Casuals lose Annual Leave Windfall
The Government and the High Court have confirmed that casual employees cannot double dip on annual leave loadings. Casuals are paid a casual loading of around 25%. The casual loading is meant to cover permanent entitlements like annual leave. Until last week, the Federal Court was saying that casuals can double dip: see Casual gets Annual Leave.
This was a big problem for employers. They faced future unknown liabilities for unpaid annual leave.
It looks like the problem is solved on two fronts.
New Casual Definition in FWA
The Government addressed the problem on 27 March 2021 by inserted a new definition of “casual employee” in Section 15A of the Fair Work Act 2009.
The new definition of casual said that the test for a casual was “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work”, tested when the job was accepted – the date of contract – not later when an employee made a claim for annual leave.
New Casual Definition by High Court
The High Court addressed the problem on 4 August 2021.
Mr Rossato drove mining trucks for WorkPac. His contract said he was casual. He worked on fixed weekly rosters in back-to-back contracts that were set months in advance.
The Federal Court said Mr Rossato could double dip on annual leave because the rosters were a “firm advance commitment of work”, he was a not a casual, and that annual leave thus accrued while he worked.
The High Court said Mr Rossato could not double dip. The High Court said that a casual employee has no firm advance commitment about the length of employment, the days or hours worked and gives no reciprocal commitment to the employer. This ruling was based on the law before the new section 15A.
The High Court said that to prove permanent employment with annual leave accruing
- A “mere expectation of continuing employment” did not prove permanent employment;
- You must have a binding contractual term that assures regular employment, not “some amorphous innominate hope or expectation falling short of a binding promise enforceable by the courts”.
It’s the contract, not the vibe – a lid on judicial activism
The High Court also put a lid on judicial activism in industrial and employment cases saying “..it is the function of the courts to enforce legal obligations, not to act as an industrial arbiter whose function is to synthesise a new concord out of industrial differences.“(at )
The factors pointing to Mr Rossato being casual were:
- He could accept or reject each offer of work.
- WorkPac was not obliged to offer a new piece of work.
- He had a reasonable expectation of continuing and systematic employment, but only for each fixed assignment. A reasonable expectation on its own does not prove ongoing commitment to employment.
What does this mean for Employers?
This case plus the new definition in section 15A FWA should spell the end of double dipping annual leave.
Employers can now put casuals on more regular shifts if each shift or set of shifts is a separate contract or assignment, with less risk of back pay claims for annual leave.
The courts will still look at the character of the relationship, but if the contract says it is casual, if casual loading is paid, (the court said this was compelling), then it should be casual.
What should employers do?
Employers should get legal advice and check:
- any award or enterprise bargaining agreement that applies
- Identify which employees have signed contracts
- that contracts state:
- the employment is casual,
- each day of work is a single contract
- neither party has to give notice to terminate,
- regular shifts do not give an expectation of ongoing permanent employment
- that “all in”, “flat rate” or “headline rate” contracts, that give casuals a loading in lieu of NES entitlements, actually specify the NES component.
Employee entitlements can be complex. Employers can get caught out. Get advice.
Contact Peter McNamara to review your casual employment contracts
The High Court case is here: Rossato v WorkPac  HCA 23