The casual approach: How employee-employer terms will change

Casual employees working regular and systematic hours with “predictable periods of working time” are likely to be considered permanent employees, regardless of what their contract says or whether they are paid a casual loading.

Long-term casual employees are the big winners in a landmark court ruling, but what are the long-term ramifications for employee and employer alike?

By Zilla Efrat

A ruling by the Full Federal Court of Australia in May is seen as a big win for long-term casual employees and a wake-up call for employers to review their casual contracts.

In WorkPac Pty Ltd v Rossato, the Full Federal Court confirmed that casual employees working regular and systematic hours with “predictable periods of working time” are likely to be considered permanent employees, regardless of what their contract says or whether they are paid a casual loading. 

Paul O'Halloran, a partner at Colin Biggers & Paisley Lawyers, says the decision indicates that stable, regular and predictable work will represent a "firm advance commitment" of permanent rather than casual employment. The payment of casual loadings and the express terms of a contract will not be sufficient to reverse such a conclusion. 

“It means casuals who have fairly regular and systematic engagements may be able to make claims in the Federal Court or Federal Circuit Court to be paid entitlements under the National Employment Standards not otherwise applicable to genuine casuals, such as annual leave, personal leave, compassionate leave, redundancy pay etcetera,” he says.

What it means to be a casual employee

Luis Izzo, managing director, Sydney Workplace at Australian Business Lawyers & Advisors, notes that in WorkPac Pty Ltd v Rossato, the court unanimously endorsed the following principles:

The parties’ description of the engagement as casual in a written contract is not determinative. One must look at all the features of the relationship.

In contrast with on-going full-time or part-time employees, a casual employee “has no firm advance commitment from the employer to continuing and indefinite work.”

The signs of casual employment and the absence of a firm advance commitment from an employer are “irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability”.

WorkPac complications

Izzo says the outcome of this case was compounded by the fact that WorkPac had paid a casual loading to Rossato in lieu of providing leave entitlements. 

“WorkPac argued that it should at least be able to offset the leave entitlements claimed against the casual loading. The court unanimously rejected this claim, finding that the casual loading could not now be used to offset leave liabilities,” he says.

“This means that the employee has effectively received the same benefit twice. He was paid a loading in lieu of being provided leave entitlements but will now also be paid the leave entitlements in any event.”

Legislation changes needed

Following the ruling, Innes Willox, CEO of employer association Ai Group, has called for the Fair Work Act to be urgently amended to define a casual employee in a simple and clear manner to address the uncertainty caused by this and other cases. 

“The current laws, as interpreted in these decisions, operate as a major deterrent to the employment of casuals,” he says.

According to Willox, the potential cost impacts on employers of the Federal Court's decisions, for annual leave alone, are between $5.7 billion and $8 billion. At least 1.6 million of the 2.6 million casuals in Australia are working on a regular, ongoing basis, he says. 

O'Halloran notes that litigation funders are already investing in litigation to test the limits of the WorkPac ruling, which means many employees can join a class action at no cost, and with the funder taking a large percentage of any compensation orders. 

But he believes legislative change is a possibility. In May, Attorney-General Christian Porter noted: “Given the potential for this decision to further weaken the economy at a time when so many Australians have lost their jobs because of COVID-19, it may also be necessary to consider legislative options.”

That said, O'Halloran believes some employers will find it difficult to prove their workers are casuals. 

“For example, it has been common in the mining industry for casual employees to be on-hired by labour hire firms to mining companies who, like the employee Rossato, may then place them on long-term pre-programmed rosters. Also, in some cases in the university sector, up to 70 per cent of academics can be characterised as casuals.” 

Advice to employers 

Considering the decision, O'Halloran says employers should:

  • Regularly review their 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.
  • Ensure those responsible for hiring staff within their organisations are aware of the casual employment indicia and the factors that would influence a genuine casual employee morphing into a permanent employee
  • Ensure contracts or enterprise agreements include a detailed definition of "casual employee" to reduce the risk of employees claiming they are not casuals. Employers may need to seek legal advice on this.
  • Separately identify casual loadings in employment contracts and payslips and expressly state that these are to be paid in lieu of paid annual leave and other entitlements 
  • Review set-off clauses in contracts 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. Again, employers may need to seek legal advice.

“Many of WorkPac’s troubles stemmed from the contractual drafting applied to Rossato,” adds Izzo. 

“More prescriptive clauses can be included in employment contracts requiring the repayment of casual loadings where employees succeed in claiming permanency. These clauses can help offset any liability for leave entitlements and prevent the ‘double dipping’ that arose in Rossato.”

With these considerations in mind, if in doubt, seek legal advice.

Editor’s note: The Full Federal Court of Australia’s aforementioned ruling is subject to appeal.

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