Federal Court WorkPac Ruling Sends Casual Shockwaves amongst Employers

The landmark decision of WorkPac Pty Ltd v Rossato has been handed down by the Full Federal Court. The Full Court held that a coal mining worker (Mr Rossato) was in fact a permanent employee with a right to paid leave entitlements, despite being classified and engaged as a casual employee under his employment contract for almost four years.

Test Case for Casual Workers

This became a major test case for the definition of casual work in Australia, with potentially widespread application and significance and provides some clarity in what has proven to be a confusing landscape.

Previously, the courts have questioned whether a particular class of ‘casual’ workers whose work patterns are more in line with permanent employment should receive paid leave entitlements. The question has fuelled debate because if you pay those employees 25% casual loading as well as paid leave entitlements, the employees may be ‘double dipping’.

In 2018 the WorkPac v Skene decision sent shockwaves in the labour market when a casual employee was found to have been employed on a permanent basis. Whilst the Skene decision was about an employee engaged under an Enterprise Agreement, the Rossato decision dealt with the nature of casual employment under the Fair Work Act 2009 (Cth) (the FW Act) meaning it may have a much broader impact for casual employment. In Rossato, the Court applied the definition of casual employment contemplated in the Skene decision, and subsequently held that Mr Rossato was not a casual employee either under the FW Act or under the relevant WorkPac enterprise agreement.

The Rossato decision reaffirmed Skene insofar as a employee classified by his employer as a casual was found to be entitled to paid leave entitlements on the basis that the employment did not meet the “traditional” definition of true casual employment, which is characterised by, amongst other things:

• “absence of firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work;

• no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work (nor does a casual employee provide a reciprocal commitment to the employer); and

• discontinuous, intermittent and/or irregular work patterns.”

What are the implications?

This decision could have major implications for employers, many of whom are already under economic pressure due to Covid-19. It has been reported that the decision could affect regular casuals across the entire economy, far beyond the mining industry, and could expose businesses to back pay of up to $8 billion.

CFMEU national president Tony Maher declared that the decision “passes the pub test on what it means to be a casual” and subsequently “puts an end to the ‘permanent casual’ rort that has become a scourge in the coal mining industry and across the workforce“.

“Employers must now stop with the nonsense that calling a worker a casual makes them so,” Mr Maher said.

Will the Government step in?

In opposition to Mr Maher, employer groups have already exerted pressure on the Morrison government to intervene. Australian Chamber of Commerce and Industry chief executive James Pearson says the decision comes as a “major blow” at the “worst possible time“.

“The prospect of having to defend up to six years worth of back pay claims from former casual employees will be the end of many small businesses who are barely hanging on right now”, Mr Pearson stated.

Attorney General Christian Porter has already expressed that the Government would consider supporting an appeal to the High Court especially considering the economic impact of Covid-19. The Morrison Government has also flagged potential legislative change to statutorily override the decision but is yet to confirm governmental intervention.

The Opposition has conveyed its strong hesitation in pursuing legislative changes to the FW Act with Mr Tony Burke, Opposition industrial relations spokesman saying “… if the Government thinks after all the insecurity that people are living with in Australia at the moment, that he wants to change the law to give people less job security — we’re there for that fight“.

WorkPac have not yet confirmed whether they intend to bring a High Court appeal for this case. We will aim to keep you updated with any future developments.

What can and should employers do?

This decision has clearly caused employers (especially those who employ casual workers) a significant degree of concern.

The case potentially allows certain casual employees, who meet the requirements, to claim leave entitlements under the FW Act. The case is also authority for the proposition that employers were not able to offset any casual loading already paid to the employee against the amount owed. These two parts together potentially creates new liabilities for employers with casual workforces.

Employers should review their casual contracts and hours to ensure that no employees have been misclassified. A pre-emptive review of employment contracts is advised as opposed to running the risk of employee claims for back pay alleging misclassification of their employment.

Industrial Relations overhaul in the wake of COVID-19

In the meantime, it seems the review of classification of casuals will form part of more general re-evaluation of workplace pay and conditions by the Morrison government, overseen by a consultation process between unions and employer groups and headed by Christian Porter.

On Tuesday 26 May 2020, the Prime Minister announced five priority areas for reform, including changes to casual and fixed-term employment, changes to Modern awards, collective bargaining for workplace pay deals, and compliance and enforcement to ensure workers are “paid properly”.

While it appears that there is an Intention for collaboration, the Morrison government has stated it will push on with IR reform even if unions and employers can’t come to an agreement.

If you have any questions about the classification of employees and whether your casual employees are ‘true casuals’ please do not hesitate to contact Nick Stevens or Jane Murray.

We would be more than happy to assist with a comprehensive review of your casual workforce to ensure that all employees are correctly classified.