Labour-Hire Loses in Case Over Casual Work Leave Entitlements

Casual work” may be redefined after a Federal Court junked a labour-hire company’s “pre-pay” argument in a case involving a casual worker. Business groups and workplace lawyers are anticipating that this ruling — or what will happen after — will have a huge impact on businesses given there are more than 2.6 million Australians classified as casual workers. 

What is casual work? 

The Fair Work Act does not define the term “casual” but courts have ruled that the “essence of casualness” is 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. Casual workers get none of the benefits of regular employees, such as annual leave, personal leave, or carers’ leave. Casual workers also do not get a notice of termination or redundancy pay. To make up for this, the law entitles them to a 25% pay loading. 

Casual work is temporary work. In 2018, the court ruled that a mine worker (Skene) was a permanent worker. This ruling came eventhough Workpac labeled the worker as a casual worker. The court based its decision on the fact that Mr Stene was working a 12-hour shift on a “7-day on, 7-day off” basis.  

Skene and the recent ruling, Rossato, involved labour-hire company, Workpac. Mr Rossato pursued claims for unpaid leave and public holiday pay. Workpac in Rossato presented an argument different from Skene. Workpac argued the company has already prepaid Rossato of his benefits by the pay loading.

Employer Cannot Use Pay Loading, Court Says

The Federal Court rejected this argument. The court held that the Fair Work Act meant for the employer to pay the entitlements to permanent employees in a different way, not through prepayment by way of the pay loading.

In summary the Court concluded that:

  1. Rossato was other than a casual employee and not a casual Field Team Member under the 2012 enterprise agreement;
  2. Rossato is entitled to the benefits he claimed, including paid annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays; and
  3. WorkPac is not entitled to either restitution or to “set off” against its liabilities any of the payments made under the six contracts of employment.

How does this ruling impact businesses? 

The Federal Court’s ruling impacts businesses because it might deluge already financially burdened businesses with back pay claims. According to the Australian Industry Group, casuals make up around 20% of the Australian workforce. This ruling could set back as much as $8 billion in back payments. 

The group said they are pressuring the government to amend the Fair Work Act and clarify the nature of casual work. Businesses cannot do anything about back payment liability until the Fair Work Act is amended, a Workplace lawyer says.

Mr Vitale encourages business to “make changes to their current and future arrangements to limit their exposure.”

Review True Casuals

Another Workplace lawyer suggests that businesses should review their casual workers to determine whether they are “true casuals.” True casuals are truly random, ad hoc, and called in only when the business needs them. 

Workplace lawyers note that the recent decision could spur class actions and could hit vulnerable firms already affected by the bushfire crisis and COVID-19 pandemic. To remedy this, the Workplace lawyers suggest that businesses ask their workers to convert to part-time employees. The workers, the lawyers note, must voluntarily accept the conversion.

“There’s a significant disadvantage for them [casuals] to convert to permanence,” Vitale tells SmartCompany. “If an employee insists on continuing on that basis [as a regular casual] the risk of a WorkPac scenario continues to be significant. 

“If the employer says, ‘well, we’re not going to give you any more shifts unless you convert to part-time’, there’s going to be all sorts of questions … about unfair dismissal claims or an adverse action claim,” he continues. 

SMEs do not also necessarily have their own Workplace lawyer or HR manager to manage labour-related matters. This leaves small businesses, particularly, vulnerable to employment claims and litigation when there are confusion and uncertainty in workplace regulations.

We at Slater Byrne Recoveries interact frequently with companies in different industries. We most especially have extensive interactions with companies in the earthmoving industry, which hire many casual workers. Seeking the right advice is one way to limit a company’s exposure to future back pay claims.

Photo by Jonny Caspari on Unsplash