Australia: Form over substance - High Court overturns WorkPac v Rossato

What are the implications for casual employment?

In brief

In its 2020 decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (Rossato), the Full Court of the Federal Court held that a casual mineworker engaged on a series of "assignment by assignment" casual contracts was not a true casual employee for the purposes of the National Employment Standards. The Full Court's decision followed a similar 2018 decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene). The decisions created uncertainty for employers by holding that employees thought to have been engaged as casuals could be entitled to benefits associated with permanent employment (such as paid leave entitlements) if the "practical reality" of the employment relationship warranted this.

On 4 August 2021, the High Court overturned the Full Federal Court's decision in Rossato (and the findings in Skene), holding that Mr Rossato was, in fact, a casual employee. The result is that Mr Rossato was found not to be entitled to any back payments.

The decision represents a shift in how Courts have approached issues related to casual employment and provides employers with comfort in relation to casual employment arrangements.  


Contents

Key takeaways

  • The effect of the High Court's decision is that employers can rely upon the written terms of their employment contracts to determine whether employees are casuals. Employers should review their casual employment contracts to ensure that their terms support a conclusion that their casual employees are, in fact, casuals.
  • This position is reinforced by the new definition of "casual employee" introduced to the Fair Work Act 2009 (Cth) (Act) in March 2021.
  • Employers are reminded that by 27 September 2021 they must have assessed all casual employees employed before 27 March 2021 to determine whether they may be eligible for conversion to permanent (full-time or part-time) employment. Casual conversion must be offered to casual employees who were employed for at least 12 months and who, for at least the last six months, have worked regular hours on an ongoing basis that could be converted to full-time or part-time hours without significant adjustment. There may be "reasonable grounds" which can be relied upon not to offer such conversion. If a casual employee is not eligible for casual conversion (either due to "reasonable grounds", or because they don’t meet other eligibility criteria - including, for example, where they have less than 12 months' service), employers must issue a written notice to the casual employee explaining why the casual employee has not been offered conversion. In respect of casual employees employed on or after 27 March 2021, casual conversion must be assessed within 12 months of commencement. Please contact us with questions on casual conversion, including potential "reasonable grounds" for declining to offer conversion.

In depth

The High Court's decision

The High Court clarified that the new legislative definition of casual employee (which has only been in place since March 2021) was not relevant to Mr Rossato, because the Full Federal Court had made a binding decision in respect of his employment status prior to that definition coming into effect. However, it was also emphasised that the definition applies retrospectively to most employees, subject only to limited exceptions. It is worth noting that the law firm representing Mr Rossato, and other class actions regarding casuals, has not ruled out a challenge to the validity of the retrospective nature of the legislation.

The Court's decision nonetheless contains reasoning that may be relevant to the interpretation of the new provisions of the Act related to casual employment.

The Court held as follows:

  • 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.
  • 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.
  • Skene was incorrectly decided in this respect: in approaching the characterisation exercise by reference to "[t]he conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship", the Full Federal Court "strayed from the orthodox path". None of the authorities cited by the Full Federal Court in support of its approach involved a written contract and adherence to those terms. In circumstances where a written contract exists, the terms of the contract must determine the character of the employment relationship.
  • If the Skene approach 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 decided the question. That outcome would not accord with common notions of freedom of contract.

In determining that Mr Rossato was a casual employee, the Court relied upon the fact that the contractual arrangement between the parties lacked a firm advance commitment to ongoing work. The Court noted that:

  • Per the contract, Mr Rossato was expressly hired on an "assignment-by-assignment basis, with each assignment representing a discrete period of employment on a Casual or Maximum Term hourly basis".
  • Per the contract, Mr Rossato was entitled to accept or reject any assignment and WorkPac was under no obligation to offer assignments.
  • Additionally, per the contract, either party could vary or terminate the period of an assignment on one hour's notice. This power of unilateral variation meant there could be no mutual obligation to pursue a continuing working relationship beyond the completion of a given assignment.
  • Notably, although Mr Rossato worked per an established shift structure with rosters fixed up to a year in advance (thereby creating regularity within the assignment) this did not establish a commitment to an ongoing employment relationship beyond the completion of each assignment.
  • While use of labels such as "casual" will not be decisive, they form a factor for consideration. Additionally, here, the parties expressly agreed that Mr Rossato would be paid a loading in lieu of entitlements that would otherwise indicate an ongoing working relationship (such as annual leave).

The casual employee provisions of the Act

In future decisions, the High Court's reasoning will need to be applied in the context of the new provisions of the Act relating to casual employment. These provisions provide that an employee will be a casual employee if they accept an offer of employment from the employer that makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work. They also provide that, in determining whether there is no firm advance commitment to continuing and indefinite work according to an agreed pattern of work, the Court must only have regard to the following:

  1. whether the employer can elect to offer work and whether the employee can elect to accept or reject work
  2. whether the employee will work as required according to the needs of the employer
  3. whether the employment is described as casual employment
  4. whether the person will be entitled to a casual loading or a specific rate of pay for casual employees.

The combined impact of the High Court's decision and the new provisions of the Act is that it is now clear that the terms of a casual employee's written contract of employment will be central to determining the employee's status as a casual, not the "practical reality" of the employment relationship. 


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