The Australian Government’s Draft Bill Response To The Rossato Decision: Where To From Here?

30 December 2020
 

The Australian Government released its preliminary draft bill in response to the Full Bench of the Federal Court's decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato) on 9 December 2020.
 

The "Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2020" (the Bill) seeks to address the uncertainty caused by the decision handed down in Rossato and WorkPac Pty Ltd v Skene (2018) 264 FCR 536 (Skene) by:
 

1. the introduction of a statutory definition of casual employee in the Fair Work Act 2009 (Cth) (the FW Act); and
    

2. allowing employers the ability to offset amounts paid for casual leave loading against claims for paid leave entitlements in circumstances where employees are later found to be permanent.
    

The response by the Federal Government takes account of the significant impact the Coronavirus pandemic has had on the Australian labour market, particularly given the effect it has had on casual employment. By creating a definition of casual employment, the Government hopes this will provide business with the necessary certainty to allow the creation of job opportunities.
 

Summary of Rossato decision
 

The decision of the Full Bench of the Federal Court of Australia reaffirmed the position taken by Skene and found that when it looked at the entirety of the arrangement between the parties, in addition to the contractual terms, Mr Rossato was deemed to be a permanent employee for the purposes of the FW Act.
 

The additional factors considered by the court in coming to this conclusion included that Mr Rossato had been employed for an indefinite duration, his employment was 'stable, regular and predictable', he had regular shift patterns, and his rosters were set months in advance.
 

On this basis, he was entitled to payment for outstanding paid leave entitlements.
 

However the court in Rossato went further than Skene and found that WorkPac were not entitled to:
 

• restitution of the casual loading it claimed was included in the hourly rate it had paid to Mr Rossato; and
   

• "set off" the 25% casual loading paid to Mr Rossato against his outstanding leave entitlements.
   

For further details of the Rossato decision please refer to our previous article: Casual "double dipping" ruling is upheld – WorkPac Pty Ltd v Rossato [2020] FCAFC 84.
 

WorkPac subsequently sought leave to appeal the Rossato decision, and was granted special leave to appeal to the High Court of Australia on 26 November 2020.
 

Government's response
 

At the time the Rossato decision was handed down, the Australian Prime Minister indicated that the Federal Government was considering whether to amend the FW Act to insert a definition of "casual" to provide certainty to employers.
 

The Explanatory Memorandum identifies a number of issues the Bill seeks to address from the Skene and Rossato decisions, including:
 

• the definitions of "casual employee" provided in the common law by Skene and Rossato;
   

• to prevent scenarios of employee 'double dipping' for those misclassified as casual employees; and
   

• to provide clear guidance to employers about the availability to offset amounts paid to casual employees for casual leave loading against claims for paid leave and other entitlements in certain circumstances.
   

Definition of 'casual employee'
 

The Bill at section 15A proposes to insert a definition of "casual employee":
 

            "15A Meaning of casual employee
 

            (1) A person is a casual employee of an employer if:
 

(a) an offer of employment made by the employer to the person is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and
 

(b) the person accepts the offer on that basis; and
 

(c) the person is an employee as a result of that acceptance."[1]
 

The definition of casual employee in subsection 15A(1) of the Bill is based on the Full Court of the Federal Court's assessment in Skene; and the court's view of a casual employee.[2] However, unlike Skene, the Bill limits the assessment of a casual employee to the time the contract of employment was entered into, and does not allow the court to consider post-contractual conduct.
 

When determining whether subsection 15A(1) of the Bill applies to the offer of employment, the scope of what the court must consider will be limited to the following factors:
 

1. whether the employer can elect to offer work and whether the  person can elect to accept or reject work;
    

2. whether the person will work only as required;
    

3. whether the employment is described as casual employment;
    

4. whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument.[3]
    

These factors are limited to the time the contract of employment has been entered into.
 

It is important to remember that for any casual employee to whom the Bill applies, there remains the right pursuant to proposed subsection 66F of the Bill for a casual employee to request to have their employment converted to permanent part-time or full-time, if they meet the following requirements:
 

• the employee has been employed for a period of at least 12 months;
   

• the employee has, in the period of 6 months worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or part-time employee; and
   

• all of the following apply:
   

  • the employee has not, at any time during those 6 months refused an offer by their employer to convert their employment (pursuant to section 66B of the Bill);
     

  • the employer has not, at any time during those 6 months:
     

    • given the employee a notice that there are reasonable grounds to not make an offer of permanent employment; and
       

    • given a response to the employee refusing a previous request to convert their employment to permanent; and
       

  • the request is not made during the period of 21 days after the employee has been employed for 12 months.
     

An employer will have 21 days from the date the request is received to respond to the employee's request for conversion which must detail whether the request has been granted or refused.
 

Off-setting of casual loading against paid leave entitlements allowed
 

The Federal Government has identified that the Rossato decision does not properly address the circumstances in which an employer can offset amounts paid to employees who have been misclassified as casual, against permanent paid leave entitlements.
 

To fill this gap in the common law the Bill proposes to insert a statutory rule for offsetting amounts under section 545A of the FW Act
 

The Bill identifies circumstances in which an employer can offset casual loading paid to an employee against any prospective award for employee entitlements, which can even be reduced to nil in certain circumstances.
 

An example provided is where there is an express term in a contract of employment under which the loading amount is paid specifies the proportion of the loading amount it is compensating for, and specifies the proportion of the loading amount attributable to each such entitlement.
 

Response to the Bill
 

Unions have rejected the changes proposed by the Bill arguing that it will allow employers to continue hiring casuals, despite them performing ongoing permanent work.
 

The Australian Council of Trade Unions Secretary, Ms Sally McManus has made a number of comments concerning the proposed casual employment conversion right stating that:
 

"the proposal makes it almost impossible for casual workers to convert to permanent work as if an employer is unreasonable or does not offer them permanent employment, there is little they can do about it".
 

This was, as described by Ms McManus, a "huge missed opportunity to begin to make jobs more secure and turn around the number of casual and insecure jobs".
 

In contrast, the Business Council of Australia's CEO, Ms Jennifer Westacott said that the proposed changes to the Bill would make an "enormous difference" to the issues she had raised for a long time.
 

Ramifications
 

It is evident that the Coronavirus pandemic has had a significant impact on the casual workforce and has played a significant role in the Australian Government's response to the Rossato and Skene decisions.
 

Should the Bill receive royal assent in its current form, this could well protect employers from potential class actions arising out of the Rossato decision, seeking billions of dollars in unpaid leave entitlements.
 

Should the Bill be given royal assent the proposed changes to the FW Act will commence with effect the following day.
 

 

 

For further information, please contact:

 

David Amentas, Partner, Clyde & Co

david.amentas@clydeco.com