There has been a lot of noise about the recent Federal Court decision on casual work Workpac v Rossato. What are the key takeaways?
“The law hasn’t changed on this, but what people do and how they should react should,” says Aaron Goonrey, partner at Lander & Rogers.
This is the essential nuance of the Workpac v Rossato case. Contrary to glib reports that “regular casuals” might now get leave entitlements or assertions that the Federal Court case opened a “loophole”, what actually happened was closer to a clarification.
“A lot of people are saying, ‘this decision is the end of casual employment’. It’s not the end of casual employment. It’s a restatement of the principles of how one should be engaging casual employees in the first place,” says Goonrey.
“Over time certain businesses have developed practices so that we now have this concept of ‘permanent casuals’. I am still surprised when I hear someone say, ‘We have a number of permanent casual employees’. Because they’re not casual, they’re likely to be permanent employees. The employer is simply giving them a casual loading.”
Goonrey says that casual employees, by the most basic definition, are employees who are engaged by the shift. If the shift starts at nine am and finishes at three pm so too does the employment. Even by having a written “employment contract” with a casual employee you are potentially disrupting this, because it implies a relationship outside of those shifts.
“What we’ve seen develop is the concept of the ‘regular and systematic’ casual employee. Which is, by its very definition, not casual in nature. The law says a casual employee is someone not working regular and systematic hours at work,” says Goonrey.
In a previous article, HRM wrote about this confusion. What this article will address are a series of other confusions arising from Workpac v Rossato, and look to see how the landscape has changed. In particular it will look at a series of questions:
- What are casuals and what they can claim?
- What about ‘regular casuals’ who don’t want to convert?
- Would you have to provide back pay on personal leave?
- What happened with set off and restitution, and how should employers respond?
- What companies are most at risk, and what is the possibility of class actions?
- What should companies be doing going forward?
1. What are casuals and what they can claim?
Goonrey addresses a confusion generated by some reports that casuals now get to claim leave. That’s back to front. In Rosatto’s case, he was claiming that he wasn’t a casual employee at all. He was instead permanent and entitled to the relevant entitlements. And the Court agreed with him.
The decision is detailed and larger than will be gone into here. But the Court said there were more than a few ways that Workpac’s argument was lacking. For example, the Court found evidence that even using the industrial agreement Rossato was under, he was probably misclassified given the nature of his employment.
Goonrey says that it’s best for organisations to focus on the root of the issue.
“The Court basically said, ‘Putting aside the paperwork, by the nature of the way this person was engaged, by the way they were rostered on, they actually don’t seem to be a casual employee.’ It’s like the old adage ‘if it walks like a duck and quacks like a duck, it’s a duck’ – not a chicken.”
This way of examining employment is more typically applied to assessing whether contractors are in fact employees. But you could argue it’s equally applicable in relation to casuals.
“One other thing that’s missing from some of the commentary is that Mr. Rossato was actually given a firm advanced commitment in relation to work,” says Goonrey. “It’s not as if the nature of how he was offered and accepted employment was such that he could take it or leave it. It was, ‘We are going to be providing you with these shifts’ and there was an expectation that he worked them.”
Giving people longer term contracts, insisting they take shifts, rostering them months in advance, failing to clearly articulate the rights and expectations of casual work – all of these things would work against an employer if a ‘casual’ staff member claimed they were permanent.
2. What about ‘regular casuals’ who don’t want to convert?
Many employers have argued that their regular, systematic casual workers wouldn’t want to be permanent, even if they had the option. They are happy with the loading and have been for many years.
“That still does not negate a future liability in relation to them coming after you for leave entitlements,” says Goonrey.
An employer cannot create an employment category out of whole cloth just because it seems to suit them and the worker. The law has to be followed. While it’s true that if none of an employer’s ‘permanent casuals’ ever make a claim there technically wouldn’t be an issue, that’s a big risk to take. For example, what if a few years down the line an employee leaves on bad terms and decides they would like to make a claim after all?
The risk of future claims from otherwise contented employees can be managed, says Goonrey, but only to a limited extent.
“The way you may mitigate it is by having ‘a casual terms of engagement’ that you revisit regularly, ideally at least every six months, that reminds the employee they can convert to a permanent employee and lose their loading. That likely mitigates the risk of possible claims. But it doesn’t get rid of the risk.”
Ultimately employers have to do what’s right for them, taking into account future outcomes and risk management.
“You’re the employer, you’re ascribed with knowing right from wrong. If you’re willing to wear the risk in order for the employee to be happy to receive their casual loading, that’s up to you. But if you look at it from a risk and compliance perspective, as in, ‘What are we better off doing in the long term?’ It may be that you determine you should be converting the employees. And if they’re not happy with that, then you can look at next steps.”
Interestingly, Goonrey says there can be a catch-22 here. If you ultimately decide to no longer provide further shifts or work to the employee, ie. let them go, because they are effectively a permanent employee who refuses to convert and lose their casual loading, they could still make a claim that they were permanent all along.
3. Would you have to provide back pay on personal leave?
If an employee is found to be misclassified as a casual, they are owed the amount of annual leave they would have accrued had they been correctly classified. Public holiday pay could also be figured out relatively easily. But personal and carer’s leave exist in a different category, depending on whether the worker is still employed, explains Goonrey.
If the worker is still employed they instantly accrue the leave they would have generated from the date it’s determined they began being a permanent employee. For example, if they’d been working for a year as a permanent they would be owed 10 days.
If they were no longer employed, then it would depend on documentation. If, for example, an employee had made a note of each day they were rostered on but didn’t go to work because they were unwell or were looking after someone in their household, they would have a chance to make a back claim on those days. Their case would be helped if they also had stronger evidence, such as medical certificates.
4. What about set off and restitution?
Particularly troubling to many employers is that the Court dismissed Workpac’s attempts to prevent so-called ‘double dipping’ – where someone receives both leave entitlements and gets to keep the extra casual loading money.
To mitigate such a thing, there are a few arguments an employer can make. One of Workpac’s was that it had paid Rossato casual loading and was therefore covered by the 2018 Fair Work regulation change. This change applies to cases where a casual employee has been misclassified. If certain criteria is met the employer can claim any paid casual loading offsets the amount owing to an employee for their National Employment Standards entitlements.
But the problem for Workpac was that while in some instances judges could identify that Rossato was paid more than a permanent employee doing the same work, it wasn’t clear by how much. His payslips merely stated he received a flat ‘wage’. So even when the casual loading was identifiable – as in, you could tell it probably existed – it was not severable from his pay.
“The problem with set off, restitution and what we call ‘the regulation argument’ is that Rossato had not been provided with a separately identifiable amount of money that represents the loading,” says Goonrey. “Workpac said, ‘The loading represents the amount we would ordinarily pay a casual, so you can deduct (for instance) 25 per cent from the hourly rate’. There is an issue with that, because the Court was not able to find that there was a separate part of Mr Rossato’s wage that Workpac paid due to mistake or in reliance on Mr Rossato’s acceptance that he was a genuine casual employee.”
An employer that better managed this issue might have achieved a different result, says Goonrey.
“Unless employers separately identify the amount that comprises casual loading, it is very challenging to make a set-off, restitution or a Fair Work regulation argument. Whereas if Workpac had outlined that amount, the Court may have thought differently.”
5. What companies are at risk, and what about class action suits?
“Workpac are not alone,” says Goonrey. “I think many employers are in a Workpac situation.”
While any employer that has ever employed a casual in a regular and systematic manner has some risk (particularly given the ability to make a claim extending years into the past), some are more exposed than others. The most at risk are those with a history of large contingent workforces.
“The words ‘class action’ are being used more in this particular area,” says Goonrey.
This involves a class action law firm finding nominal plaintiffs, at least seven, who have “very similar factual matrixes”, says Goonrey.
“Even sophisticated employers get casual engagements wrong. They put a process and procedure in place and they do not deviate from it. If you have never deviated from a process and procedure and you’ve done it for one employee, then that’s a time bomb right there. The Skene and Rossato cases lead naturally to a conclusion that this is an area ripe for class action.”
There is already evidence out there that plaintiff firms are building towards class action cases. These things can fly under the radar until they hit the news. Employers shouldn’t assume they are safe just because they haven’t heard anything yet or because they believe they have had good relationships with their staff.
To illustrate this last point, Goonrey poses a thought experiment.
For many of us, the first experience of work was with a fast food chain, retailer, supermarket or otherwise, in some casual position. Imagine it was a regular job but because you were young you were happy to get the casual loading. This loading was not identified to you at the time as separate from your flat rate of pay.
If someone reaches out to you and says that there is a class action that captures a period of time when you were working, would you avail yourself of it? Why not, if it costs you nothing and could result in a pay out?
That’s the risk some organisations are living with right now.
6. What should employers be doing now?
“It tends to be practise and engagement that I often see employers get wrong,” says Goonrey. The advice he offered after Workpac vs Skene still stands, but he has a few more suggestions.
He says a good first step is to look at what Workpac got wrong. Workpac v Rossato has enunciated the principles of casual employment, and so acts as a good case study in what not to do.
Instead of a contract, use terms of engagement for casual employees and get them to approve them regularly. The terms should clearly articulate all the principles of casual employment, including that it’s engagement as and by the shift, that it can be refused, and the rules around converting from a casual to a permanent worker.
To protect against future claims, it’s important to clearly outline in all payslips the money that is considered casual loading.
But paperwork isn’t enough. Goonrey offers this final piece of advice: “Change your practices. That’s fundamental. You can change documentation all you want, but you ultimately have to change the way you engage practically with casual employees.”