Federal Court ruling and IR reform: Workpac v Rossato

A labour hire employee is employed by the labour hire agency. A commercial contract will exist between the labour hire agency and the host employer. Whilst the employee works at the host employer’s site, the host pays the labour hire agency which in turn pays the employee. The employment relationship is between the labour hire agency and the employee. Therefore, the responsibility for the payment of wages to the employee rests with the labour hire firm. If you do engage a labour hire agency you must satisfy yourself that the commercial contract protects your business from any claims being made against the labour hire firm for unpaid permanent entitlements.

However, a host employer has responsibility for, and can be liable, for other matters such as the health and safety of the casual and allowing the employee to exercise their workplace rights.

This case does have far reaching effects for labour hire agencies which will no doubt be reviewing casual workforces. This may mean if you want to retain an individual casual who has been working on a regular basis they will need to be directly employed on a permanent basis

Most awards do not permit the engagement of employees on a seasonal basis. Where the engagement of employees on a seasonal basis is permitted employers must ensure they comply with the definitions and parameters set out in the award or enterprise agreement in relation to the engagement.

Where a business has regular busy periods they may look to casuals to bolster the labour pool. This has resulted in a perhaps colloquial use of the term “seasonal worker” being used to describe a casual worker who is engaged for a particular period of time but is not strictly a “seasonal worker”.

In relation to the use of casuals for busy periods, the risk that attaches will be informed by the length of the engagement as well as the terms contained in the contract, the payment and identification of loadings, and the pattern of work.

If the length of the season is known, the employer could consider whether a fixed term contract would be more appropriate. However, caution should be exercised if that contract ends and you continue to require the services of the employee. Allowing the employee to continue to work without first having a suitable contract in place may result in the employee arguing they are permanent. Similarly, having a series of consecutive fixed term contracts can lead to a finding the employee is a permanent employee.

Yes. The case confirms an employee that receives casual loadings may still accrue permanent employment benefits. Whilst clearly stating and identifying any casual loading paid both in the contract of employment and wage slips is a positive step, a court will consider a range of factors. This measure alone, will not be sufficient.

Additional steps include:

• The contract stating the casual loading is paid because the employee is not entitled to other NES entitlement which a permanent employee would. Simply saying the loading is paid “in lieu” of those entitlements and benefits will be insufficient;
• The contract containing a set off clause allowing the employer to set off the loading against any of the permanent entitlements that have accrued; and
• The contract should enable the employer to claw back the loading paid if the employee is deemed to be permanent.

Getting the contract right, isn’t the only measure to be taken. Employers must regularly review those engaged on casual contacts and comply with any casual conversion requirements. 

An employee who has taken a period of unpaid parental leave has a right to return to their former position. As a result of the return to work guarantee some employees will backfill the positions by utilising a casual employee. However, the employee is unlikely to be considered to be an irregular casual. Bearing in mind an eligible employee can take up to 24 months of unpaid parental leave, a casual employee backfilling the role is likely to have a fixed, stable work pattern. An employee working on a regular and systematic basis will have additional rights after 12 months’ employment. Those rights include being able to bring unfair dismissal claims as well as accessing other entitlements. If the engagement continues there is also the risk that employee could argue they are a permanent employee and entitled to paid leave entitlements.

When a business wants to backfill a parental leave role, we recommend they are engaged on a fixed term parental leave contract which clearly articulates the circumstances in which the contract can be terminated including for example, when the employee who has accessed parental leave gives notice that they intend to return earlier than originally planned.