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Businesses face $8bn in backpay after casuals ‘double dipping’ is upheld

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
21 May 2020 4 minute readShare
court ruling

Businesses could face up to $8 billion in backpay after the Federal Court reaffirmed an earlier controversial decision, ruling that a casual employee on regular shifts is entitled to be paid annual leave.

In a ruling celebrated by the unions, the Full Federal Court reconfirmed on Wednesday that casual employees working regular and systematic hours with “predictable periods of working time” are entitled to personal leave, compassionate leave and public holiday payments.  

The court ruled that regardless of what their contract says and regardless of the payment of a casual loading, casuals are likely to be considered permanent employees based on their nature of work.

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Conventional wisdom has been that casuals do not accrue annual leave entitlements, because the casual loading sees them effectively paid a higher hourly rate in lieu of such accrued entitlements.

However, on Wednesday, the Federal Court upheld the precedent WorkPac v Skene ruling in 2018, when it decided that a casual mine worker who had regular and predictable shifts was entitled to the same benefits as a permanent member of staff, including accrued annual leave pay.

 

The labour hire firm, WorkPac, decided not to appeal the ruling in the High Court, instead deciding to challenge the Skene decision’s definition of casuals before a new full bench and with a different employee, Robert Rossato.

However, in a long-awaited judgment, the court on Wednesday made a similar decision, ordering WorkPac to pay Mr Rossato unpaid annual leave, personal leave, compassionate leave and public holiday payments which are owing on the basis that he was a permanent employee.

Mr Rossato was engaged by Workpac under six separate casual contracts of employment over the course of three years, and casual loading was, according to the firm, incorporated into his flat rate of pay.

The labour hire firm claimed that one of Mr Rossato’s contracts expressly spelt out each proportion of the 25 per cent casual loading that was paid in lieu of leave, notice and redundancy entitlements. In addition, Mr Rossato was covered by an enterprise agreement which provided for the engagement of casual employees and the payment of a 25 per cent casual loading in lieu of leave entitlements.

However, despite arguments from WorkPac that Mr Rossato was a casual because of the lack of “firm advance commitment” as to his days and hours, the full bench ruled unanimously that the party’s description of the engagement as casual in a written contract is not determinative.

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Justices Mordy Bromberg, Richard White and Michael Wheelahan found that, according to the “regularity and predictability” of Mr Rossato’s hours, the long-term and advance rostering that was present from his first contract and the provision of accommodation facilities, he was a permanent employee.

The court found that Mr Rossato and WorkPac had in fact agreed on employment of “indefinite duration” which was stable, regular and predictable “such that the postulated firm advance commitment was evident in each of his six contracts”.

WorkPac’s argument that it should be able to set off the casual loading it had to Mr Rossato against the unpaid entitlements was also quashed. Further, the labour hire giant was told it was not entitled to restitution of the casual loading built into Mr Rossato’s hourly rate.

In fact, Justice Bromberg warned that by failing to pay the National Employment Standard, including leave, an employer would be considered in breach of the Fair Work Act.

“That would be so even if Mr Rossato had agreed to accept something else in lieu of or in substitution of the entitlements because WorkPac and Mr Rossato cannot contract out of those entitlements or the timing and manner of their provision,” Justice Bromberg said.

End to ‘casual rort’

With concern brewing in the business community, the Construction, Forestry, Mining and Energy Union (CFMEU) has applauded the court’s ruling, calling it a win for casuals and an end to the “permanent casual” rort.  

CFMEU national president Tony Maher said employers should now start employing people according to the objective nature of their work rather than their preferred label.

“This is a fantastic decision that puts an end to the ‘permanent casual’ rort that has become a scourge in the coal mining industry and across the workforce,” Mr Maher said.

“It’s a decision that passes the pub test on what it means to be a casual and is consistent with community expectations that casual work is irregular and intermittent.

“Employers must now stop with the nonsense that calling a worker a casual makes them so. When a job is full-time, regular and ongoing, it is permanent and deserves the security and entitlements that come with permanent work.”

Urgent government intervention sought

Reacting to the court’s decision on Wednesday evening, national employer association Ai Group called for urgent intervention from the government.

It warned that at least 1.6 million of the 2.6 million casuals in Australia work on a regular, ongoing basis, meaning that the potential impacts on employers for annual leave alone are between $5.7 billion and $8 billion.

Innes Willox, chief executive at Ai Group, said that the case highlights the need for “urgent legislative reform to provide certainty to businesses and casual employees, and to prevent double-dipping claims”.

“The Fair Work Act needs to be urgently amended to define a casual employee in a simple and clear manner to address the uncertainty caused by the Federal Court’s WorkPac v Skene decision, and now the WorkPac v Rossato decision,” Mr Willox said.

He noted that the current laws, as interpreted in these decisions, operate as a major deterrent to the employment of casuals, especially during the current coronavirus crisis.

“With unemployment and underemployment rapidly increasing during the COVID-19 crisis, employers need to be encouraged to retain and take on casual employees — not deterred from doing so.”

Mr Willox concluded: “Parliament needs to act now, to address the uncertainty caused by the Federal Court’s WorkPac v Skene and WorkPac v Rossato decisions, and to preserve fairness for all parties.”

Businesses face $8bn in backpay after casuals ‘double dipping’ is upheld
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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