High Court clarifies characterisation of casual employees

Casual employees are characterised by binding contractual terms rather than the entirety of the employment relationship.

Case Update: WorkPac Pty Ltd v Rossato & Ors [2021] HCA 23

In a decision handed down today, the High Court of Australia upheld the appeal by WorkPac and overturned the orders by the Full Court of the Federal Court in finding that Mr Rossato was a casual employee and was therefore not entitled to be paid for annual leave, public holidays, personal leave and compassionate leave.  

This highly anticipated decision informs employers that the characterisation of casual employment requires no firm advance commitment of ongoing employment and issues such as the substance and totality of the relationship are not relevant in that characterisation.

Unfortunately, the decision to categorise Mr Rossato as a casual employee meant that the High Court did not consider whether employees would be able to ‘double dip’ on casual loading and the entitlements to which that loading is meant to substitute. However, recent legislative amendments which took effect as a result of the Federal Court judgment provide that source of clarity to businesses.  

Facts

WorkPac Pty Ltd (WorkPac) is a labour hire company whose business includes the provision of services of its employees to firms engaged in the mining of coal. Among WorkPac’s customers was Glencore Australia Pty Ltd (Glencore) which operates mines in Queensland.

Between 28 July 2014 and 9 April 2018, Mr Robert Rossato (Mr Rossato) was employed by WorkPac as a production worker. During that time, WorkPac provided Mr Rossato’s services to Glencore. At all times, WorkPac treated Mr Rossato as a casual employee, reflected in the fact that Mr Rossato was paid a ‘casual loading’ of 25% in accordance with the relevant industrial instruments.

Following his retirement on 9 April 2018, Mr Rossato claimed payment from WorkPac in respect of annual leave, public holidays, and periods of personal leave and compassionate leave. WorkPac rejected these claims and initiated proceedings in the Federal Court seeking declarations that Mr Rossato was a casual employee for the purposes of the Fair Work Act 2009 (Cth) (Fair Work Act). In the alternative, WorkPac argued that it was entitled to a ‘off set’ or restitution against the entitlements claimed by Mr Rossato through payments WorkPac had made in compensation for those entitlements (that is, the 25% casual loading).

In a decision handed down last year, the Full Court of the Federal Court of Australia concluded that Mr Rossato was not a casual employee under the Fair Work Act and made declarations that he was entitled to the payments he claimed. The Full Court rejected WorkPac’s ‘off set’ and restitution claims, holding that Mr Rossato’s entitlements were not to be reduced by taking into consideration the amounts paid in casual loading.

WorkPac appealed the Federal Court’s decision to the High Court of Australia.

Decision - Mr Rossato is a casual employee

The High Court considered that under the Fair Work Act a “casual employee” is an employee who has no firm advance commitment from the employer as to the duration of the employee’s employment or the days (or hours) the employee will work, and provides no reciprocal commitment to the employer.

The High Court determined that Mr Rossato’s employment was expressly on an “assignment by assignment basis”. This was evident through the contractual document entitled ‘Casual or Maximum Term Employee – Terms and Conditions of Employment’ (General Conditions) which was signed by Mr Rossato when he first applied for employment with WorkPac. Clauses in the General Conditions held that Mr Rossato was entitled to accept or reject any offer of an assignment, and at the completion of each assignment WorkPac was under no obligation to offer further assignments.

The High Court held that where parties commit the terms of their employment relationship to a written contract and thereafter adhere to those terms, the requisite ‘firm advance commitment’ must be found in the binding contractual obligations of the parties. A mere expectation of continuing employment on a regular and systematic basis is not sufficient for the purposes of the Fair Work Act, as the express terms of the General Conditions were distinctly inconsistent with that commitment.

Whilst Mr Rossato was working in accordance with an established shift structure, fixed in advance by rosters, the High Court determined that this did not establish a commitment to an ongoing employment relationship beyond the completion of each assignment.

Hence, the High Court unanimously held that Mr Rossato worked as a casual employee for the purposes of the Fair Work Act and the enterprise agreement under which he was employed, when carrying out each of his assignments.

Legislative Changes

The High Court also made reference to the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) (Fair Work Amendment) that came into effect after the filing of the appeal by WorkPac.

The Fair Work Amendment sought to address some of the uncertainty that arose as a result of the Full Federal Court judgment in this case. It inserted a definition of ‘casual employee’ into the Fair Work Act[1] and provided that an award for compensation for permanent employee entitlements payable to an employee that was mistakenly treated as a casual, must be reduced by the amount of any identifiable casual loading paid to the employee.[2]

While the Fair Work Amendment did not apply to Mr Rossato, the amendments apply retrospectively to other employees.

What does this mean?

The decision today along with the Fair Work Amendment creates some clarity to businesses on how to characterise casual employees and what a ‘firm advance commitment’ means. Where there is no firm advance commitment from the employer, the employee is a casual employee.

While the decision today is silent on the ‘off set’ and restitution claims made by WorkPac, the Fair Work Amendment enables casual loading to be ‘off set’ against claims for leave and other entitlements, prohibiting any potential for ‘double dipping’. It remains to be seen how these provisions will be utilised by employers.

In light of the High Court attributing particular significance to the contractual arrangements entered into between the parties as well as the recent amendments to the Fair Work Act, employers should take steps to audit their current casual engagement methods to ensure that their casual employees do not have a ‘firm advance commitment’.

If you require any assistance in reviewing the employment contracts of your casual employees in light of these new developments, please contact our employment team.