Permanent casual – like smart casual, a very ambiguous category indeed

In brief 3 min read

In its widely anticipated decision, the Full Federal Court (Full Court) has decided that a labour hire employee was a permanent employee, despite being engaged as a 'casual' by a labour hire firm, WorkPac, for almost four years.¹

This decision has significant ramifications for businesses with a casual workforce.

How does it affect you

• Casual employees may, by virtue of their employment relationship, in fact be permanent employees and entitled to paid leave (including annual leave and personal/carer's leave), notice of termination, redundancy pay, public holidays and, in some circumstances, access to the unfair dismissal regime.
• The characterisation of employment does not depend solely on the terms of the employment contract but all the relevant factors that speak to the nature of the employment relationship.
• Employers of casual employees should carefully scrutinise their employment arrangements, including their employment contracts, pattern of work and rosters, particularly those that are set far in advance.
• Employers may not be able to rely on set-off clauses in casual employment contracts to off-set casual loading paid to employees against other entitlements they may be owed.

Background

WorkPac engaged Mr Rossato under six consecutive employment contracts between 28 July 2014 and 9 April 2018.

WorkPac sought declarations from the Full Court to the effect that:

• Mr Rossato was a casual employee within the meaning of the Fair Work Act 2009 (Cth) (Act) and the applicable enterprise agreement. He was therefore not entitled to any types of paid leave; or
• alternatively, if Mr Rossato was not a casual employee, then WorkPac:
  1. could set off the payments it had made to him on the basis that he was a casual employee against any leave entitlements he was ultimately owed; or
  2. was entitled to restitution of the casual loading paid to him on the basis of failure of consideration or mistake.

The Full Court had recently found that another WorkPac employee, Mr Skene, was not a casual employee.² Mr Skene had been employed in circumstances which were similar, but not identical, to those of Mr Rossato. Our Insight on that case is available here.

The decision – assess an employment contract as a whole

In summary, the Full Court decided that:

• Mr Rossato was not a casual employee. This was because the employment was for an indefinite duration and was stable, regular and predictable such that a 'firm advance commitment' was evident in each of the six employment contracts.
• When considering an employment contract, it should be assessed as a whole. The description given by the parties as to the nature of their relationship, while relevant, is not conclusive. Other factors should also be considered such as whether the employment contract provides for the parties to offer work, or to elect to work, on a particular day.
• WorkPac was not entitled to restitution or to set off casual loading payments made to Mr Rossato against his entitlements to paid leave. This is because the payments do not have a close enough correlation. An entitlement to paid leave is not simply monetary as it allows an employee to have a period of absence from work while receiving payment. In addition, casual loading is not paid to employees in order to satisfy such entitlements, but is paid on the basis that they do not have such entitlements.

The broad-reaching ramifications of this decision, coupled with the fact that it has been handed down during the COVID-19 pandemic, may see the Federal Government propose legislative change or support an appeal.