Issue 2: was WorkPac entitled to “set-off” the casual loading in order to discharge its liability in respect of leave entitlements that it owed to Mr Rossato?
WorkPac sought to assert its right to “set-off” on the basis of common law and reg 2.03A of the Fair Work Regulations 2009 (Cth). Reg 2.03A was enacted to remedy the so-called problem of “double-dipping” which arose as a result of the Court’s decision in Skene, whereby employees could have the benefit of casual loading and subsequently claim payment of leave entitlements. The Court held that “set-off” was not available to WorkPac on either of these grounds.
The Court had regard to existing case law on the applicable legal principles governing “set-off”. A common proposition to be found in the authorities is that “set-off” is only available if the purpose of the payment is identical to the obligation that it is intended to discharge.
In Rossato, the casual loading could not be “set-off” for the following reasons:
- It is not logical to use a monetary payment to discharge a non-monetary entitlement, such as leave. In substance, leave entitlements provide benefits to an employee whereby they could take absence from work (with approval from their employer) and to receive payment of their ordinary wages during that absence.
- At law, leave entitlements accrue progressively based on an employee’s service. It would be inappropriate to allow “set-off” of casual loading as it had been paid from the start of Mr Rossato’s employment, before he was able to accrue leave entitlements.
- The Fair Work Act contains prohibitions on the cashing out of leave entitlements, except in limited circumstances, and none of these exceptions applied. Therefore, allowing “set-off” would have contravened the Fair Work Act.
- The casual loading was made “in lieu” of leave entitlements. It could not be used to satisfy liability for leave entitlements.
On the application of reg 2.03A, the Court held that reg 2.03A was not applicable because:
- The regulation only applies to a claim for payment in lieu of one or more NES entitlements. Mr Rossato was not making such a claim, he was claiming the entitlements.
- The regulation is only declaratory of existing substantive law. It is not intended to change or replace the law regarding “set-off” that would govern an employer’s claim to take casual loading into account to satisfy an employee’s claim to be paid an amount in lieu of one or more of the relevant NES entitlements.