THE BLACK HOLE WORTH POTENTIALLY BILLIONS
LONG TERM CASUALISATION CASE HIGHLIGHTS CHANGES AHEAD
The Federal Court has potentially created mayhem with their determination in WorkPac Pty Ltd vs Rossato (May 2020), or is there another route in play…. read on.
You may have been diverted from employment news in the last few weeks with the ongoing COVID-19 impacts and statistics, economic and employment recovery, coupled with some very sobering global news dominating headlines.
However, if you are a business owner/manager/leader/HR specialist, it is vitally important to understand the implications of the latest Federal Court decision in WorkPac Pty Ltd vs Rossato, which deals with the “long-term” casual question in regards to the ability to claim for leave entitlements not paid, without taking into account the payment of casual loading.
Let’s preface the summary below with a few salient points first up as this is a moving beast with no clear outcomes yet for businesses:
The Federal Industrial Relations Minister, Christian Porter, will consider this decision framed in a post COVID-19 world and has openly acknowledged it could hurt businesses at a critical time;
Employer lobbyist groups such as Australian Industry Group (AIG) are urging the Government to amend the definition of a casual (“engaged and paid as such”) in the Fair Work Act to support businesses;
An appeal on the decision from WorkPac Pty Ltd (supported by other groups) may be in the making.
The Case Summary
Mr Rossato was an employee of WorkPac (labour hire) in the mining industry from July 2014 to April 2018, employed via six consecutive contracts during this time of a regular and systemic nature. He was classed as a casual and paid a casual loading rather than receiving leave entitlements.
In the Federal Court, Mr Rossato argued he was not a casual employee by definition of the Fair Work Act and the applicable Enterprise Agreement, meaning he was therefore entitled to all types of leave entitlements that a permanent employee would receive.
WorkPac argued he was a casual, and if he was found not to be by the Court, then in all cases there should be a restitution of the casual loading which had already been paid to Mr Rossato within his hourly rate to compensate him for any leave entitlements. It is noteworthy that WorkPac lost a similar case (Skene) in 2018.
WorkPac’s main argument was that there was no firm advance commitment and the contract of employment stated he was casual.
The Court stated that the contract of employment and the context is crucial in determining casual status – and found in this instance that Rossato’s employment was regular, the employee was not “permitted” to elect to work or not, and the duration of the employment was relevant (over 3 yrs), and hence he was not a casual employee as defined in the Fair Work Act (this part is important for later). The Court further found that whilst the description of the employment as “casual” is relevant, it is not the conclusive element.
The Federal Court also crucially rejected WorkPac’s argument that the casual loading paid to Mr Rossato to date is restitution for any leave entitlements – stating that there was no “mistake” made so, therefore, the Fair Work Regulations cannot be relied upon to absolve them.
Is this a black hole for businesses?
Some commentators have said that the “black hole” of liability for employers for back-dated claims for leave entitlements from long-term casuals could run to $8 billion.
However, before all hell breaks loose, a number of avenues are still in play as per my preface including whether or not the Government will amend the definition of casuals in the Fair Work Act, and whether retrospective claims can be made, and across all industries. In addition, an appeal seems possible. It is worth noting that WorkPac was subject to a similar case in 2018 which they lost, and apart from a flurry of words, not a lot has changed since then.
Nevertheless, case law is a definitive thing and doubling down on this with Skene and Rossato, the risk is clear. Long-term casuals are like permanent employees – this now goes a step further with the casual loading ruling.
Manage your risk
Simply put, you should, in the framework of the industry and business you work in, take steps to actively manage your risk of liability, and structure your business accordingly.
Consider whether your casuals have:
Long-term (12+ months) of employment that is stable, regular and predictive
Check that you have offered casual conversion if it was appropriate (and have it in writing if it has been rejected by the employee). Most Awards (and Enterprise Agreements) have requirements to do this at 12 months – reach out to us for assistance with this.
Re-word and re-issue employment contracts to spell out that if an employee is found to be permanent in nature, then the casual loading is restitution for any leave entitlements.
True casuals should:
Work irregular rosters and hours, not planned well in advance
Be able to knock back shifts (i.e., not be expected to always be there like permanents)
There are a few other tips & tricks – contact the team here at HR Unplugged to engage us in assessing your company’s risk and working to mitigate current and future issues.
Workforce Casualisation
It’s no secret I’m not a fan of this long march towards casualisation of the workforce – it raises practical and social issues that many casual employees often do not consider when they opt for the higher casual loading rate. On the other hand, some industries cannot support permanency and are dynamic (or volatile), and/or made up of employees who equally do not want to move to permanent part-time or full-time. It is not a one-size-fits-all scenario. Practicality is vitally important.
From my perspective, attempts within Awards to “coerce” the hand of both parties (employer and employee) through a Casual Conversion clause by agreement after 12 months of regular and systemic employment, have, for the most part failed. These casual conversion clauses do not deal with the core of the problem – many employees simply want the higher take-home pay, rather than the concept and security of permanency in a generation that has (until COVID) been working in a society that has enjoyed high employment, even in GFC times. These comments are general in nature, so by no means cover all cases. There are some employees who yearn to be permanent, however the majority love the extra $$ that come with casual status.
Unions may well find themselves in some hot water with parts of their membership base - Union members often wish to receive the higher casual loading rate of pay. In some industries, they may find themselves having to accept a lower permanent rate of pay with no choice to remain on casual rates. And that, for some, maybe the difference in making ends meet or not.
The CFMEU, who was the Union involved in the first WorkPac case with Skene, have started class action for miners specifically.
I urge businesses to not panic in regard to this ruling as there is still some water under the bridge to run, but the time has come to make informed decisions on employment structures within your businesses.
Long-term casuals have not been “true casuals” for many years – you must treat them in the same way as permanents, and now this ruling may well run to remuneration as well.
Contact the team at HR Unplugged now for affordable, practical and sound HR / IR advice. We have many years of experience across many industries to assist you in this matter in a practical way.