High Court delivers win for employers on casual employment


High Court delivers win for employers on casual employment

In a landmark decision with major consequences, the High Court of Australia unanimously reversed a decision of the Full Court of the Federal Court on 4 August 2021(WorkPac Pty Ltd v. Rossato & ors [2021] HCA 23) (see earlier article (11 June 2020)).

It relates to the nature of casual employment.  The decision potentially saves employers around Australia billions of dollars in potential backpay that could have resulted from future claims, had the Full Court decision been upheld.

Facts of case

Mr Rossato was employed as a production worker by WorkPac (a labour-hire company) to provide services to its client, which mines black coal in Queensland.  He was employed under a series of 6 contracts, described as “assignments”, to perform the work as a casual employee.  As a casual, Mr Rossato was therefore not paid the leave and public holiday entitlements owed by employers under both the Fair Work Act 2009 (Cth) (Act) and WorkPac’s enterprise agreement.

Mr Rossato claimed that he was not in fact a casual employee, despite being described as a casual in his employment contract.  He therefore claimed to be entitled to be paid for untaken annual leave, public holidays, and periods of personal leave and compassionate leave taken during his employment.  This was despite the fact that he had been paid a 25% casual loading which his contracts stated was paid in lieu of his receiving annual leave, personal leave and other entitlements.  His claim was based on another decision of the Full Court of the Federal Court relating to a similar employee in August 2018 (WorkPac Pty Ltd v. Skene (2018) 264 FCR 536).

WorkPac denied that Mr Rossato was a permanent employee.  In the alternative, WorkPac submitted that if he was found to be a permanent employee, then it was entitled to a set off against the entitlements he claimed for the casual loading already paid to Mr Rossato.

Decision of Full Court of the Federal Court

In May 2020, the Full Court found that Mr Rossato was not a casual employee (under the Act or the enterprise agreement).  It found that he was entitled to the leave payments he claimed.  The Full Court also rejected WorkPac’s claim to set off the entitlement he would receive against the casual loading he had already been paid.  This therefore allowed a “double dipping” situation, where Mr Rossato would end up being paid much more overall than he would have been had he been engaged as a permanent employee from the outset (owing to his receipt of the 25% casual loading).

High Court decision

Significantly, the High Court found that the Act contemplates that casual employment may be regular.  It commented that “a reasonable expectation of continuing employment … on a regular and systematic basis” (as outlined in the Act) is still entirely consistent with an employee’s status as a casual.  This expectation, however reasonable, “remains an expectation only and falls short of a ‘firm … commitment'”.

The High Court found that a “casual employee” is an employee who has no firm advance commitment from the employer as to the duration of their employment or the days (or hours) the employee would work (with the employee providing no reciprocal commitment to the employer).

The Court also found that where the parties commit to a written employment contract and thereafter adhere to its terms, any required firm advance commitment necessary to establish a permanent relationship must be found in the binding contractual obligations.  A mere expectation of continuing employment on a regular systematic basis is not sufficient here.

In this case, Mr Rossato’s employment was expressly on an “assignment-by-assignment basis”.  He was entitled to accept or reject any offer of an assignment.  Similarly, at the completion of each assignment, WorkPac was under no obligation to offer further assignments.

Mr Rossato was therefore found to be a casual employee.  There was therefore no need to address the set off claim.

The High Court commented that the Full Court had erred in considering that the systematic nature of the work under the roster system allowed it to conclude that Mr Rossato’s employment was in reality of a permanent nature (based on its view that the rosters involved a firm advance commitment to continuing work beyond the completion of the particular assignment).  Instead, it found that the express terms of the employment contracts were inconsistent with the making of any such commitment.

The Court also made the following observations:

  1. it is not the function of the courts to act as an industrial arbiter to reshape or recast a contractual relationship in order to reflect a quasi-legislative judgment about the just settlement of an industrial dispute; and
  2. it rejected the CFMMEU’s submissions that Mr Rossato’s employment was not casual based on a characterisation of his employment at the time his impugned statutory entitlements arose, rather than at the time the contract was made. If these submissions were accepted, it “would mean that the parties could not know what their respective obligations were at the outset of their relationship and would not know until a court pronounced upon the question.  That outcome does not accord with the elementary notions of freedom of contract.  The submissions by the CFMMEU involve the very kind of obscurantism that has been said to be alien to the judicial function”.

Significance of decision

The decision’s primary significance is that it potentially saves employers billions of dollars in potential backpay that could have resulted from future claims, had the Full Court decision been upheld.

The impact of the judgment was reduced as a result of the Federal government’s casual employee amendments to the Act earlier this year (see earlier article (9 April 2021)).  This involved the first ever statutory definition of “casual employee”.  This definition operates in the future.  It also covers the past, except for narrow exceptions.  The exceptions relevantly include a person previously determined by a court not to be a casual employee.

The decision marks a change in the way that the courts consider the characterisation of the true nature of the employment relationship.  The express terms of the employment contract are of extreme importance.  If the contract indicates that the employee is a casual employee, not just in its description but in its terms, then the employee is likely to be found to be a casual employee.  The factors used by the courts to determine whether the employee is a casual do not extend to an analysis of whether the work is genuinely casual in nature.

However, casual employees with at least 12 months service can still convert to permanent status if they qualify under the new provisions in the Act.  In this regard, employers should be mindful that 27 September 2021 is the sunset date for required offers of conversion to permanent status to be made to eligible casual employees.

For assistance with these issues please contact our employment team.

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