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. 

Labour-Hire Loses in Case Over Casual Work Leave Entitlements

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) who was employed by Workpac as a dump truck operator for two Queensland mines was a permanent worker despite the company labelling him 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.  

The recent ruling involved the same labour-hire company, Workpac, and another employee (Rossato) who supplied his labour to companies within the Glencore Group. Mr Rossato pursued claims for unpaid leave and public holiday pay but this time the company presented another argument: that even if the worker is a permanent employee he has already been pre-paid of his benefits by the pay loading.

The Federal Court rejected this argument saying 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. in his employment under each of the contracts, Mr Rossato was other than a casual employee for the purposes of the FW Act and not a casual Field Team Member under the 2012 enterprise agreement;
  2. Mr Rossato is entitled to the entitlements that he claimed under the FW Act and the 2012 EA with respect to 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 and this ruling could set back as much as $8 billion in back payments. 

The group said in a statement that they are pressuring the government to amend the Fair Work Act to clarify the nature of casual work. Until the Fair Work Act is amended, businesses cannot do anything about back payment liability, according to Workplace lawyer Peter Vitale.

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

Workplace Law managing director Athena Koelmeyer also suggests businesses should review their casual workers to determine whether they are “true casuals” — truly random, ad hoc, and called in only when the business needs them. 

Ms Koelmeyer also notes that the recent decision could spur class actions, incurring litigation expenses that negatively affect cash flow. The recent decision could also hit vulnerable firms affected by the bushfire crisis and COVID-19 pandemic particularly hard, not only labour-hire companies such as Workpac. Mr Vitale said the business can ask their workers to convert to part-time employees but this conversion must be voluntarily accepted by workers, who may be remiss to give up their 25% loading during the COVID-19 pandemic.

“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. 

One of the problems identified by Ms Koelmeyer is that SMEs are not necessarily equipped with their Workplace lawyer or HR manager to manage all labour-related matters. This leaves small businesses, particularly, vulnerable to employment claims and litigation when there are confusion and uncertainty in workplace regulations.

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