A not so casual assignment: High Court hands down the final verdict on casual employment

The eagerly anticipated High Court decision in WorkPac Pty Ltd v Rossato & Ors [2021] HCA 23 (WorkPac) was handed down on 4 August 2021.

The High Court unanimously allowed WorkPac's appeal and in the process, clarified what it means to be a "casual employee" in Australia.

In short, a casual employee is one who does not have a firm advance commitment from their employer about how long they will be employed for, or when they will work - and in turn, does not give their employer any such commitment.

The key outcomes

Mr Rossato had been employed as a production worker by WorkPac. He had worked under six sequential contracts for Glencore, one of WorkPac's clients, at its coal mines.

WorkPac had at all times believed that Mr Rossato was a casual employee and had treated him as such, providing him with a casual loading, but not paid leave entitlements or public holidays.

The High Court said that in carrying out each of his separate work assignments, Mr Rossato worked as a casual employee for the purposes of both the Fair Work Act 2009 (Cth) (FW Act) and WorkPac's enterprise agreement.

Some key takeaway points are:

• The Full Court in the earlier Skene decision (detailed below) had strayed from the orthodox path in approaching the characterisation of the nature of the employment by reference to the conduct of the parties and the "real substance, practical reality and true nature of that relationship".
• The provision of Glencore's rosters to Mr Rossato fell well short of being a contractual promise that Mr Rossato would be either entitled, or required, to work all the shifts listed.
• While the rosters may have given Mr Rossato's employment some degree of regularity and systematic organisation, that was not incompatible with the notion of "casual employment" in the FW Act.
• The performance of work by Mr Rossato in accordance with Glencore's rosters did not establish a commitment between Mr Rossato and WorkPac to an ongoing working relationship beyond the completion of each assignment.
• WorkPac and Mr Rossato had not agreed at any time that, once an assignment was completed, Mr Rossato would then be engaged for further assignments. Their contractual arrangements did not include a mutual commitment to an ongoing working relationship.
• Rather, Mr Rossato and WorkPac had deliberately sought to avoid a firm advance commitment to continuing work beyond the completion of a particular assignment. Mr Rossato's entitlement to remuneration was agreed on that basis.
• While Mr Rossato may have been said to have had, over time, a reasonable expectation of continuing employment on a regular and systematic basis, that was not a firm advance commitment to continuing employment beyond a particular assignment.

The third question that WorkPac asked the High Court to determine was whether it was in any way entitled to use "excess" amounts (such as the casual loading) paid to Mr Rossato to discharge his "permanent employee" entitlements.

This issue did not need to be determined by the High Court, given its findings on the other issues.

Where it all started

The Full Court held in WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene) in August 2018 that Mr Skene was not a casual employee under the FW Act or the applicable enterprise agreement.

Mr Skene had been employed on a "fly in, fly out" basis, working seven days rostered on followed by seven days rostered off. His employment contract allowed for termination with one hour's notice and he was employed on an "assignment by assignment" basis. Mr Skene was paid a flat hourly rate that included casual loading. Importantly, his roster was provided 12 months in advance of his shifts.

When his employment ended, Mr Skene claimed annual leave entitlements from WorkPac under the FW Act and the applicable enterprise agreement on the basis he was a permanent employee.

The Full Court agreed with Mr Skene, finding that he was not a casual employee because his employment did not retain the "essence of casualness" indicated by irregular work patterns, uncertainty, discontinuity and intermittency of work and unpredictability. This meant WorkPac had to pay Mr Skene his accrued annual leave entitlements on top of the casual loading he had already been paid because of a complexity with using flat hourly rates.

The legislative response to Skene

In an effort to deal with the "double-dipping" issue, regulation 2.03A was introduced into the Fair Work Regulations 2009 (Cth) (FW Regulations).

The regulation was intended to apply if an employee has been mistakenly classified as a casual employee during some, or all, of their employment.

Under the regulation, an employer, in response to a claim by an employee who is employed as a casual employee (but who is later found to be other than a casual for the purposes of the National Employment Standards), can apply to offset any casual loading paid to the employee against other entitlements the employee may be due.

Mr Rossato

Mr Rossato was employed at WorkPac's coal mines from July 2014 until he retired in April 2018, pursuant to six consecutive employment contracts. Each contract expressly stated Mr Rossato was engaged on a casual basis and was paid the casual rate under WorkPac's enterprise agreement that included 25% casual loading.

Relying on the decision in Skene, Mr Rossato wrote to WorkPac claiming he was a permanent employee and that he had not been paid his leave and public holiday entitlements.

After receiving Mr Rossato's demands, WorkPac applied for various declarations to clarify the nature of Mr Rossato's employment, under the FW Act and the relevant enterprise agreement, and as to its ability to offset casual loadings paid to Mr Rossato against other entitlements.

What the Full Court of the Federal Court said

The Full Court of the Federal Court (Full Court) concluded in WorkPac v Rossato [2020] FCAFC 84 (Rossato) that Mr Rossato was not a casual employee under either the FW Act or the applicable enterprise agreement, and that he was entitled to the payments he claimed.

The Full Court held that even where a contract is wholly written (such as was the case here), consideration of implied terms, the parties' conduct in the employment relationship and the other indicia of permanent or casual employment also need to be considered.

WorkPac's argument, that where an employment contract is wholly written there must be express terms that demonstrate the existence of a firm advance commitment to work, was rejected.

The Full Court determined that there was an express written "firm advance commitment" to ongoing work in Mr Rossato's employment agreements with WorkPac.

This included because:

• Mr Rossato would work regular shifts, which were scheduled 12 months in advance, for continuing standard blocks of time
• his employment contracts and enterprise agreement included rights for either party to terminate on notice, which supported the conclusion that the parties intended an ongoing indefinite employment relationship, and
• though the last three of the six contracts contained a clause allowing Mr Rossato to reject shifts, this was inoperative when viewed against the behaviour of the parties (i.e. regular work shifts, advanced scheduling of rosters, continued and predictable pattern of work) and the nature of the work being performed in a remote location.

Even though the Full Court considered that Mr Rossato was paid an hourly wage, could turn down work, was not guaranteed work, could be terminated on an hour's notice and had to submit timesheets to confirm his hours, this was not significant enough to outweigh the regular and continuing standard blocks of time he worked.

Further, the Full Court considered that the changes made to the FW Regulations (as they then were drafted) introduced after the decision in Skene were ineffective due to a technical drafting issue. This prevented WorkPac from offsetting the casual loading paid to Mr Rossato against the subsequent underpayment of entitlements as a permanent employee.

To read more about the Rossato decision, see our earlier article.

Reforms to the FW Act

Subsequent to the Full Court decision in Rossato, the FW Act was amended in various respects relevant to casual employment.

There were four key changes:

• Introduction of a new definition of casual employment, in which an employee's status is assessed on commencement, regardless of any subsequent work patterns
• Casual conversion provisions that clarify an employee's rights and an employer's duties to prevent the misuse of "permanent casuals"
• Clearer guidelines to prevent "double-dipping", including provisions that aim to offset casual loading paid to an employee against permanent employee benefits and resolve the issues identified by the Full Court
• A Casual Employment Information Statement must be provided by employers to all new casual employees and for existing casual employees after 27 September 2021.

To read more about these changes, see our earlier article.

Where to from here?

While the High Court's decision in WorkPac will no doubt provide comfort to some employers who engage casual employees, practical issues for employers still remain.

Our suggestions for employers are as follows:

• Undertake a review of your current casual employment agreements. Have an eye to both compliance with the new FW Act provisions and ensuring that terms inconsistent with a casual employment relationship are not included.
• If your factual circumstances differ from those which were considered by the High Court in WorkPac (e.g. contractual terms and the way your business is arranged), consider whether you need to take steps to identify and address any historical claims from employees.
• Get prepared for casual conversion. We suggest implementing a procedure for reviewing casual employees' conversion to permanent employment, to prevent administrative error or oversight that could lead to liability exposure.

For advice on responding to claims from casual employees or reviewing casual employment agreements, contact Lander & Rogers.