Employment and Workplace Relations case note: High Court overturns significant Full Federal Court decision on casual employees

The past few years of court decisions and legislative changes regarding casual employees has taken Australians on a wild ride trying to determine what exactly is needed to be classified a ‘casual employee’. On 4 August 2021, the High Court may have put an end to that ride with their decision in Workpac Pty Ltd v Rossato & Ors [2021] HCA 23.

Background

There is no single test to differentiate casual and permanent employees but the essence of casual employment is that it does not have a ‘firm advance commitment’ as to how long for or when the employee will work.

On 16 August 2018, the Federal Court decided in WorkPac Pty Ltd v Skene (2018) 264 FCR 536 that Mr Skene was not a casual employee of WorkPac (a labour-hire company) when assessing the existence of the ‘firm advance commitment’. Mr Skene’s roster was provided 12 months in advance. He worked 12.5 hour days with the same crew as a dump-truck operator, seven days rostered on followed by seven days off. The Court said Mr Skene’s employment did have a firm advance commitment when considering the ‘totality of the relationship’, the conduct of the parties, including the real substance, practical reality and true nature of the relationship.

Robert Rossato, also an employee of Workpac, relied on that decision to claim that he too was not a casual employee.

Rossato at the Federal Court of Australia

The Rossato claim was taken to the Federal Court of Australia by WorkPac in a test case.

WorkPac sought declarations that Mr Rossato was in fact a casual employee for the purposes of the National Employment Standards and under the relevant enterprise agreement.

Mr Rossato was employed by WorkPac under a series of six contracts to perform work. WorkPac treated Mr Rossato as a casual employee and he was not paid the leave and public holiday entitlements owed by employers to non-casual employees set out in the Fair Work Act 2009 (Cth) (the FW Act) and the enterprise agreement that governed Mr Rossato.

Rossato relied on the Skene decision to claim in the Federal Court that he was not a casual employee so he was entitled to be paid leave entitlements that would have been paid to permanent employees.

Workpac denied this claim arguing that Mr Rossato was engaged as a casual employee. If he was considered not to be a casual employee then Workpac were entitled to set off payments it had made to Mr Rossato in compensation for the entitlements claimed by Mr Rossato (to avoid ‘double-dipping’).

Practically, WorkPac was asking the Full Federal Court to assess casual employment by reference only to the terms of the written contract upon its commencement rather than the ‘totality of the relationship’ after the time the employment contract was made and the employment had started.

The Court found that Mr Rossato’s employment was a firm advance commitment, which meant he could not be a casual employee.

The Court found that a ‘set off’ was not permitted because there was not a ‘close correlation’ between the reasons for the casual loading payments and the entitlements being claimed in this case. The Court found that casual loading had been provided as a substitute for leave, so could not later be assigned to discharge the obligation to provide that leave.

WorkPac appealed this decision to the High Court for the same reasons outlined above.

Legislative reforms following the Skene and Rossato decisions

The Skene and Rossato decisions resulted in much uncertainty that led the government to amend the FW Act by passing the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2020 which predominantly:

• introduced a definition of a ‘casual employee’;
• protected employers against ‘double-dipping’; and
• provided casual employees with the right to convert to permanent employment in certain circumstances.

The High Court decision

The High Court decided that an employee is a casual employee if they have agreed to be a casual employee in their written employment contract at the commencement of the employment. It did not consider the subsequent conduct of the parties was relevant, rather it was the intention of the parties when entering into the contract. This is in sharp contrast to the view taken by the Federal Court. Because of this decision, it did not go on to consider the argument in relation to setting off entitlements by a casual loading and the assertion that to seek entitlements whilst in receipt of this loading was ‘double-dipping’. As such that question remains for another day.

Does this affect gig workers?

Recently, the Fair Work Commission made a statement that they are considering not to determine a Deliveroo rider’s appeal case regarding his employment status until the High Court decides on how the Rossato case applies to two other cases dealing with the employee-independent contractor distinction.

This is because the High Court in the Rossato case focused on the terms of the employment contract and the intention at onset, as opposed to the longstanding approach of the Hollis v Vabu case. That case focused on the totality of the relationship which considers conduct after the relationship begins when determining the employment status. We need to know now whether the approach taken by the Court in determining the Rossato decision, that is, considering the contractual terms rather than the post engagement conduct, will apply to assessing employment relationships in general.

Leading expert in employment law and workplace relations Professor Andrew Stewart said the High Court’s stance “signal[s] that they’re about to rewrite the rules on how you determine employment status”.

It is clear now that the doors have opened for significant development in how we determine employment relationships.

Takeaways for employers

The High Court has emphasised that the employment contract and its terms are vital in ensuring casual employees are considered to be casual employees. Therefore, every employer should review their casual employment contracts to ensure that casual employees are classified appropriately.

Furthermore, employers would want to consider their processes to meet the new casual conversion requirements in the FW Act and inserting appropriate ‘set off’ clauses in their casual employment contracts to give them the best chance to set off entitlements with casual loading in case a casual employee successfully claims that the are a permanent employee.

More information

For more information on casual employees, or for general advice on employee entitlements or employment contracts, please contact a member of our Employment and Workplace Relations team:

Author

This Employment and Workplace Relations update was authored by Nadeem Hekmat, Associate.

Note: This update is a guide only and is not intended to constitute legal advice.