WorkPac Pty Ltd v Rossato [2020] FCAFC 84
Executive summary
The Full Court of the Federal Court of Australia has found that a “casual” employee is entitled to paid leave entitlements under the Fair Work Act 2009 (Cth). Further, the employer is not able to “off set” the amount owing to the employee for those entitlements against any casual loading paid to him during his employment.
Background
Mr Rossato was an experienced production employee in the mining industry, employed by WorkPac Pty Ltd (WorkPac), a labour hire company.
Mr Rossato was deployed to mine sites to perform work for WorkPac’s client, Glencore, from July 2014 until his retirement in April 2018.
Following his retirement, Mr Rossato approached WorkPac claiming payment for entitlements under the Fair Work Act 2009 (Cth) (FW Act. Specifically, Mr Rossato sought payment for:
- accrued but unused annual leave;
- payment for personal/carers leave and compassionate leave that he took during his employment but for which he was not paid; and
- payment for public holidays that fell within his rosters, but which he did not work and for which he was not paid.
WorkPac considered Mr Rossato a casual employee and that therefore he was not entitled to the amounts he claimed.
Decision of the Full Court
Without Mr Rossato having commenced any formal proceedings, WorkPac applied to the Federal Court of Australia for declarations in relation to Mr Rossato’s employment and his claim. The matter was heard by the Full Court of the Federal Court.
The primary issues for consideration were:
- Was Mr Rossato a casual employee and therefore not entitled to paid leave of the kind he claimed?
- Was Mr Rossato paid a casual loading during his employment?
- If he was paid a casual loading, was it a mistake or could it be used to offset any amounts owed to Mr Rossato for the entitlements he now claimed?
The employment contract
WorkPac’s position was that Mr Rossato was, at all times, a casual employee and this was established by his employment contract. The contract was essentially made up of two parts, a Notice of Offer of Casual Employment (NOCE) and a set of General Conditions, both of which were underpinned by an enterprise agreement. During the total period of his engagement with WorkPac, Mr Rossato was issued with a number of NOCEs either as a result of changes to his rate of pay or changes to his worksite. In total, Mr Rossato had six consecutive periods of employment with WorkPac.
Given the nature of WorkPac’s business, the terms of the NOCEs and the General Conditions were generic in nature. They referred to Mr Rossato’s employment as “casual employment” but also referred to the ongoing nature of his employment and the proposed length of his assignments.
For example, the first NOCE issued to Mr Rossato advised that his employment would be for a period of six months (as a guide) and that his ordinary hours of work would be 38 hours per week, with the possibility of reasonable additional hours depending on rostering arrangements.
The NOCEs advised Mr Rossato of his hourly “flat rate” and included wording to the effect that the flat rate may include a casual loading, and Mr Rossato should refer to the enterprise agreement or a schedule to understand that casual loading.
Was Mr Rossato a casual employee?
The parties were in general agreement that the question of whether there was casual employment could be answered by understanding whether there was a “firm advance commitment” as to the duration of Mr Rossato’s employment, or the day or hours he would work.
WorkPac argued that the question could and should be answered with reference to the terms of the written employment contract only, and any other extraneous material should be excluded from consideration. WorkPac submitted the required “firm advance commitment” to ongoing employment was absent in Mr Rossato’s contract because the contract expressly stated that Mr Rossato was a casual employee.
The Court rejected WorkPac’s argument that interpretation of Mr Rossato’s contract should be based on the written terms of the contract alone and found that, where a contract contains terms that potentially have more than one meaning, the contract should be interpreted by taking into account the context in which it was made.
In this case, the context included the commercial and other interests of the parties and the commitments they were making to each other in entering into the contract.
Specifically, WorkPac knew when it hired Mr Rossato that he would be required to work for extended periods of time according to rosters prepared by its client, Glencore, that could be for periods of up to 12 months in advance. Mr Rossato also knew this, having worked in the mining industry for some time.
Accordingly, WorkPac knew that, when entering into the contract with Mr Rossato, it was expecting him to work in accordance with those conditions. Mr Rossato, in turn, was making a commitment to WorkPac to work in the way it required him to work to fulfil its obligations to Glencore. The Court found that there was was an understanding between the parties, based on both the terms of the contract and their knowledge, that the work being offered was “organised, structured, ongoing, regular and predictable” [White J at 542].
In response to WorkPac’s contentions regarding the description of Mr Rossato as a casual employee, the Court said that “the label or description which the parties themselves give to their arrangement cannot be conclusive of the position under the FW Act” [White J at 590].
Therefore, it was held that the contract did contain the requisite “firm advance commitment” required for employment that is “other than” casual employment – Mr Rossato was not a casual employee and the parties never intended that he would be. Under the FW Act, he was at all times, entitled to the leave and public holiday entitlements as claimed.
What about the casual loading?
On the question of casual loading, the Court found that Mr Rossato was paid a casual loading, but it was not severable from the other amounts paid to him in the “flat rate” he received. The reason that the casual loading could not be severed was that the “flat rate” actually paid to Mr Rossato included a number of components and was a market rate set by WorkPac in order to attract and retain Mr Rossato. Accordingly, the casual loading was subsumed into the overall market “flat rate”.
Did WorkPac pay the casual loading by mistake?
No. The Court rejected WorkPac’s claim that is had mistakenly paid Mr Rossato the casual loading. The Court held that WorkPac had paid Mr Rossato the rate it saw fit to attract and retain him as an employee.
Can the casual loading be used to offset the FW Act entitlements?
In relation to offsetting in general, the Court said that the parties to a contract must agree that an amount is paid for a specific purpose, and an employer is precluded from later claiming that the amount should be used to satisfy some other purpose.
In this case, the question was – what was the agreed purpose of the payments to Mr Rossato, taking into account the circumstances known to the parties?
The Court found that the payments made to Mr Rossato were to discharge WorkPac’s obligation to pay him for the hours that he worked. The entitlements now claimed by Mr Rossato were not contemplated by the amounts paid to him during his employment – that is, they were not within the agreed purpose of the contractual payments. Although some amounts may have been attributable to a casual loading, the contract was not truly a contract for casual employment at the time it was made.
In this regard, the Court also referred to the general prohibition on cashing out certain paid leave entitlements under the FW Act, noting that it was not the intention of the legislators that an employee entitled to paid leave be paid for that entitlement during their employment, rather than actually take their leave (particularly in reference to paid personal/carers and compassionate leave).
Accordingly, WorkPac could not use the casual loading to offset the amounts owed to Mr Rossato because the amounts paid to Mr Rossato under his contract were not paid to him with the intention that he was a casual employee.
What can your business learn from this decision?
Employers should very carefully consider both the drafting of their employment contracts, the way remuneration is expressed in contract and payroll records and the true nature of the employment of employees.
Imprecise drafting or poor explanation of remuneration components can result in contracts being opened up to interpretation, which in turn can expose an employer to unintended consequences – such as in this case.
Failing to properly and genuinely identify the status of an employee (taking into account the true nature of the employment arrangement) can result in significant underpayments, which may not crystallise until an employee leaves many years later and makes a claim.
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