The High Court has today handed down its landmark decision in WorkPac Pty Ltd v. Rossato & Ors, and overturned the Full Federal Court decision of May 2021 by finding that Mr Rossato was a casual employee.
The High Court decision aligns the common law position with the changes to the Fair Work Act 2009 (Cth) earlier this year for casuals. As a result, if a person is offered employment on the basis that there is no firm advance commitment to continuing and indefinite work based on an agreed pattern of work, the employee will remain casual unless the employee agrees to be converted to full-time or part-time employment.
The High Court has held that whether a person is a casual or permanent employee will be determined by reference to the interpretation of contractual terms, not by reference to the conduct or expectations of the parties.
As a result, employers should urgently review their casual employment contracts to ensure they are drafted to reflect the factors of casual employment identified by the High Court.
As discussed in our previous article, the parties accepted that the expression "casual employee" refers to an employee who has no "firm advance commitment as to the duration of the employment or the days (or hours) the employee will work". This definition is now reflected in the Fair Work Act.
The High Court has held that in assessing the existence or otherwise of a “firm advance commitment”, reference should be had to the employee’s contract as this contains the legal rights and obligations agreed between the parties.
By endorsing WorkPac’s submissions, the Court clarified that in characterising the employment, reference should not be made to the subsequent conduct of the parties or their expectations as to continuing employment. This is a significant departure from the Full Federal Court decision.
The provisions of Mr Rossato’s contract that were considered critical to determining that he was a casual employee included:
(a) the employment was on an assignment-by-assignment basis, with each assignment representing a discrete period of employment;
(b) the employee was entitled to accept or reject offers of assignment; and
(c) the employer was under no obligation to offer more assignments.
Another indicative, but less critical, factor was that the period of assignment could be varied by the employer on one hour’s notice.
The Court held that another indicative (though not decisive factor) is the “labelling” of the employment as casual within the contract.
Mr Rossato contended that “ambiguities” in his written contract justified the Court’s consideration of the parties’ conduct in the employment. Also, his rosters could be taken as a written indication of a “firm advance commitment” to his working hours.
The Court held that although the rosters “imbued Mr Rossato's employment with the qualities of regularity and systematic organisation”, those qualities could be entirely compatible with the notion of "casual employment" in the Fair Work Act including, the flexible work and period of employment provisions. The latter provisions of the Fair Work Act contemplate than an employee may be a casual employee even where they have been employed “long term” and have a reasonable expectation of continuing work.
In light of the above, the Court considered it unnecessary to contemplate WorkPac's alternative ground of appeal. This alternative ground contended that because WorkPac paid Rossato more as a casual than it would have as a permanent employee, it should be allowed to "appropriate the whole of the contractual overpayment, or at least the amount of the casual loading" to discharge any obligation to have provided paid leave.
In any event, as outlined in our recent update, this issue has largely been addressed through amendments to the Fair Work Act that received assent in March 2021. Key aspects of these changes for casual employees included introducing:
(a) a definition of "casual employee";
(b) “double dipping” or “set off” provisions to allow employers to reduce the amount owing in permanent entitlements by an identifiable casual loading paid to the employee where an employee was mistakenly treated as a casual; and
(c) casual conversion provisions imposing obligations on employers to offer eligible casuals conversion to permanent employment.
On the interaction between the amendments to the Fair Work Act and the decision, the Court confirmed that the definition of casual employee and the provisions that prevent casuals double dipping by claiming accrued entitlements for which they have been paid a loading do not apply to employees like Mr Rossato. This is because Mr Rossato accepted an offer of employment made before the commencement of the amendments to the Fair Work Act and was a person in respect of whom a court has made a binding decision before commencement or converted from a casual employee before that time. However, the amendments will apply retrospectively to other employees.
The High Court decision will provide much relief to employers who engage casual employees, and particularly those employers who rely on casual rostering practices. However, employers should be aware that the decision makes it easier for claims to be made based solely on the contract of employment rather than how the contract is applied in practice.
On one level, this could result in more claims (including class actions) based on poorly drafted contracts. Accordingly, in view of the High Court decision employers should ensure that their casual employment contracts are properly drafted or updated to minimise the risk of such claims.
Class action law firm Adero is reported to be considering a High Court challenge to the constitutionality of the Fair Work Act’s retrospective application of double dipping provisions. At the time of publication, no such action had been filed, but watch this space.
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