Australia: In the Rossato decision, the Court confirms overall relationship is still critical in determining casual employment; rejects ‘double dipping’ argument

In the long awaited decision of WorkPac Pty Ltd v Rossato [2020] FCAFC 84, the Full Federal Court finds ‘casual’ WorkPac employee entitled to leave and holiday payments.

Background

Robert Rossato was employed by labour hire company WorkPac Pty Ltd (WorkPac) as a casual coal mining worker across companies within the Glencore Group from 28 July 2014 to 9 April 2018.

After his employment ceased, Mr Rossato asserted that, contrary to WorkPac’s characterisation of him, he had not been a casual employee. He claimed outstanding entitlements to paid annual leave, paid personal/carer’s leave and paid compassionate leave under the National Employment Standards (NES), as well as public holiday pay entitlements under the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (the 2012 EA).

WorkPac commenced proceedings in the Federal Court of Australia, seeking declarations that Mr Rossato was a casual employee for the purposes of the NES and under the 2012 EA. The effect being that he was not entitled to paid leave and public holiday payments. In the alternative, WorkPac argued that it could recover certain payments that had been made to Mr Rossato on the assumption that he was a casual employee.

In a long awaited decision handed down on 20 May 2020, Justices Bromberg, White and Wheelahan delivered separate judgments, all concluding that Mr Rossato was not a casual employee for the purposes of the NES, nor under the 2012 EA. Accordingly, Mr Rossato was entitled to paid annual and personal/carer’s leave, compassionate leave and public holiday payments. There was no entitlement to set off or otherwise recover payments that had been made to Mr Rossato on the basis that he was a casual employee.

Casual or permanent?

WorkPac accepted that the Full Federal Court’s earlier decision in Skene¹ had been correct in finding that the term ‘casual employee’ when used in the NES has the general law meaning, and that the touchstone of the general law meaning was ‘the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work’.

In Skene, the Full Federal Court assessed the existence of the ‘firm advance commitment’ by considering the ‘totality of the relationship’, having regard to the conduct of the parties, including the real substance, practical reality and true nature of the relationship. In Rossato, WorkPac invited the Court to depart from that approach, and to assess casual employment by reference solely to the terms of the written contract upon its commencement.

While the Court indicated that it was not wrong to look at the ‘totality of the relationship’, it was not necessary to ultimately determine this issue. That was because even accepting WorkPac’s pure contractual assessment approach, Mr Rossato’s employment amounted to a firm advance commitment, meaning he could not be a casual employee.

Factors leading the Court to this conclusion included:

• Mr Rossato was contractually required to complete an ‘assignment’ once he accepted it, and he was liable to a financial penalty if he failed to do so. The ‘assignment’ was of an indefinite duration because he was told that the initial 6 month period was a guide only;
• Mr Rossato was required to serve a ‘6 month minimum qualifying period’;
• Mr Rossato’s employment continued indefinitely, subject only to termination on notice; and
• the stable, regular and predictable nature of Mr Rossato’s employment, as prescribed by the annual rosters that Mr Rossato was contractually required to work. These rosters indicated a mutual understanding that the employment offered was organised, structured, ongoing, regular and predictable.

These factors pointed to a conclusion that the employment was not intermittent, irregular or informal and unlikely to continue. Had it been necessary for the Court to consider the ‘totality of the relationship’, the matters identified above also supported a finding of permanent employment. This was reinforced by the manner in which the contracts were performed, including the fact that Mr Rossato:

• was given the annual rosters in advance and was told that he was to work in accordance with the roster (that is, the function of the roster was to assign work to Mr Rossato);
• was issued timesheets that were pre-populated with his shift pattern;
• was never asked whether he intended to attend on a day that he was rostered, and there was a corresponding absence of any meaningful mechanisms by which Mr Rossato was able to accept or reject shifts; and
• lived over an hour’s drive away and was provided with on-site accommodation. This was inconsistent with an expectation that the employment was intermittent and Mr Rossato having a choice of whether to reject work on a particular day.

The ‘Set-Off’ Claim

WorkPac said that if Mr Rossato was not a casual employee, it should be entitled to have two payments brought into account in discharge of its obligation to pay Mr Rossato his leave and public holiday entitlements.

The first was the amount that it had paid Mr Rossato which exceeded the rate of pay applicable to a permanent employee under the 2012 EA (Overpayment). WorkPac sought to recover this on the basis that the parties had failed to create the type of relationship that they had intended, and therefore, the purpose of this payment did not need to relate to the entitlements being claimed. The second was the casual loading which WorkPac said had been specifically paid in lieu of the leave entitlements now being claimed.

The Court unanimously found that a ‘set off’ was not permitted in either case because there was not a sufficiently ‘close correlation’ between the purpose of the payments and the entitlements being claimed. In respect of the casual loading, the Court found that it had been provided as a substitute for leave, so could not later be assigned to discharge the obligation to provide that leave.

The Court was also unanimous in finding that WorkPac’s reliance on the ‘double dipping’ provisions of the Fair Work Regulations 2009 (Cth)² was misguided. This was because the regulation only applies when the employee makes a claim to be paid an amount in lieu of one or more of the relevant NES entitlements. As Mr Rossato sought payment of the NES entitlements, not payments in lieu, the Regulation did not apply. In any event, Justice Wheelahan found that the Regulation did not affect the substantive law of ‘set off’ that remains applicable to the determination of such a claim.

The restitutionary claims

WorkPac argued that it was entitled to restitution of the Overpayment or, in the alternative, the casual loading because:

• it had been mistaken as to the proper characterisation of the employment; or
• those payments had been made in consideration for a purpose which had failed.

Although they each rejected the ‘mistake’ claim, the approach of the three judges differed, with the exception of one fundamental issue upon which they all agreed: even if WorkPac could demonstrate that it was operating under a mistake, it was not so fundamental that the basis for the contract wholly failed. That is, the contract was not alleged or demonstrated to have been void as a result of the mistake.

That same issue also defeated WorkPac’s ‘failure of consideration’ claim. The Court unanimously finding that the remuneration paid to Mr Rossato was not divisible merely because an assumption which may have formed part of the calculation of the agreed hourly rate of pay did not exist. WorkPac had agreed to pay Mr Rossato his hourly rate in order to secure the performance of work by Mr Rossato. There had been no failure of that object.

What does this mean for employers?

The calls for legislative reform are already coming from employer groups in search of clarity, with proposals to redefine the meaning of a ‘casual employee’ under the Fair Work Act. In the absence of legislative clarity, employers should endeavour to:

• use casuals only where the employment is truly intermittent, irregular, informal and unlikely to continue for any length of time;
• offer employment to casuals on a daily or shift basis only, and ensure that there are appropriate mechanisms for the employee to elect whether or not to work on each day or shift;
• ensure that the express contractual arrangements reflect the arrangements identified above;
• ensure a casual employee’s rate of pay reflects a separately identifiable casual loading;
• consider contractual provisions that expressly permit the recovery of the casual loading if the relationship is subsequently found to have been mischaracterised; and
• avoid casuals working patterns of stable, regular and predictable employment.

Endnotes

1. Reg 2.03A.
2. WorkPac Pty Ltd v Skene (2018) 264 FCR 536 (Skene).

This article was written by Dean Farrant, Special Counsel and Georgina Langford, Graduate.

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