An important decision about casual employees was published this week, and it’s making everyone think twice about their casual employees. If you’re not careful, you will also end up paying double – first 25% casual loading, then statutory entitlements.

It looks like the ongoing trend to dilute the ‘casualisation’ of the labour force is only accelerating. The ‘Faustian bargain’ between employers – who have wanted to avoid commitment and maintain flexibility, and employees – who have preferred higher wages and flexibility over permanent employment, is coming to an end.

Workpac Pty Ltd v Rossato [2020] FCAFC 84 is the latest in a series of recent Court decisions finding that many ‘casual’ employees are in fact ‘permanent part time’ in the eyes of the law. As permanent employees they have a right to leave entitlements and access to unfair dismissal laws and redundancy payments. This decision will have a dramatic impact on the way employment is conducted in Australia.

What is a casual employee?

A casual employee is one that has “no firm commitment from their employer to continuing and indefinite work according to an agreed pattern of work”. That is, a casual employee has no firm advance commitment to work.

In return for this casual status, casual employees are entitled to a 25% loading on top of their minimum hourly rate. This loading is designed to compensate the employee for not receiving leave entitlements (such as annual leave and personal/carers leave) and not having the benefit of a predictable and stable income.

What happened in the Rossato Case?

In the Rossato case there was no express term in the employee’s contract that the employee had:

  • A reasonable expectation of ongoing employment; or
  • An agreed pattern of work.

In fact, quite the contrary. The contract was written on explicitly casual terms.

Nonetheless, the Court placed great emphasis on the post-contractual conduct of the parties. The Court found that the employee was not engaged in the manner of a casual employee, and was therefore entitled to the benefit of leave entitlements.

The Court found that post-contractual conduct can ‘re-characterise’ the whole nature of the employment relationship. One judge suggested that this re-characterisation will be deemed to have taken effect not just at the time of transition, but from the beginning of the employment relationship.

Further, the Court also rejected the contention that the receipt of a 25% loading meant the employee had received payment in lieu of leave, thus allowing the employee to ‘double dip’, (i.e. get paid the loading, and get their leave).

Take this as a cautionary tale

When you are employing people on a casual basis, the employment must in fact be characterised by “irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability”. Essentially, the employee must “stand and wait” to be offered the opportunity to provide their services, and then must make their own mind up whether to actually provide those services. The arrangement needs to be genuinely ‘casual’!

Be aware that employment relationships “tend to be fluid and evolving”. If the post-contractual behaviour of the parties changes, the relationship may transition to one of permanent employment (and vice versa).

Paying annual leave to a casual employee, and being exposed to potential unfair dismissal costs and redundancy payments if you cut their hours, are all significant additional costs to your business, considering you have also paid the same person a 25% loading on all of their pay to avoid this.

So, what should you be doing?

If you are actually employing people on a regular basis then recognise that fact now, and put them on permanent part time contracts perhaps with individual flexibility agreements if flexibility is important. Your ongoing remuneration will be lower overall, and you won’t end up paying again (and again) at a later time.

You also get another benefit from permanent employment – the right to expect your employees to be available for work on certain days and at certain times. This is one of the obligations that employees owe you back in return for their permanent part time status.

What if you want to keep it ‘casual’?

If you don’t want to move to a permanent part time status, then you need to take extra care to ensure you keep things genuinely casual.

To put this into place we recommend implementing the following measures:

  • Provide your casuals with the option to accept or decline a rostered shift. If they are expected to turn up when you tell them, they’re not casual;
  • Do not create an expectation of ongoing employment or availability for a particular shift. You avoid creating this expectation by not actually providing them with regular shifts; and
  • Following on from the point above, put in place a rostering system that ensures you do not inadvertently provide regular and certain hours.

In a nutshell, you need to properly implement a casual rostering policy. We have a number of pro-forma solutions to either effectively engage your employees on a permanent part time basis, or to ensure that your casuals remain casual.

The key takeaway is that a ‘casual employee’ should not be embedded into your workplace. If they are a permanent fixture, then they are a permanent (and expensive) employee, no matter what you call them.

So, do you want to know if your ‘casuals’ really are casual? Do you need to restructure your workforce? Do you need some strategies if you wish to continue to employ casuals? Contact Sladjana Skoric on 0410 900 248.