Another hit for WorkPac’s casual arrangements: WorkPac Pty Ltd v Rossato  FCAFC 84
email@example.com | August 14, 2020
A decision of a Full Court of the Federal Court confirms casual employment can be characterised by the absence of a firm commitment to the duration of employment and the days and hours the employee will work and that double dipping may follow.
WorkPac has failed to obtain the Federal Court’s approval of its casual working arrangements, shortly after having failed to do so in WorkPac Pty Ltd v Skene  FCAFC 131.
In proceedings initiated by WorkPac, WorkPac argued that an ex-employee, Mr Rossato, was engaged as a casual and therefore was not entitled to annual leave, personal leave, compassionate leave and payment for public holidays pursuant to the Fair Work Act 2009 (the Act).
WorkPac argued that Mr Rossato was a casual employee because that was the arrangement agreed between WorkPac and Mr Rossato over six employment contracts.
WorkPac also argued that should the Court find that Mr Rossato wasn’t a casual employee:
- the law of restitution should be applied so that it didn’t need to pay Mr Rossato annual leave, personal leave, compassionate leave and public holiday entitlements in addition to wages paid to Mr Rossato by WorkPac; or
- the law of set off developed in employment law meant that wages paid to Mr Rossato satisfied amounts due for annual leave, personal leave, compassionate leave and public holiday entitlements.
WorkPac’s arguments in relation to restitution and set off was to avoid Mr Rossato “double dipping”.
The Full Court ultimately found that Mr Rossato was not a casual employee and WorkPac was liable to pay paid leave to Mr Rossato. The Full Court also determined that WorkPac was not entitled to restitution or set off against these liabilities.
We outline the issues in further detail in this article.
What is casual employment for the purposes of the paid leave provisions in the Act?
WorkPac argued that Mr Rossato was a casual employee for the purposes of the paid leave provisions in the Act as WorkPac and Mr Rossato had agreed that Mr Rossato was a casual employee in the six employment contracts.
Mr Rossato argued that the six employment contracts didn’t in substance provide for casual employment. Instead, they provided the type of firm advance commitment found not to be casual employment in Skene. Alternatively, if the six employment contracts did provide for casual employment, the parties’ conduct had varied the terms to provide for non-casual employment.
The Full Court (Bromberg, White and Wheelan JJ) agreed that Mr Rossato was not a casual employee.
The Full Court agreed that Mr Rossato’s employment was not casual from the commencement of the contract. The leading judgment was by White J with Wheelan J in agreement.
White J stated that there was no one test for determining whether a person is casual but held that the absence of a firm commitment as to the duration of employment or the days or hours that an employee would work to be a significant consideration.
White J indicated that the following show an absence of a firm commitment:
- irregular and intermittent employment;
- an employer being able to elect to offer employment on a particular day;
- an employee being able to elect to work or not to work any employment offered; and
- working only on demand or as required over a short period.
White J added that:
- the parties describing the arrangement as casual is informative but not conclusive;
- employment being by the hour, and termination on an hours’ notice, indicates the absence of a firm commitment but is not conclusive;
- a firm advance commitment doesn’t have to be express but can be discerned from the arrangement as a whole;
- the time for considering if a person is casual is determined by the statutory context; and
- changes in the employment relationship can be taken into account.
White J considered the factual matrix in existence at the time the six contracts were made on the basis that Mr Rossato’s status under the employment contracts was uncertain and with a view to identifying the type of employment objectively intended by the parties.
White J suggested that a multifactor test akin to that used to identify if a person is a contractor or employee could also be used to determine if someone was a casual.
White J relied on the following in reaching his finding that Mr Rossato was not a casual:
- Mr Rossato was expected to work a shift roster which indicated an expectation that he be available on an ongoing basis to perform duties in accordance with that roster;
- Mr Rossato’s drive in and drive out arrangement, which included him being provided with accommodation when working a swing, was inconsistent with the arrangement being intermittent or discontinuous;
- there was no evidence that WorkPac’s arrangement with Glencore meant that it couldn’t commit to employment with Mr Rossato;
- the requirement that Mr Rossato pay damages to WorkPac if he didn’t finish the assignment (being at least 6 months) made it implausible that Mr Rossato could chose to work a shift;
- use of the word “assignment” to describe Mr Rossato’s engagement indicated continuity;
- the pre-populating timesheets used by WorkPac indicated it had advanced knowledge of Mr Rossato’s hours of work;
- there was limited reference to casual employment in the six employment contracts; and
- Mr Rossato was encouraged by a WorkPac representative to take up a role under the second contract for additional job security.
White J stated that matters typically regarded as indicia of casual employment were missing including the notification of commencement of swing or a daily check, or periodic check, of work requirements.
Did it matter that Mr Rossato was designated a casual employee?
WorkPac also argued that Mr Rossato was a casual employee for the purposes of determining his entitlement to paid leave because the enterprise agreement that applied to Mr Rossato allowed it to designate Mr Rossato’s employment as casual.
White J held the enterprise agreement didn’t provide for designation as argued by WorkPac. White J referred to comments in Skene that if WorkPac could simply designate people as casual, this would lead to arbitrary and capricious results.
What did the Full Court say about restitution?
WorkPac argued that if Mr Rossato was casual it was entitled to recover the casual loading paid to him pursuant to the laws of restitution. Restitution is based on the concept of unjust enrichment.
The Full Court determined that WorkPac wasn’t entitled to restitution as WorkPac had failed to establish its premise that the casual loading was identifiable and separate. This was despite White J finding that the casual loading was identifiable in the first three contracts.
White and Wheelan JJ held that Mr Rossato had been paid a flat rate, no part of which had been set by reference to Mr Rossato being designated a casual. White J explained that the rate had been set by reference to reward and market factors (that is, the amount required to hire and retain Mr Rossato).
Despite finding restitution was not available for this reason, White and Wheelan JJ considered the grounds which restitution had been sought by WorkPac. These grounds were mistake and failure of consideration.
WorkPac argued that if Mr Rossato wasn’t casual, it had paid the casual loading to Mr Rossato by mistake.
White J explained that the law of mistake applies where:
- an understanding of law which a payment is based is falsified by a court decision and the payment is made involuntarily; and
- payments are voluntary if a person chooses to pay but believes a law or contract provision that requires payment may be invalid and is not concerned to query the validity and is prepared to assume the validity, or is prepared to make payment irrespective of validity or invalidity.
White J found that WorkPac was aware that its arrangements were considered invalid after the Skene decision but continued with the arrangements for Mr Rossato in any event. Accordingly, its payments were voluntary after the Skene decision and it couldn’t rely on mistake to recover Mr Rossato’s casual loading after this point.
In respect of the period before the Skene decision, White J found that WorkPac could be considered unaware that its arrangements were invalid and therefore could be said to have held a mistaken belief about its arrangements. However, White J found there was no link between the mistaken belief and the amount paid to Mr Rossato for the same reason that the casual loading was not separate, and therefore WorkPac couldn’t rely on mistake to recover Mr Rossato’s casual loading.
Wheelan J added that if a mistake had been made, it wasn’t in relation to Mr Rossato’s pay but in framing offers of employment as casual when they weren’t. Wheelan J indicated that this wasn’t of assistance to WorkPac as WorkPac wasn’t arguing that the employment contracts themselves were void for mistake, only the casual loading.
Failure of consideration
WorkPac argued that if Mr Rossato wasn’t casual there had been a failure of consideration as the basis for its payment had failed.
White and Wheelan JJ held that the basis for the payment hadn’t failed.
White J observed that WorkPac had represented to Mr Rossato that his hourly rate was for the performance of work, which he had performed, and that he could use his pay however he pleased.
White J further observed that WorkPac had received the benefit of this work.
Comments about adjustments for overpayments
White J referred to a clause in the terms of Mr Rossato’s employment that WorkPac could make adjustments for overpayments and noted two points: WorkPac didn’t make any argument using this clause and in any event, the issue was not one of underpayment.
This could be interpreted as a suggestion that the clause, if reworded, could have supported WorkPac’s case from a contractual perspective.
However, White J appears to put the brakes on this where he states that WorkPac still couldn’t contract out of ss 92 and 100 of the Act via payment of an hourly rate and suggested that to do so would be unlawful.
What did the Full Court say about set off?
WorkPac’s argument took two forms.
Firstly, the principles of set-off didn’t apply as the relationship that had been created was different to what WorkPac intended. Accordingly, it could apply amounts paid to amounts due without limitation.
Secondly, if that failed, the principles of set off allowed WorkPac to set off the casual loading, or parts of it, to paid leave.
The Full Court rejected these arguments.
Notably, the Full Court referred to the existing case law on set off. These are, in summary:
- if no more appears than that work was done, the work was covered by an award (or statutory obligation) and a wage was paid for that work, then the whole of the amount paid can be credited against the entitlement for the work whether it arises as ordinary time, overtime, weekend penalty rates or any other relevant monetary entitlement under the award (or statutory obligation);
- wages can be appropriated by an employer to a particular incident of employment by contractual agreement (express or implied) or by designation at or after a liability to pay arises;
- if the whole or any part of the payment is appropriated by the employer to a particular incident of employment the employer cannot later claim to have that payment applied in satisfaction of an obligation arising under some other incident of the employment;
- when considering if payment has been appropriated by an employer to a particular incident of employment by contractual agreement, the critical question is whether the relevant statutory entitlements arose outside the contractually agreed purpose.
Wheelan J (with Bromberg J in agreement) said the following when considering if payment has been appropriated by WorkPac to a particular incident of employment by contractual agreement:
- the question is whether the discharge of indebtedness arising under the contract also operated to satisfy the statutory obligations to pay the entitlements claimed;
- the inquiry is into the objective purpose of the payments under the terms of the contracts set against the circumstances known to the parties and surrounding statutory framework (which amount to determining what a reasonable person would have understood by the terms); and
- if directed at the same purpose, then they may be taken into account in satisfying the statutory obligations.
Wheelan J considered the purpose of the leave payments in the Act.
For instance, in respect of annual leave, Wheelan J highlighted that the Act provided annual leave as a composite entitlement containing a payment and an absence. Wheelan J also referred to s 323(1) of the Act which provides that an employer must pay an employee amounts payable (including leave) in full and at least monthly.
Wheelan J then compared the paid leave entitlements to the wages paid to Mr Rossato, in particular the flat rate, and held:
“…The remuneration was calculated by reference to specified flat hourly rates of pay, and on the basis that entitlements such as those that are now claimed were not available…whether or not there was an identifiable and applicable casual loading, I do not consider that the weekly wages paid to Mr Rossato and the entitlements that he claims in this proceeding had a close correlation in purpose. That is because 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.”
Wheelan J also stated that the prohibitions on cashing out annual leave and personal leave told against a finding that Mr Rossato’s contracts appropriated Mr Rossato’s weekly wages to his entitlements to paid leave.
White J took a similar approach and noted:
- the intention of the first three contracts was to pay a rate in lieu of paid leave under the Act (the other contracts didn’t have a similar clause);
- this created a conceptual difficulty in that a payment in lieu of an entitlement couldn’t be said to satisfy that entitlement;
- the rate of pay and entitlements had a different purpose, in particular, paid leave is not just monetary but also an entitlement to be absent from work; and
- the temporal divergence between the payment of wages and when paid leave entitlements became due told against any closeness between the two.
Lessons for employers
The Full Court’s decision indicates that work arrangements like that of Mr Rossato are likely to be considered not to be casual and makes it clear that designating an employee as casual is unlikely to result in the person being considered casual at law. Further, the Full Court’s decision indicates that employers may be ordered to pay paid leave to casual employees in addition to casual rates already paid.
Accordingly, employers should be cautious of entering into casual arrangements in circumstances like Mr Rossato’s or where the characteristics of casual employment set out by White J are not present, for instance, where work is not intermittent and irregular, or where an employee can’t elect to work a shift offered to them.
Further, the Full Court’s decision indicates that it is unlikely that an employer can pay an employee a casual loading and set this off against paid leave. This is because the purpose of a casual loading is likely to be considered not to be for those entitlements but instead a substitute for those entitlements. Additionally, the Full Court appeared unwilling to accept that part of an hourly rate could lawfully satisfy the requirements to grant paid leave during employment.
Lastly, the Full Court’s decision indicates that restitution in respect of a casual loading is unlikely to be granted.
While this doesn’t leave much room for an employer to mitigate the risk that an employee may be found to not be casual and also entitled to paid leave on top of their rate of pay, it should be noted that the Full Court’s analysis was, to a degree, limited by the factual circumstances in the matter. Accordingly, arrangements should continue to be assessed on a case by case basis.
If you have any questions about how this decision may affect your business, please contact HLS Legal on (08) 9322 5202.
This article is intended to be informative only and does not constitute legal advice. If you are concerned about your individual circumstances, please contact a lawyer.