High Court’s ruling may mean reversals of employee leave provisions for casual employees

Good news for employers with a large casual workforce. You may be able to remove provisions for employee entitlements from your balance sheet that you previously recognised under IAS 37 Provisions, Contingent Liabilities and Contingent Assets because of the WorkPac Pty Ltd v Rossato case (Rossato decision).

Background

However, two recent events, i.e. recent legislation and a High Court decision, may result in some entities no longer needing these provisions in June 2021 financial statements.

Recent legislation

A recent change to the Fair Work Act 2009 by the Fair Work Amendments (Supporting Australia’s Jobs and Economic Recovery) Act 2021, introduced a definition of ‘casual employee’. The change is operative from 27 March 2021 and operates retrospectively in certain respects. Businesses have a six-month transition period to assess whether an employee is a ‘casual employee’ or not.

Casual employees will not be entitled to certain entitlements if they receive loading on their pay rate.

High Court overturns the Rossato decision

In addition, in August 2021, the High Court overturned the Rossato decision which said that employees working regular and predictable shifts were not casual employees, despite being paid a 25% ‘loading’ on their pay rate. The High Court found that:

  • Mr Rossato was a casual employee and that his employment was expressly on an ‘assignment-by-assignment basis’ and therefore he was entitled to accept or reject any assignment.
  • A casual employee has no advance commitment from an employer about the duration of their employment, or the days or hours they would work, nor did they give a reciprocal commitment to the employer, despite what a work roster might suggest to the contrary.

In summary

Provisions for casual employee entitlements going back a number of years are no longer needed because of changes to the Fair Work Act 2009 regarding casual employees and the High Court’s Rossato decision. Provided casual employees have been paid their due entitlements, no other amounts will now be owing to casual employees for past services (and therefore no provision required in the 30 June 2021 financial statements).

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