Casual or Permanent Employment: why the difference needs to be distinguished

Dec 01, 2020 • JOHN WALTON

Hiring and Firing Hosts Derek Reilly and John Walton are once again joined by legal brains Tim Horne (Horne Legal) to discuss situations in which casual employment can become permanent, workplace investigations into underpayment, and potential repercussions for businesses.

For many employers adhering to workplace policy and procedure, risk management and compliance framework, as well as providing employment contracts stating the specific titles of their employees, it seems almost impossible to argue that an employee working casually could be anything other than such. But with recent developments in case law, this may no longer be the case.

The recent decision of Workpac Pty Ltd v Rossato [2020] FCAFC 84 has tried to clear up some confusion surrounding the issue of casual employment becoming permanent. It seems that where once a business owner had control over the employment status of employees, this may no longer be the case.

Hired by labour company, Workpac, Mr Rossato was engaged under six consecutive contracts which identified him as a casual worker. At the end of his engagement there was a dispute with the company as to his employment status and regarding benefits that would have been applicable if he was found to be a permanent worker. Despite contracts clearly expressing him as a casual worker, with a casual loading rate, the court found that he was a permanent worker of the company.

This case has certainly shaken up many industries, creating a new aspect to employment contracts that employers must have regard to - whether their staff are truly casual or whether they have become permanent employees.

In Rossato’s case, being rostered on to work seven months in advance, and being required to ask for leave both acted as indicators of employment that was not definitively casual. So, even despite having received casual loading - a concept through which an employee receives a higher rate in place of paid benefits (such as sick or annual leave), a casual employee can still be found to be permanent.

Although courts aimed to provide clarity on such an issue, in reality, Rossato has led to quite a lot of confusion for business owners who believe they are doing the right thing legally.

Casual employment essentially works as shift to shift employment, each being a separate engagement. The layer of uncertainty around this employment equates to the higher pay rate. Employers often opt to hire workers casually for these very reasons.

For business owners who do employ casual workers, Tim advises them to review their employees every 12 months to ensure they are being employed under the correct title. An example is in the Hospitality Industry, whereby a casual employee can request to become permanent after 12 months of employment. Also having clear regard to the industry award under the Fair Work Act is another important note that employers should be taking away from a case like Rossato.

Further developments since this case have been the problems relating to unfair dismissal. It seems that casual employees have more of an opportunity to claim unfair dismissal if they can claim they were actually employed on a permanent basis.

Employers should no longer be making assumptions as to casual employment being the simplest arrangement. Many industries will see the effects of decisions such as this; when paying the extra 25% of casual loading has been found to be insufficient when not providing entitlements of a permanent worker. Ensuring proper workplace policy and procedure, reviewing contracts and avoiding disgruntled employees seems to be the soundest advice for businesses affected by such a decision. Seeking help and advice where there is any confusion is another stable measure that businesses can take.

Another important and current issue discussed by the Hiring and Firing team, was that of wage theft and underpayments - and the possibility of accessorial liability.

The Fair Work Ombudsman has claimed it will be adventurous in its pursuit of cases against accountants, as well as HR managers to set out clear examples and precedent. With financial advisors that are wilfully blind of underpayments of employees being made liable under s550 of the Fair Work Act, it seems that the potential for accessorial liability is widening.

We have all heard of the George Colambaris wage scandal, and that is what we associate his name with rather than the businesses themselves. The protection of business brand should see a high level of risk management and compliance framework where corners are not cut, and employees receive the correct pay under the correct award. Being associated with wage theft will be shattering to business reputation, something that many businesses are learning the hard way with the plethora of current investigations being engaged by the Fair Work Commission.

Owners should also note that despite the complexities of payment, accidental underpayment is not a defence. The SaucedIt platform itself provides further information as to how to ensure proper payment is occurring, and even builds on employee scheduling systems such as Deputy, to ensure that employees receive the required wage. By allowing users to select the relevant award, stream, level, duty and age of employee (as well as 10% margin for error) businesses can be reassured of meeting payment requirements, and even insert them into their business’ employee scheduling systems (such as Deputy).

Tim also notes that although there are cases of overpayments, this can be quite difficult to rectify when an employee believes that such a wage was genuine and has used this for basic living expenses. It is ultimately about morality, and ensuring that everyone is receiving the correct amount for the work being completed, and many employees will naturally notify their employers if they believe they are receiving too large of a sum.

In this day and age, people will be made liable all the way through the chain of command - from accountants to HR managers. Protecting the brand of the business starts with ensuring that employees are paid correctly, to avoid long lasting reputational damage to business. Corners can never be cut when regarding payment - don’t learn this the hard way.