Casual Employment – compounding uncertainty for Employers

There have been a number of decisions in recent years which have caused concern for employers around the use of casuals. The shock from the decision in WorkPac Pty Ltd v Skene in 2018 (“Skene”), is still reverberating today. The Full Federal Court decided in Skene that a casual employee may be able to claim entitlements of permanent employees (annual leave, personal leave) even when they have been engaged as a casual and paid a casual loading.

In a ruling delivered this week (WorkPac Pty Ltd v Rossato [2020] FCAFC 84) (“Rossato”), the full bench of the Federal Court has reaffirmed the decision in Skene that casual employees may be able to “double-dip” – meaning they can receive payment of a casual loading and still claim entitlements such as paid leave.

The problem for employers is that this latest case has now gone further than the decision in Skene by dismantling “set-off” clauses used by employers to stop casuals from double-dipping.

The same labour hire company (WorkPac) as the one involved in the Skene case brought this case against its employee, Rossato. The circumstances in the two cases are similar.

The employer argued that Rossato was intended to be engaged as a casual employee, and that the casual nature of the engagement was evidenced in the employment contract. The Court disagreed that Rossato was a casual. Despite the intention reflected in the contract, the Court considered that whether or not the employment relationship is one of casual or permanent employment is to be determined by looking at the relationship as a whole, including the way in which the work is performed. Like Skene, the Court found that Rossato’s employment was stable, regular and predictable, and reflected the characteristic of “firm advance commitment” which is not evident in casual engagements.

The employer also argued that, if the employee has entitlements as a permanent employee, then the casual loading paid should be either “set off” against Rossato’s claim, or should be repaid to the employer. Although the reasoning differed among the Judges, the Court’s decision was that off-set clauses and claims for restitution (that the employer had “overpaid” the employee the amount of the casual loading) would not be effective.

The Court also observed that, where an employer seeks to pay an employee up-front for paid leave entitlements when the employee is not a casual employee, this amounts to “cashing-out” paid leave entitlements, which is expressly prohibited by the Fair Work Act.

The decision also dismissed the amendment made to the Fair Work Regulations in 2018 following the decision in Skene (regulation 2.03A) to provide for off-set of casual loadings. The Court said this regulation was ineffective.

Lessons for Employers

The Court has essentially reaffirmed that employees that are engaged as casuals and paid a casual loading, but are not casuals as defined by law, are effectively entitled to “double-dip” on employment entitlements. Further, set-off clauses that were being used by employers to overcome this will not be valid.

With a very large question mark now hanging over the efficacy of set-off clauses in employment contracts, the focus comes back to the use of casual employees and which employees are “truly” casual.

To reduce the risks that casual employees will claim they are entitled to accrue annual leave and other entitlements:

  • The only real, safe option left for employers is to regularly assess the working patterns and arrangements with casual employees to ensure that they are actually casuals as defined by law; and
  • We recommend that you continue to use a well-drafted set-off clause in your employment contracts, even though this may not be effective in every case.

BlandsLaw can assist with auditing your casual workforce to ensure that you are legally compliant and to minimise the risks around claims for permanent entitlements.

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