The new casual loading offset provisions explained


The recent Federal Court decisions of WorkPac Pty Ltd v Rossato [2020] FCAFC 84 and WorkPac Pty Ltd v Skene [2018] FCAFC 131 have attracted a lot of media attention over the last six months, particularly around the issue of “double dipping”. They have also attracted a lot of criticism from the federal government, which recently supported an application made by WorkPac to appeal the Rossato decision in the High Court.

In addition to intervening in the Rossato case, the federal government has also recently tabled the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 in parliament, which aims to overturn key aspects of the Rossato and Skene decisions.

On the issue of “double dipping”, the Bill proposes a new section of the Fair Work Act 2009 (Cth) which would allow an employer to reduce their liability to pay permanent employment entitlements to an employee who was mischaracterised as a casual employee but was still paid an identifiable casual loading. It does this by compelling courts to reduce any compensation owed to the employee by an amount equal to the casual loading that was paid.

This means that any separately identifiable casual loading that was paid to the employee can be used to offset a claim for the following entitlements:

  • paid annual leave;
  • paid personal/carer’s leave;
  • paid compassionate leave;
  • payment for absence on a public holiday;
  • payment in lieu of notice of termination; and
  • redundancy pay.

The Explanatory Memorandum to the Bill expressly confirms that the government is seeking to overturn the decisions of Rossato and Skene, which it says has “…resulted in a risk that a significant number of employers and employees have been left in a precarious position of uncertainty as to their rights and obligations.”

In order to try and remove this “uncertainty”, the new casual loading offset provisions also adopt a new definition of “casual employee”, which essentially allows an employer to dictate who is and isn’t a casual employee at the time the employment commences.

For a number of reasons, the public criticism of the decisions in Rossato and Skene and the corresponding rationale for the introduction of these provisions is misplaced.

What is often overlooked is that in many of these cases, the employee has not actually been paid a casual loading and is not therefore “double dipping”. They are simply seeking to recover entitlements that are owed to them.

For example, in Rossato, the terms of employment were contained in six different employment contracts, as well as an enterprise agreement that applied to the employment.

Two judges of the Federal Court held that some of these contracts did not actually contain a separately identifiable casual loading at all. It was also accepted by WorkPac that Mr Rossato’s pay slips did not record any separate casual loading that was paid to him.

This scenario is not uncommon and is often inaccurately labelled by commentators as a form of “double dipping”. Instead, it is simply a case where an employer is found to have underpaid an employee and, in defence to a claim that is made, tries to retrospectively assert that the rate of pay that the employee received always contained a casual loading, even if the employment contract and the payslips make no reference to same.

This situation is not aided or resolved by the type of casual offset clause proposed in the Bill. It is also a situation that seems to have been lost in the discussion and criticism around casual loadings and offset.

The public criticism around Rossato is also surprising given that the decision simply expanded on existing principles of law. For example, Justice White in Rossato explained that it is already accepted at common law that an employer cannot “reallocate an amount agreed to be paid to an employee in respect of subject A (for example, ordinary hours of work) to meet a claim in respect of subject B (for example, overtime)”.

Justice White here is recognising the scenario above, whereby an employer will, retrospectively, try to use a higher rate of pay to offset unidentified permanent employment entitlements that are found to be owed to the employee.

This inability to offset amounts in this way is also a common feature in cases where the court is asked to determine whether a person is a contractor or employee. In these cases, a person is often called a contractor but is in fact an employee and is therefore entitled to be paid permanent employment entitlements such as annual leave and public holiday pay.

In these cases, the employer is not able to assert that it paid the person more than what it would have if they knew the person was an employee, and seek to use this additional amount to “offset” the claim for previously unidentified employment entitlements.

Much of the debate around “double dipping” also ignores the views of the Federal Court about the purpose and value of leave entitlements. Specifically, in both Skene and Rossato, the Federal Court determined that leave entitlements are not simply monetary entitlements that can be off-set by an additional payment. For example, annual leave is not simply a defined sum of money owed to an employee. It is an opportunity to access a break from work in order to facilitate rest and recreation. It would therefore be inconsistent with the purpose of the Fair Work Act 2009 (Cth) to allow an employee to be deprived of these benefits in exchange for a simple monetary sum.

Nevertheless, the federal government has attempted to justify the introduction of these new casual loading offset provisions by asserting that without these amendments “…employers would need (on a case by case basis) to litigate any possibly available restitution claims in order for courts to conclusively determine liabilities outstanding to employees….”.

It is surprising that the federal government would use this as a justification for the Bill given that litigation is the logical and natural consequence when an employer breaches the law and does not pay the correct entitlements to its employees.

A concerning possibility is that the federal government has simply used this misplaced public outcry from employers about the decisions in Skene and Rossato as an opportunity to introduce legislation aimed at retrospectively extinguishing genuine claims that are available to “casual” employees.

Given the way in which they have been drafted and the circumstances surrounding their introduction, these new offset provisions will likely attract criticism as an overreach, designed to protect employers from facing the consequences of their breach of law, rather than genuinely preventing “double dipping”.

Either way, it is certainly alarming that a federal government has intervened and is attempting to extinguish billions of dollars of compensation owed to the most vulnerable workers in Australia, many of whom lost their casual employment as a result of COVID-19. Now is the time to support casual workers, not penalise them.

Further updates about the progress of the Bill will be provided as it makes its way through federal parliament over the coming months.


Disclaimer: This article should not be construed as legal advice and is not intended as such. If readers wish to obtain advice about anything contained in this article, they should speak with a lawyer and discuss their individual circumstances.