The Full Federal Court has held that an employee employed as a casual and ostensibly paid casual loading, was nonetheless entitled to payment of accrued annual leave upon termination of his employment – see WorkPac Pty Ltd v Skene  FCCA 3035. Following our initial article, further developments have occurred in relation to this case.
What you need to know
Employers are exposed to claims for annual leave and other accrued entitlements (such as redundancy pay and personal leave) for casual employees engaged on a regular and systematic basis, including in circumstances where:
- the casual employees are engaged as such under the terms of an Enterprise Agreement or Modern Award; or
- the employees are paid a flat rate per hour inclusive of casual leave loading.
The employer, WorkPac Pty Ltd decided not to appeal the Full Federal Court Decision to the High Court.
However, the employer WorkPac Pty Ltd, with the cooperation of another employee, Robert Rossato, has instituted a test case to mitigate the effects of the Full Federal Court Decision in Skene.
To that effect the employer has instituted proceedings against Mr Rossato to come before the Federal Court seeking declarations that in substance:
- Mr Rossato was a “casual employee at common law” even though he was engaged on a regular and systematic basis because he was classified as a casual employee under the Enterprise Agreement and therefore not entitled to annual leave upon termination of his employment;
- Mr Rossato was bound by employment contracts identifying him as a casual employee under which he was paid a flat hourly rate that “incorporated a casual loading of 25%”;
- a declaration that a 25% casual loading compensated Mr Rossato as to 11% or in lieu of annual leave, and a further 5% for personal and compassionate leave;
- the employer, WorkPac Pty Ltd is therefore entitled to “set-off” the flat rate or casual loading against any further entitlement Mr Rossato may have to annual leave or personal leave.
The Commonwealth Minister for Jobs Kelly O’Dwyer is intervening in the test case to support the employer’s argument due to its concern whether an employer can be required to pay twice for the same workplace entitlement.
The CFMEU will be intervening to resist the making of such declarations and the use of set-off in this manner upon the basis that use of casual employment on a semi-permanent basis should be stamped out.
Recommended steps to take in the meantime:
- Ensure casual employees are engaged in a manner that is irregular, intermittent or variable and without a firm advance commitment beyond 7 days
- If that is not possible, mitigate the risk by using a common law set off clause in the contract of employment which specifically identifies the employee entitlements being set off in a composite rate of pay
- Please discuss any concerns or queries you have with a member of our WPR team
We will keep you advised of further developments on this important issue estimated to affect the employers of approximately 1.6 million employees in Australia.