Breaking News: High Court rules to keep things casual

The High Court of Australia today handed down a long-awaited judgment (Workpac Pty Ltd v Rossato [2021] HCA 23), unanimously allowing the appeal of Workpac Pty Ltd (Workpac), and ruling that long-term employee Mr Rossato was, contrary to the findings of the Full Federal Court, a casual employee.?The ruling gives finality to a series of decisions arising from the Federal Courts with labour-hire company Workpac seeking declarations that those workers they designate as casuals, are actually employed as casuals.

The History

The first such case, as Hall & Wilcox has earlier reported, was that of Skene in 2018, where the Full Federal Court found against Workpac on the basis that a casual employee had ‘no firm advance commitment from the employer to continuing and indefinite work according to an agreed patter of work’. ?Workpac did not seek to further appeal this decision.

A second set of proceedings was brought by a similar employee, Mr Rossato, and in 2020 the Full Federal Court affirmed the approach taken in Skene, thereby rejecting Workpac’s assertion that Mr Rossato was a casual employee.

These decisions have been significant.?Of the more far-reaching implications, the Full Federal Court considered that payment of casual loading was not determinative of casual employment, and nor would it be a barrier to a finding that an employee was employed other than on a casual basis (potential allowing employees to ‘double dip’). Some estimates place the cost of such an outcome on employers in the realm of $39 billion. ?Hall & Wilcox examined the decision and its implications at the time.

Workpac’s application for special leave to appeal the decision, as supported by the Federal Government, was approved, and the matter was heard before the High Court of Australia.

To recap, Mr Rossato was a labour-hire mining truck driver employed by Workpac between 2014 and 2018, during which time he worked across six consecutive assignment contracts all notionally describing him as a casual employee.?Significantly, Mr Rossato worked on a fixed weekly roster, which he sometimes received up to seven months in advance.

Mr Rossato’s work circumstances were very similar to those in Skene, and the Full Federal Court in that respect upheld its previous finding that casual employment lacks a ‘firm advance commitment’ of work, and held that Mr Rossato was therefore other than a casual.

Perhaps learning from its experience in Skene, Workpac brought three claims in the alternative, should the court be inclined to consider Mr Rossato as other than a casual: a set-off claim, a regulation 2.03A claim, and a restitution claim.?All three claims were grounded in the fact that Mr Rossato was paid an amount which was clearly specified as a casual loading, and all three were rejected by the Full Federal Court.

In reaching its conclusions, the Full Federal Court left a lot of uncertainty in its wake, particularly surrounding what employers should be doing to legitimise their casual relationships and avoid hefty claims for leave (and other) entitlements from employees who felt they were misclassified.?

It was this uncertainty, combined with the significant strain placed on businesses during the COVID-19 pandemic, which contributed to the Federal Government supporting the subsequent appeal to the High Court.

A year after the judgment of the Full Federal Court, Parliament passed amendments to the Fair Work Act 2009 (Amendments), imposing a statutory definition of ‘casual employee’ at s15A.?Hall & Wilcox examined these amendments and their implications at the time.

The definition adopted in the legislation follows broadly the ‘no firm advance commitment’ approach of the courts, but shifts the focus of such an inquiry to the moment of job offer, rather than the the point where the entitlement emerged (i.e. the time when a claim was made, being the approach taken by the courts).

The amendments also solidified the statutory position against ‘double-dipping’. If an employer can show with sufficient clarity that an employee has been paid casual loading, but is subsequently found to be entitled to NES entitlements, the court may reduce the amount owing to the employee as far as (but not beyond) zero.

The amendments came into effect on 27 March 2021, after Workpac was granted special leave to appeal.

The High Court decision

On 4 August 2021, the High Court unanimously upheld Workpac’s appeal, finding that the Full Federal Court erred in its finding that Mr Rossato was other than a casual employee under the Fair Work Act 2009 (Cth) (Fair Work Act) and the applicable Enterprise Agreement.?On this basis, it was not necessary to consider Workpac’s alternative claims in set-off and restitution.

Both parties and the Court accepted that casual employees are those with no ‘firm advance commitment’ of ongoing work, consistent with the Full Federal Court in Skene. ?The question before the court, was from when such a commitment should arise, and whether, in Mr Rossato’s circumstances, such a commitment existed.

Was there a ‘firm advance commitment’ to continuing work?

Taking into account other sections of the Fair Work Act (including in relation to requests for flexible working arrangements, parental and other leave entitlement and unfair dismissal protection entitlement) and held the ‘mere expectation of continuing employment’ is not sufficient to distinguish casual employment from other forms of employment.

In considering the nature of the commitment, the court held that ‘the existence or otherwise of a “firm advanced commitment” must be for enforceable terms’, and should not be held to exist from expectations or understandings borne from the manner in which the parties have performed their agreement.?The court held any such commitment to further work must be contained in an enforceable agreement to be recognised. To insist that anything less than a binding contractual term could form the basis of such a commitment, such as ‘[s]ome amorphous, innominate hope or expectation’, would be to descend into ‘obscurantism’.?

The High Court held that it was not the role of the courts to ‘moderate a perceived unfairness resulting from a disparity in bargaining power between the parties’. In making these findings, the court considered the Full Federal Courts in Rossato and Skene, to the extent they had ‘strayed from the orthodox path’, were in error.

Was Mr Rossato provided with a ‘firm advance commitment’ to continuing work?

The High Court considered Mr Rossato’s various fixed-term assignment contracts, as well as the applicable enterprise agreement, and concluded he was employed on an ‘assignment-by-assignment’ basis. He was entitled to accept or reject any offer of assignment, and Workpac was under no obligation to offer additional assignments.?

The terms of the engagements demonstrated the parties deliberately avoided a firm commitment to ongoing work once an assignment was completed.?Accepting the clauses bound the parties according to their ordinary meaning, the court also accepted that Mr Rossato was a casual employee as there was no contractual commitment to further work.

The court identified specific provisions in the engagements that indicated a lack of a firm advance commitment to work, including that termination or variation of an assignment could occur at one hours’ notice. ?Whilst there was a clause entitling Workpac to recover the cost of any assignment not completed by Mr Rossato, this was not equivalent to a commitment to providing ongoing work at the conclusion of an assignment.

Significantly, the High Court considered the fixed nature of Mr Rossato’s roster, and its long-term nature, were of limited significance.?The court essentially held that the fixed and long-term nature of the roster, whilst providing structure and regularity, were entirely consistent with the nature of his casual employment by assignment.

‘Inasmuch as the rosters imbued Mr Rossato's employment with the qualities of regularity and systematic organisation during the period of each assignment, those qualities have been demonstrated to be entirely compatible with the notion of "casual employment" in the Act.’

Whether or not the roster afforded Mr Rossato ‘regularity and systematic organisation’, it still lacked a ‘firm advance commitment’ to ongoing work.?Mr Rossato could fairly have been said to have had a reasonable expectation of continuing and systematic employment, but only within his particular fixed assignment.?This commitment was consistent with the nature of his employment as a casual, but was not consistent with an ongoing commitment to employment. ??

Keeping it casual

The court emphasised, in line with pre-existing authority, that the label given to the employment by the parties will not be determinative of the relationship.?What will be determinative, is the ‘character of the relationship between the parties’, as established by, primarily, the contract of employment. ?

The High Court also emphasised that in Mr Rossato’s case, the fact that he was paid an amount for casual loading, in circumstances where the amount was specified as a loading paid in lieu of his NES entitlements, was a ‘compelling indication’ that the parties intended him to be a casual employee to whom such benefits were not owed. Briefly, the Court acknowledged the changes to the Fair Work Act, but as neither party sought to submit that the Amendments were relevant to the proceedings, the matter was not raised.?

Key takeaways for employers

The High Court has clarified that employers who have given clear expression to the casual nature of employment in their contracts will be able to rely on this characterisation, regardless of the manner in which the employment relationship has developed, or the expectations of the employees. ?

Of course, the engagement must still be one of genuine casual employment, and employers are still cautioned against labelling their employees as casual, whilst treating them as otherwise.?However the High Court has clarified that where the formal relationship between the parties, being the employment contract, genuinely reflects a casual engagement, this will be recognised by the courts.

The High Court also clarified that payment of casual loading in lieu of entitlements is still a strong indicator of casual employment, reducing the risk of ‘double dipping’ claims.?Furthermore, employers in industries where recurring short term engagements on a casual basis are common will be reassured by the High Court’s finding that a fixed roster, set well in advance, will not provide a commitment to ongoing work where such a roster is still consistent with nature of the engagement.