The decision in Workpac Pty Ltd v Skene [2018] FCAFC has created a wave of uncertainty for a range of businesses who rely on casual employment.

In this case, Mr Skene – who was employed for two years working ’seven days on, seven days off’ – was paid a loaded rate which was said to be inclusive of casual loading.

The Full Federal Court found that Mr Skene was in fact not a casual employee and was therefore entitled to paid annual leave on termination.

But what has created considerable concern for employers is that the annual leave was to be paid at the loaded rate, rather than at the base rate exclusive of casual loading.

The Australian Industry Group has assessed the potential cost of the Court’s decision at between $5.7 billion to $8 billion.

Against this background, on 11 December 2018 the Industrial Relations Minister (the Hon Kelly O’Dwyer) announced her intention to make a Fair Work Regulation to provide for offsetting casual loading amounts against minimum entitlements such as annual leave. This is in addition to her decision to intervene in the Federal Court Proceedings of Workpac Pty Ltd v Rossato.

While we have not yet seen the draft Regulation, the announcement focuses on the issue of double dipping and set-off. The announcement relevantly stated:

Every employer must comply with their legal obligations. But being forced to pay for entitlements twice is unfair and potentially crippling for many small businesses.

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A new regulation will provide that, where an employer has paid an identifiable casual loading to an employee engaged as a casual, it may potentially be offset against any subsequent claim for NES entitlements.

The media announcement does not state whether the effect of the proposed Regulation will be retrospective, although that appears to be the intention.

Given current uncertainty, we recommend that businesses who engage significant casual labour review their current employment agreement and arrangements including in respect of the issue of set-off.