The High Court provides more certainty around casual employees

The High Court has provided further certainty in determining whether an employee is a casual employee in handing down its much anticipated decision in WorkPac Pty Ltd v Rossato [2021] HCA 23 (4 August 2021). However, because of reforms in this space earlier this year, the practical implications of the High Court’s decision in Rossato are more limited than first expected.

A recap of the Full Federal Court decision of Rossato

As we reported on 8 December 2020 (read here), the Full Federal Court decision of Rossato had cemented the view that engaging employees on the basis they were casual and paying them a casual loading was not enough for them to be considered true casuals at law. This decision had followed on from the previous decision of WorkPac v Skene, where the court had considered it necessary to define a ‘casual employee’ in circumstances where that term was not defined in the Fair Work Act 2009 (Cth).

A finding that an employee was not a casual could be based on the post-contractual conduct of the parties, rather than the express terms of the employment agreement. The effect of the Full Federal Court’s decision was that long term casuals who worked regular and systematic hours were likely to be considered permanent employees and be entitled to receive leave and other entitlements on that basis.

The Full Federal Court had also upheld the ruling that WorkPac was not entitled to set off the 25% casual loading that had been paid to Mr Rossato against the paid leave entitlements that he was claiming as a permanent employee. In our article dated 23 March 2021 (read here), we explained that this outcome resulted in the Federal Government’s Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Casual IR Reforms) which addressed the potential cost for employers of this ‘double dipping’.

How did the High Court decide Rossato?

The High Court unanimously held that Mr Rossato was a casual employee and was not entitled to receive the various paid entitlements he had claimed.

The High Court confirmed that an employee is a casual if there is no ‘firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work.’

However, the High Court’s approach differed from the Full Federal Court’s position, in finding that the question was to be determined exclusively by considering the contractual arrangements between the parties, not by taking into account post-contractual conduct or the ‘totality of the relationship’. This simpler approach, relying upon the contractual terms entered into between the parties, has been welcomed by employers.

In determining the character of a legal relationship between parties, the High Court stated that courts can only do this by reference to the legal rights and obligations that constitute that relationship – that is, the employment contract. The search for a ‘firm advance commitment’ must be from enforceable terms, not ‘unenforceable expectations or understandings’ that reflect the way that the parties performed the agreement once it had been entered into.

In reaching its view, the High Court noted that the Fair Work Act recognised casual employees could:

• be engaged on a long term basis;
• be engaged on a regular and systematic basis; and/or
• have a reasonable expectation of ongoing employment.

None of these factors were said to be inconsistent with employment as a casual employee.

What does this all mean?

Although welcomed by employers, the High Court’s decision may have limited practical impact for most employers because the Casual IR Reforms continue to apply and in large part have overtaken the arguments made in WorkPac v Skene and WorkPac v Rossato. For those employers who have been dealing with historic claims concerning casual employees, including a number of class actions which have been commenced, the High Court’s decision remains significant.

Clearly now, the question of whether an employee is a casual will be determined on the statutory definition of a ‘casual employee’ under the Fair Work Act and the contractual terms on which the employee is engaged.

The focus for employers should continue to be ensuring that their casual employment contracts are reviewed and updated to:

• reflect the new legislative definition of a ‘casual employee’; and
• put employers in a position where they can seek to set off the casual loading paid against any claims for leave and other relevant entitlements in the event that an employee is ultimately found to be a permanent employee.

If employers have not already done so, those that engaged casuals prior to 27 March 2021 should also be taking steps to ensure that they will comply with the new NES requirements relating to offers of conversion before the end of the transitional period on 27 September 2021 (see our article dated 4 August 2021 – here).

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Authored by:

Steven Troeth, Partner
Diana Diaz, Special Counsel