The Federal Court decisions in Workpac v Skene and Workpac v Rossato put the issue of employment entitlements for casual employees in the mainstream media. As the media reported on the decisions commentators often criticised the decision as allowing ‘double-dipping’ by employees and the Commonwealth government actively sought to limit casuals ability to seek employment entitlements.
The situation prior to the Workpac decisions
Prior to Workpac decisions a status quo had developed in relation to casual employees and entitlements. It was generally understood by employers and employees that as long as the employee was paid 25% above the minimum award wage that employee could not seek permanent employment entitlements regardless of whether they in fact worked like a permanent employee. From a mathematical perspective the 25% loading off-sets entitlements such as annual leave and public holiday however no consideration was given to the actual right to take leave or the loss of stability resulting from lack of redundancy or notice requirements.
Accordingly, if a casual employee sought to assert they were owed permanent employee entitlements then the employer could point to the 25% loading and argue the employee was ‘better off’ meaning the claim would go away. More prudent employers would separate the 25% loading in employment agreements and pay slips however this was not considered crucial.
The Workpace decisions
Each of Workpac v Skene and Workpac v Rossato considered employees were engaged by labour-hire firms on casual employment contracts to provide ‘FIFO’ work. Each involved fixed-term agreements that provided certainty around hours, pay and duration of engagement, and each was asserted to be a casual arrangement.
In both cases the Court assessed what the actual arrangement was and determined that the arrangements was not truly of a casual nature because there was a ‘firm advance commitment’, and accordingly the employees were entitled to receive permanent employment entitlements such as annual leave and public holiday pay.
In each case the employer argued that allowing employees to access entitlements in these circumstances meant they were ‘double-dipping’ because they had the benefit of the casual loading as well as the entitlements. The Court rejected this argument and held that as the employees were not casual employees it was irrelevant whether they were provided a loading – they were each entitled to receive their employment entitlements as a permanent employee.
In relation to the specific argument that the loading off-set the entitlements, the Court found that leave entitlements are not just monetary entitlements and cannot be off-set by additional payment. The logic is clear – an employer cannot ask an employee to accept a higher salary on the condition they do not take leave.
The criticisms (and why they are wrong)
The first criticism is that there will be an ‘opening of the floodgates’ and there will be a stream of claims for entitlements. While there has been no such ‘flood’ if there was it would just mean that employers who have acted in breach of the law are then required to meet the consequences of that breach.
The second criticism is that poor small business owners will be unfairly forced to compensate employees and ruin their businesses. However, the published cases involve sophisticated third-party employers whose business models revolve around allowing the true employer to avoid employment obligations – these are not milk bar or cafe owners. Colloquially these small businesses are much more likely do the right thing and don’t enter into unlawful arrangements, and if they did they would be acting in breach of Australian law and therefore would be required to meet the consequences of the breach.
The third criticism is that students with no obligations get the benefit of casual arrangements and then get top-up payments when they leave. This is obviously not the case for genuine causal arrangements, so again, if an employer is not breaching the law they have nothing to worry.
Ultimately any employer doing the right thing has nothing to fear.
What it means
The first and most obvious effect of the decision is that for employees in a similar situation they may have a strong claim for annual leave and public holiday pay.
However the second, and more longer lasting, effect is that employers will now have to err on the side of offering permanent employment. If an employer employs and employee on a causal arrangement and that arrangement starts to look like a permanent arrangement then the permanent arrangement should be formalised. This means the employee receives proper entitlements and has certainty in their role, and the employer also benefits from the certainty they also ‘save’ the 25%, if was genuinely applied in the first place.