AMMA’s Workplace Policy Advisor, Tegan Morris (pictured) has prepared for members the following comprehensive case summary of the WorkPac v Rossato Full Federal Court Judgement. For CEO comment, read this related article.

Last Wednesday (20 May 2020) the Full Federal Court delivered its long-anticipated judgment in Workpac v Rossato, dismissing Workpac’s claims for declarations that coal mine worker Robert Rossato was a casual employee and not entitled to claim back-paid permanent entitlements.

The decision backs the earlier contentious Workpac v Skene ruling that an employee’s patterns of work were the key determinative factor to their employment status.

It is also the first decision which tests the application of new Fair Work Regulations 2009 (Cth) in determining whether employers can offset the casual loading paid to an employee against claims for permanent entitlements.

The Federal Court judgment has reignited calls for the Australian Government to resolve the casual employment issue and provide greater clarity and certainty to employers and employees on the rights and entitlements of casual workers in Australian workplaces.

Background

From July 2014 until his retirement in April 2018, Workpac engaged Mr Rossato as a casual employee to provide labour hire services at various coal mines across Queensland.

Workpac engaged Mr Rossato under six employment contracts over that period. Mr Rossato had signed a declaration that he had read and understood the document which outlined the general conditions of his casual employment with Workpac. The general conditions document was applicable to each of his six contracts and provided the terms and conditions to all individual contracts which are entered into by Workpac with its employees.

In each of the contracts, Mr Rossato was required to perform work as directed by Glencore and was allocated to a particular crew under roster arrangements which were also determined by Glencore. The rosters specified the pattern of work required to be performed over a period of time.

In October 2018, in a letter to Workpac, Mr Rossato made a claim for payment of annual leave not taken by him before the end of his employment, and payment for public holidays and periods of personal/carer’s leave and compassionate leave taken by him during his employment. Mr Rossato made his claim for entitlements following the Full Federal Court decision in Workpac v Skene found a former coal mine worker who was employed by Workpac in similar circumstances to Mr Rossato was not a casual employee.

In light of the Full Federal Court’s judgment in Workpac v Skene, Workpac chose not to seek leave to appeal the decision to the High Court. Instead, after Mr Rossato made his claim for permanent entitlements, it commenced fresh proceedings in the Federal Court seeking to minimise the practical effect of the Skene judgment and determine its ability to ‘set off’ portions of the payments it had made to Mr Rossato.

In December 2018, the Minister for Jobs and Industrial Relations, the CFMMEU and another coal mine worker Mr Matthew Petersen were granted leave to intervene in the matter.

In its application, Workpac sought declarations that for the duration of Mr Rossato’s employment, he was a casual employee at common law and under the Fair Work Act 2009 (“FW Act”), a casual field team member under the applicable enterprise and not a permanent field team member.

Given his status as a casual employee, Workpac sought declarations that Mr Rossato was not entitled, and it was not liable to pay him, for the entitlements he sought to claim.  Further, Workpac claimed Mr Rossato was bound by employment contracts identifying him as a casual employee under which he was paid a flat hourly rate including a 25% casual loading.

In submissions, the parties to the proceedings all agreed with the principle in Skene that the absence of a “firm advance commitment” of work is the criteria for determining whether casual employment can be ascertained.

Workpac submitted that the required firm advance commitment had to be expressed within the contract and was to be ascertained at the time the contract was made.  It also sought to exclude any extraneous materials in determining whether there was a firm advance commitment by referring only to the contractual terms and without consideration for post-contractual conduct.

Mr Rossato, supported by the CFMMEU and Mr Petersen, contended that a firm advance commitment had to be determined by the employment relationship as a whole, including the manner in which the relationship played out in practice.

Casual employment determined by more than being engaged and paid as such

The members of the Full Federal Court (Bromberg, White and Wheelahan JJ) all gave separate judgments, however all three agreed that Mr Rossato was not a casual employee for the purposes of the FW Act and the applicable enterprise agreement.

The issue in contest was whether or not an assessment of the existence of a firm advance commitment is purely by reference to the contract of employment or through characterising the nature of the employment relationship as a whole.

Firstly, the Court had to determine the sources of the entitlements Mr Rossato claimed to be owed under the FW Act.  While the Court acknowledged there is no definition of a “casual employee” within the FW Act, it is distinguishable from other types of employment and has been determined based on the facts in several of the legal authorities examined in its judgment.

The Court acknowledged the difficulties in defining casual employment as “the meaning given to it varies according to the particular context in which the issue arises for determination and that the matters bearing on its existence may vary according to the factual circumstances”.

Despite this, Bromberg J agreed with observations in Skene that the “indicia of casual employment referred to in authorities – irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability – are the usual manifestations of an absence of a firm advance commitment”.

It was White J’s view that “the apparent purpose for excluding casual employees from the NES entitlements supports the view that the FW Act contemplates employment of that kind is irregular, intermittent and uncertain”.

To determine Workpac’s liability for the entitlements Mr Rossato claimed to be owed, the Court then had to consider whether Mr Rossato was “other than a casual employee” under the FW Act. This required the Court to assess whether or not a firm advance commitment of work existed and what factors were to be considered in making that assessment.

The Court rejected Workpac’s contention that the requisite firm advanced commitment should be determined at the time the contract is made and by reference solely to the terms of the contract. The Court emphasised that the words of the FW Act direct attention to the character of the employment “at the time the impugned entitlements accrued, rather than simply what type of contract he made at the outset of that employment”.

While Workpac contended that Mr Rossato was a casual employee for the purposes of the FW Act and was engaged and paid as such, it was the Court’s assessment of the way in which the contracts were performed that went against its consideration that Mr Rossato was a casual employee.

In construing each of the six contracts of employment, the Court made an assessment about how the work was to be performed under each of those contracts. Generally, under each employment contract, Mr Rossato was assigned to a particular crew and required to perform work in accordance with a pre-determined roster.

Bromberg J found “on the characterisation of the employment, it is not necessary for the firm advance commitment to be a contractual term. A mere subjective expectation of continuing work according to an agreed pattern of work would not be sufficient, but an objectively justified expectation of that kind would ordinarily suffice”.

The Court determined that the parties had agreed to regular, continuing and predictable employment of an indefinite duration.

The reasons for the determination included “the very fact that the work Mr Rossato was to perform was not to be performed on demand but was pre-programmed long in advance and fixed by a roster is strongly indicative of a firm advance commitment”.  That the shifts allocated to Mr Rossato were not optional and he did not have the capacity to elect whether or not to work a shift also supported the determination.

Further, Workpac also had the capacity to stand Mr Rossato down without pay in circumstances it could not be held reasonably responsible.

Other indicia which supported the intention of regular, continuing, and predictable employment was the pre-populated timesheets indicating there was a set pattern of ongoing work, terms in the notice of offers which provided damages if Mr Rossato failed to attend to perform work and the provision of accommodation and transport costs.

The Court said it was of no significance that “the duration of the employment was uncertain given the period of employment could be varied or terminated” because employment of indefinite duration (permanent and ongoing) are also subject to rights of termination”.

The Court found “the facts of each of the employments of Mr Rossato, including the contractual facts, justify the conclusion that a characteristic of each was that a firm advance commitment was given to Mr Rossato and that, for the purposes of ss 86, 95 and 106 of the FW Act, Mr Rossato was ‘other than [a] casual employee’”.

The ability to offset liabilities against entitlements already paid

Workpac sought declarations that in the event the Court found Mr Rossato was not a casual employee, it was entitled to restitution.

Workpac pursued restitution on two grounds; that the casual loading was paid by mistake and the casual loading was a distinct and severable component of the remuneration where there has been a failure. On both grounds Workpac contended that it would be inappropriate for Mr Rossato to retain the amount of the casual loading paid to him if found not to be a casual employee.

The Court did not accept Workpac’s claim that the casual loading Mr Rossato received, which was included in the hourly rate and exceeded the pay rates in the enterprise agreement, was paid by mistake or a consideration which had totally failed.

The Court found Workpac could not explain how the mistake caused it to pay the casual loading where it “voluntarily paid hourly rates which exceed the amounts it was required to pay under the enterprise agreement” suggesting the hourly rates paid reflected market rates as opposed to any mistaken legal entitlement.

The Court did not accept Workpac’s claim there had been a failure of consideration finding Workpac received the benefit of Mr Rossato not accessing leave which allowed it to continue its obligations to Glencore by providing his services.

Workpac also sought to offset a portion of the remuneration paid to Mr Rossato against the obligations to pay the entitlements he claimed he owed by relying on common law rights and the Fair Work Regulations 2009 (Cth).

In seeking to offset already paid entitlements against claimed entitlements, Workpac submitted that of the 25% casual loading, 11% compensated him for, or in lieu of or instead of, his annual leave, and 5% for personal and compassionate leave.

While the members of the Court had different reasons, they all agreed that Workpac was not entitled to set-off the portion of remuneration.  The main concern of the Court was the notion that casual loading is not paid to employees towards or in satisfaction of those entitlement.

The Court also found that there was no express term in the employment contracts which required Mr Rossato to repay any of his remuneration should Workpac have made an error in characterising the basis of employment nor had Workpac made a claim for overpayment.

Regardless of the payment of a casual loading, the Court said the remuneration paid to Mr Rossato did not have a close correlation to the entitlements that he sought to claim. Wheelahan J was of the view that “the wages were not paid on account of any such entitlements, and any loadings that were incorporated were ostensibly paid on account of the absence of those entitlements”.

This decision was the first test of regulation 2.03A of the Fair Work Regulations 2009 (Cth). The Full Court examined the application of the regulation introduced by the Fair Work Amendment (Casual Loading Offset) Regulation 2018 (Cth) to give employers some protection against claims for back paid entitlements. The Court questioned the efficacy and usefulness of the regulation for employers seeking to offset already paid entitlements.

The Court established that subregulation (d) can only apply if the underpayment claim relates to an amount in lieu of an NES entitlement rather than for payment of the entitlement itself. As Mr Rossato was seeking payment of the NES entitlements, not in lieu of, Workpac could not rely on this regulation in this instance.

In finding that Mr Rossato was not a casual employee and entitled to the entitlements he claimed under the FW Act and enterprise agreement, the Court also determined that Workpac was not entitled to either restitution or to offset against its liabilities to pay such entitlements.

Workpac and Mr Rossato have until today (26 May) to reach an agreement on proposed declarations and orders giving effect to the judgment.

It is not yet known whether Workpac intends to appeal to the High Court.

Implications for employers

This is a difficult outcome for employers who have a common understanding that paying casual loading to an employee compensates them for not accruing entitlements under the FW Act.

However, notwithstanding employees are paid that entitlement, employers cannot contract out of the entitlements under the National Employment Standards which is why in this instance the employee was entitled to those payments.

If Workpac seeks to appeal the decision to the High Court, AMMA’s view is it likely the Government will intervene in support of Workpac’s claim.

This decision will become a test case with a number of class actions waiting in the wings to challenge employers on the use of casual employment in the industry.

In September 2019, Justice Bromberg placed two class actions against Workpac on hold until the Rossato judgement had been delivered.

Since the Skene decision effectively overturned the common understanding of the entitlements afforded to casual employees, AMMA has been actively lobbying the Australian Government to fix this area of significant industrial relations uncertainty.

While the Court noted the difficulties in attempting to provide a single definition for casual employees, this decision highlights the need for binding authority about how to distinguish casual employment and provide certainty to employers utilising this legitimate model of employment.

AMMA’s view is that casual employment and labour hire is a small but very important function of Australia’s labour market. In the resources industry, it comprises an estimated 16 per cent of the total workforce.

Casual employment often provides a foot-in-the-door in entry level positions for people new to the industry. At the other end of the spectrum, highly-skilled employees often take well-paid casual contracts where their capabilities are in greatest demand.

Until the Australian Parliament fixes this issue with a clear, common-sense definition of casual employment, businesses will remain reluctant to hire casuals or provide existing casual employees with any regularity in their working hours.

It will be likely that any fix to the casual employment definition will be counterbalanced with a new casual conversion measure, namely an automatic right for all casual employees working on a regular and systematic basis to convert to permanency after 12 months with the same employer.

AMMA would support this new broad casual conversion right in return for greater clarity and certainty on casual definitions, and importantly the removal of the enormous contingent liability that would face Australian business should WorkPac v Rossato be upheld in a possible High Court challenge.

AMMA encourages members who have large number of casual employees to begin examining their employment arrangements to ensure they are not incorrectly classified. For support in reviewing your casual contracts contact your AMMA workplace consultant via [email protected].

For more information about this case or AMMA’s policy and advocacy work in general, contact [email protected].