The High Court has overturned a highly debated Full Federal Court decision that entitled long-term casuals to claim leave and pay entitlements reserved for permanent employees.

Introduction

In its highly anticipated decision, the High Court has confirmed in WorkPac Pty Ltd v Rossato [2021] HCA 23, that a casual employee is an employee who does not have a firm advance commitment to continuing and indefinite work, which is assessed based on the binding contractual obligations of the parties.

This decision emphasises the importance of:

  • clearly understanding whether your casual employees were offered a firm advance commitment in their written contracts
  • reviewing your casual employment contracts to ensure compliance with the relevant changes
  • revising any changes made to your employment contracts following the Federal Court decision.

How did we get here?

Mr Rossato claimed that he was not a casual employee of WorkPac because he performed regular, constant and predictable work under a series of six assignments. Mr Rossato claimed payment for untaken annual leave, public holidays, and periods of other leave taken during his employment.

In 2020, the Full Federal Court found that Mr Rossato was not a casual employee for the purposes of the Fair Work Act 2009 (Cth) (FW Act) and relevant Enterprise Agreement. More surprisingly, Mr Rossato’s entitlements were not ‘set off’ by the 25% casual loading that he had been paid in lieu of these entitlements.

High Court provides clarity and overturns Federal Court decisions

Firm advance commitment

The High Court confirmed that the test of whether an employee is a casual employee is based on whether there is a firm advance commitment to continuing and indefinite work.

The terms of Mr Rossato’s employment provided that he was employed on an ‘assignment-by-assignment’ basis. Mr Rossato could accept or reject an offer for an assignment, and WorkPac was not obliged to offer further assignments. The High Court found that, on the plain and ordinary meaning of these provisions, the parties avoided a firm commitment to ongoing employment. Based on a straightforward application of the test, Mr Rossato was a casual employee.

The High Court also found that placing Mr Rossato on a roster system under which he was obliged to work was of limited significance. While the rosters exhibited features of regularity and consistency, they did not establish a commitment to an ongoing relationship after each assignment was completed.

Contract rather than conduct

The High Court rejected the approach to classify casual employment by reference to the ‘entirety of the relationship’ based on the conduct of the parties and the ‘real substance, practical reality and true nature’ of the employment relationship. Instead, the existence of a firm advance commitment is determined based on the binding contractual obligations of the parties in a written contract.

A firm advance commitment must be based on enforceable terms, rather than ‘unenforceable expectations or understandings that might be said to reflect the manner in which the parties performed their agreement’.

However, the High Court also found that the ‘label’ attached to an employment relationship is not decisive. Rather, the character of the relationship between the parties is established by the rights and obligations that constitute the relationship.

Based on the contractual obligations of the parties, Mr Rossato carried out each assignment as a casual employee.

Consistency with amendments to the Fair Work Act

The High Court’s decision is consistent with the new definition of ‘casual employee’ in the FW Act, which came into effect on 26 March 2021 (see our related article here).

Although not dealt with by the High Court in this instance, the FW Act also provides that courts must reduce any amount payable for relevant entitlements by the amount of casual loading already paid if an employee is later found not to be a casual employee.

What should you do now?

It is imperative that employers review their casual employment contracts to ensure that the terms reflect the clarified meaning of casual employment.

Employers should also revise any changes made following the Federal Court decisions and ensure compliance with the new requirements under the FW Act.

If you would like more information or need assistance with reviewing your employment contracts, please contact a member of our Workplace Relations and Safety team.