Pty Ltd v Rossato [2020] FCAFC 84, the Court considered the characterisation of employment and upheld the view that casual employees, who have the characteristics of permanent employees, are entitled to paid leave entitlements even if they are in receipt of a casual loading. The effect of this case is that there now is a substantial risk that an employer will be liable to pay its casual employees leave and other paid entitlements.

Prior to this case, the view was that a casual employee was paid a casual loading as the employee does not enjoy the benefits that permanent employees do, such as paid personal leave and annual leave.

 

Case Summary

Mr Rossato was engaged as a casual employee for a labour hire company. Mr Rossato claimed that contrary to Workpac’s treatment of him he was not casual employee and claimed outstanding entitlements. Workpac argued that:

  1. Mr. Rossato was a casual employee and not a permanent employee; and
  2. If Mr. Rossato was found to be a casual employee, the payment of a casual loading could be set off against any amount owed to Mr. Rossato for payment of outstanding entitlements.

 

The Court found that Mr Rossato’s employment was that of a permanent employee and as a result, Mr Rossato was entitled to the following entitlements under the National Employment Standards (NES):

  1. paid annual leave
  2. paid personal/carer’s leave;
  3. paid compassionate leave; and
  4. payment of public holidays.

 

The Court further found that the monies paid to the employee forming the casual loading could not be used to set off the entitlements that the employee was entitled to under the NES (as set out above).

 

Who is a casual employee?

A casual employee is someone that is engaged with no firm advance commitment of work, who works irregular and unsystematic hours of work, who has no certainty of work as the work is unpredictable and who does not have to accept a shift that they are requested to work.

However, if your casual employee has work that is characterised as follows, they may not be a casual employee but instead a permanent employee:

  1. the employee works regular and systematic shifts;
  2. the employee’s work is continuous and not subject to significant fluctuation; and
  3. the employee is required to provide a firm advance commitment.

 

Most Modern Awards include clauses with respect to the conversion of casual employees to full-time or part-time employees. These clauses are important to consider as they provide a basis as to when casual employees are considered to be eligible for permanent employment under their respective Awards and this is a factor in determining when employees may be considered to be long term casuals.

Our members’ employees are predominately covered by the Electrical, Electronic and Communications Contracting Award (Electrical Award) for their field staff and the Clerks- Private Sector Award (Clerks Award) for their administration staff.

The Electrical Award provides that a casual employee, who is not an irregular casual employee and who has been engaged for a period of six months can elect to have their contract of employment converted to a full-time or part-time employment.

The Clerks Award provides that a regular casual employee, who was engaged for a period of 12 months and worked a pattern of hours on an ongoing basis and without significant adjustment, may request that their employment be converted to full-time or part-time employment.

 

What should I do as an employer?

In order to determine whether you are engaging a long term casual employee, you should carry out an audit of your casual employees and consider the following:

  1. How long has the employee been working for the business?
  2. What does the employee’s work patterns look like? Are they regular and systematic?
  3. Is the employee required to provide a firm advance commitment?
  4. Is the employee free to choose whether they accept or decline the offer of work?
  5. Has the employee requested to become a permanent employee?
  6. What does the applicable Award state about conversion of casual employees?
  7. Was the employee an eligible employee for the JobKeeper scheme?

 

If your employee appears to meet the criteria of a long-term casual, you may need to consider one of the following:

  1. offering the employee permanent full-time or part-time employment in accordance with the conversion clauses of the relevant modern Award; or
  2. ensure your employees are employed for irregular and unsystematic hours and that they have an option to decline the shift; or
  3. engaging independent contractors (if practicable).

 

If you are unsure if your employee is a long term casual, CTI Lawyers can do an audit of your casual employees and provide an assessment and advice on the way forward.

Employers should also look at their casual employee’s contracts of employment and consider the following:

  1. removing or amending clauses that reflect permanent employment such as leave entitlements and a notice of termination;
  2. include casual loading as a separate distinguishable amount that is payable to the employee because the employee is not entitled to benefits under the NES;
  3. including a clause to the effect that if an employee is found not to be a casual employee, the employer is entitled to be repaid the casual loading.

 

Please note that these amendments are not guaranteed to protect an employer from paying entitlements and casual loading but may assist in mitigating the risk to the employer.

In summary, if you employ casual employees and their hours of work mirror regular hours, you may be at risk of being liable to pay your employee paid entitlements under the NES and potentially, although not sought by Mr Rossato, other service-based entitlements such as notice and redundancy.

Please note however that the effect of this case may change if there is a successful appeal of the decision or if the Federal Government enacts legislative changes.

Disclaimer: This summary is a guide only and is not legal advice. For more information on legislative or contractual obligations, call CTI Lawyers on 1300 361 099 or email law.clerk@neca.asn.au