By Fizzah Usama
We’re only mid-way through 2020, and yet there have been many significant events that have impacted the Australian industrial relations framework – one major event being the Full Federal Court’s recent decision in the matter of WorkPac v Rossato. Why? The Rossato decision has the potential to affect many businesses that hire casual employees.
In this article, we’ll explain why and provide some solid tips to help mitigate the risks associated with casual employment.
It was decided by the Full Federal Court, that a labour-hire casual employee (Rossato) who was engaged and paid as such, had been misclassified for their engagement and was, in fact, a permanent employee with entitlements under the National Employment Standards (NES) such as annual leave and personal leave.
This decision affirms an earlier decision made in 2018 by the Full Federal Court in the matter of WorkPac v Skene where the Court explained that to assess whether a casual employee is truly a casual employee or permanent one, it would look at the true substance of the employment relationship rather than its form. This meant that merely a casual contract would not of itself be sufficient to avoid the formation of a permanent employment relationship.
Despite these important decisions it’s not correct to say that all casual employees are entitled to paid leave and other forms of permanent employment rights. In both matters, the casual employees involved were working a defined and consistent pattern of work which required an advance commitment to working the roster over an extended forward period. In this case, the Court determined that the obligation required of each employee to work that defined the roster structure on an ongoing basis was an important characteristic of permanent employment.
In doing so the Court has sent a strong reminder to businesses that the engagement of casual workers needs to be assessed against the context, obligation and framework of the particular role. The mere representation of a role as a casual position, together with the payment of casual loading, will no longer suffice.
Here’s what you can do to reduce your risk of a dispute.
1. Review casual rosters
One of the main reasons why the Court determined Mr Rossato to be misclassified is that he worked the same hours as a permanent employee and was required to provide an advance commitment to work a roster pattern which was determined well in advance.
Employers should be wary of the regular and predictable nature of hours worked by a casual employee, as this may indicate the engagement as permanent. On the other hand, hours of a true casual employee tend to be irregular, uncertain, intermittent and unpredictable, and the employee is free to choose to either accept or decline the offer of work.
2. Evaluate employment contracts
Employers also need to review their casual employment contracts to consider whether any terms within the document suggest the existence of obligations incidental to a permanent employment relationship. This means that any references to set rosters, a notice of termination, leave entitlements, or guaranteed work should be reconsidered. In Mr Rossato’s example, his employment contract stated that he would work to a roster, while there were clauses in his contract which allowed him to reject a shift it also imposed significant penalties and disincentives if he did so, which, from a practical perspective, ultimately limited his ability to reject such work when offered.
While a well-defined casual employment contract is not conclusive, it is a significant factor which demonstrates the intentions of the parties at the formation of the relationship.
It is also important that the contract contains other essential clauses, including offset provisions, which will enhance an employer’s ability to respond to a dispute or minimise liability.
A professionally drafted and bespoke contract of employment is essential in circumstances where a business engages casual employees on a regular and systematic basis.
3. Payment of casual loading
The decision in the Rossato matter means that long-term or regular casual arrangements with aspects similar to permanent employment carry the risk of the employer being potentially liable to pay entitlements including paid leave, notice of termination and redundancy pay. This is even if casual loading has been paid to the casual employee. Rossato’s contract specified that he would be paid an hourly rate that included casual loading. This specification in some of Rossato’s contracts did not expressly state that the casual loading was in lieu of entitlements under the NES. The Court held that the liability to pay NES entitlements cannot be offset against casual loading already paid to a casual employee treating the employment relationship as dynamic and changing.
From this, employers should ensure the payment of a 25 per cent casual loading which is separately identified in an employee’s contract and within their payslip. Additionally, payslips should specify separately the payment of casual loading on top of the base rate of pay. While the payment of casual loading is not a decisive indicator of a casual employment relationship, non-payment of casual loading or its non-specification in payslips forms a strong basis for claiming entitlements.
4. Offer permanent employment to regular casuals
The Rossato matter creates a strong need for employers to constantly monitor the working arrangements of casual employees to assess the regularity of the hours worked, and consequently offer permanent employment to casual employees who are working regular hours.
In many instances where an employee is covered by a Modern Award, the employer is required to notify a casual employee of their right to request conversion to permanent employment, and an employer has an obligation to reasonably consider any such request.
In instances where a casual employee is engaged on a regular and systematic basis, the offer of permanent employment will weigh in favour of the employer in any future dispute if an employee fails to express an interest in conversion to permanency. While not determinative against any future dispute, it will clearly identify the employee’s own views and expectations relating to their classification.
5. Opportunity for employees to cancel or refuse shifts
Casual employees are engaged as such and cannot be bound or be asked to provide a guarantee of engagement. Employers should be careful when creating any direct or indirect disincentive to refusing casual work when offered.
It is important to remember that the decision in Rossato does not provide all long-term casuals with an automatic right to entitlements, but rather a potential to claim that the true nature of their relationship is other than what it is expressed to be. While it is unlikely that a casual employee would have a clear-cut claim as Rossato’s, the five guidelines outlined above can help employers correctly classify their workforce and avoid severe repercussions for their businesses.
If you have a query about the information in this article, get in touch with us.
Fizzah Usama is a Workplace Relations Consultant at HR Assured and FCB Group (our parent company). She advises and supports our clients with any workplace issues through our Telephone Advisory Service including matters arising from the engagement of casual employees and how to review a business’s engagement structure to minimise the likelihood of a future dispute.