In an attempt to address the Skene and Rossato decisions, amendments were made to the Fair Work Act 2009 (Cth) (FW Act), effective 27 March 2021, to introduce a new definition of a “casual employee” and provide a mechanism for the conversion of casual employees to permanent employment (amongst others).
Whilst the High Court was not required to consider the legislative amendments, including the new statutory definition of casual employee, the decision nonetheless will have an important impact upon the operation of the new provisions in the FW Act.
In addition, for those employers who are not national system employers, this decision will be most instructive to the proper characterisation and determination of true casual employment.
The High Court decision
On 4 August 2021, the High Court handed down its decision unanimously finding that Mr Rossato was a casual employee, because although he worked well-established rosters during each “assignment” the subject of his employment, there was no “mutual commitment to an ongoing working relationship…after the completion of each assignment”.
In so doing the High Court found the following.
- Firstly, casual employment is characterised by no “firm advance commitment from the employer as to the duration of the employee’s employment, or the days (or hours) the employee will work”.
- Secondly, regular and systemic patterns of work and/or the existence of a “reasonable expectation of continuing employment” are not inconsistent with casual employment. So much is apparent from a number of pre-existing provisions of the FW Act, such as those applying to “long term casual” employees. Therefore, any such pattern or expectation “falls short” of being a “firm advance commitment”.
- Thirdly, the search for the existence (or lack thereof) of a “firm advance commitment” must be for enforceable terms and not “unenforceable expectations or understandings that might be said to reflect the manner in which the parties performed their agreement”. It is the terms of the contract of employment that will be the “reliable indicators of the true character of the employment relationship”.
Importantly, the High Court found that, to the extent, the Court in Skene (followed in Rossato) approached the characterisation of the employment relationship by reference to “the conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship”, the Court fell into error.
Therefore, the High Court found that roster predictability did not represent a firm advance commitment to employ Mr Rossato for an indeterminate period and did not displace the written terms of their agreements with Mr Rossato that his employment was on an assignment-by-assignment basis with each assignment terminable on one hours’ notice by either side and no obligation by Workpac to offer further employment once Mr Rossato had completed an assignment.
How does the decision interact with casual employment under the FW Act?
Since the Federal Court’s Rossato decision, the FW Act (which applies to national system employers) has been amended to include a number of terms to address casual employment.
Statutory definition of a casual employee
The starting point for defining casual employment under the FW Act is to consider the nature of a person’s employment at the time they were employed. Later changes to the nature of the employment will not change a person’s casual status but may provide a basis for the person to seek conversion to full-time or part-time employment after 12 months.
Employment is deemed to be casual if the employer offers, and the employee accepts, employment where there is no firm advance commitment by the employer to “continuing and indefinite work according to an agreed pattern of work. The considerations a court could have regard to when determining whether the “firm advance commitment” are limited to:
- whether the employer can elect to offer work and whether the person can elect to accept or reject work;
- whether the person will only work as required;
- whether the employment is described as casual employment; and
- whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the employment offer or a fair work instrument.
By itself, the pattern of hours does not indicate the employment is casual.
The High Court decision is consistent with the amendments to the FW Act. Particularly, where a casual employee is employed for a particular engagement (like Mr Rossato was), the decision confirms that regular advance rostering will not change the character of casual employment to permanent employment.
Rather, it is the firm advance commitment to indefinite work after the conclusion of the casual engagement that is essential.
Preventing double-dipping
The amendments to the FW Act also introduced terms that permit an employer to set-off casual loading paid to employees against claims for permanent employment entitlements. The set-off provisions avoid the double-dipping issues which employers were so concerned about following the Rossato decision.
As the High Court found that Mr Rossato was a casual employee, it considered it unnecessary to deal with Workpac’s set-off arguments.
Therefore employers will have the benefit of the statutory provision to set-off the casual loading paid to casual employees against claims for certain employment entitlements, provided that there is an identifiable amount of casual loading.
Implications for employers
For state-system employers in Western Australia, casual employment is not a defined term in either the Industrial Relations Act 1979 or the Minimum Conditions of Employment Act 1993. The High Court’s decision in Rossato will therefore be instructive for future court decisions about whether a particular employee is casual, or permanent.
For all employers, the importance of having carefully drafted employment contracts cannot be overstated. The High Court has affirmed that employment is a contractual relationship in Australia and the contract made between an employer and their employees is primarily determinative of the rights and obligations of the parties, subject only to any necessary modifications made by statutes or as varied by the parties.
Like other contracts, it is important that parties take time to carefully describe suitable terms and conditions. In Workpac’s case, their employment terms and conditions were ultimately determinative that Mr Rossato and others like him are not entitled to paid leave upon leaving their employment.
Conversely, employers who do not maintain and use clear, comprehensive and suitable employment contracts may still find themselves at the mercy of a court or tribunal who may then have regard to other factors to determine whether an employee is employed on a casual basis or some other basis.
If you would like to know more about how your business can manage risk and introduce greater certainty into your employment arrangements, please contact Panetta McGrath’s Employment and Workplace Relations team on (08) 9321 0522.
Authors: Kathryn Maric and Sean Foy.