The High Court has upheld the employer’s appeal in the Rossato casual employment test case, and in the process has clarified the definition of casual employment (Workpac Pty Ltd v Rossato [2021] HCA 23). However, the practical significance of this decision has been limited by recent legislative amendments.

The High Court held that a casual employee is one who has 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, and provides no reciprocal commitment to the employer.  Where parties have a written contract and adhere to those terms, the requisite firm advance commitment must be found in the binding contractual obligations of the parties; a mere expectation of continuing employment on a regular and systematic basis is not sufficient.

In early 2021, and prior to the conclusion of the proceedings in the High Court, the Federal Government amended the Fair Work Act 2009 (Cth) to include a new definition of casual employee (in section 15A) that would apply retrospectively.  That definition substantially accords with the definition now articulated by the High Court in Rossato.

As part of the amendments to the Act, casual employees have an entitlement to convert to permanent employment subject to certain criteria being present.  Employers (other than small business employers) must carry out an assessment of existing employees to determine eligibility to receive an offer of permanent employment, and make such offers, by 27 September 2021.  The decision of the High Court in Rossato does not impact these rules (and this case was not a vehicle to challenge those provisions).

Background

In a previous Legal Update we reported on the outcome of the Full Federal Court decision in Rossato (WorkPac Pty Ltd v Rossato [2020] FCAFC 84).

The matter was a specially constituted test case arising out of an earlier Full Court decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131.  In Skene, the Full Court held that an employee was not a casual employee for the purpose of the annual leave provisions set out in the National Employment Standards, despite being designated as a casual under the applicable enterprise agreement.

Given the decision in Skene, the parties in Rossato agreed that a casual employee is one who has no firm advance commitment from their employer to continuing and indefinite work according to an agreed pattern of work.

WorkPac argued that the existence of a firm commitment should be determined solely by reference to an express term providing for that commitment (that is, if there was no express term, there was no firm commitment).  The employee (Mr Rossato) argued, in line with Skene, that the proper approach to determining the existence of a firm advance commitment should be a process of “characterisation” having regard to “[t]he conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship”.  The Full Court preferred that approach.

The Full Court held that the parties had agreed on an employment of indefinite duration which was stable, regular and predictable such that a firm advance commitment was evident. As Mr Rossato engaged in work that was “regular, certain, continuing, constant and predictable”, he was not a true casual employee.

High Court

The main issue before the High Court was how to determine whether the firm advance commitment was present.

The High Court examined the Fair Work Act and concluded that it does not regard the existence of “a reasonable expectation of continuing employment … on a regular and systematic basis” to be inconsistent with the nature of casual employment.  Rather, such an expectation is entirely consistent with an employee’s status as a casual.  So far as the Fair Work Act is concerned, such an expectation, however reasonable, remains an expectation only and falls short of a “firm … commitment”.  A reasonable expectation of continuing employment is simply not the kind of firm advance commitment to continuing employment the absence of which typifies casual employment.

Further, a court can determine the character of a legal relationship between the parties only by reference to the legal rights and obligations which constitute that relationship. The search for the existence or otherwise 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.

The High Court then moved on to examine the provisions of the written contracts under which Mr Rossato was engaged, finding that there were a number of key provisions which expressly provided that Mr Rossato’s employment was on an “assignment-by-assignment basis”, with Mr Rossato entitled to accept or reject an offer of an assignment and WorkPac under no obligation to offer any further assignments.  On the plain and ordinary meaning of these provisions, the parties deliberately avoided a firm commitment to ongoing employment once a given assignment had been completed.  Once it was accepted that those clauses bound the parties according to their ordinary meaning, it must also be accepted that on a straightforward application of the test which the parties accepted to be the hallmark of casual employment, Mr Rossato was a casual employee.

The High Court was not therefore required to consider the issue of whether Workpac was entitled to set off payments made to Mr Rossato.

Significance

Amendments were made to the Fair Work Act in March 2021 to address perceived difficulties arising from the Full Court decision in Rossato.  The amendments did the following:

  • Establish a definition of casual employee based around the concept of the absence of a firm advance commitment to continuing and indefinite work.
  • The question of whether a person is a casual employee is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party.
  • When a person is a casual employee under the definition, even if they were employed before the amendments, that person is a casual employee for all purposes until that person converts to permanent employment or he/she accepts a new offer of employment as a permanent employee.
  • Where a person is not a casual employee under the definition and they have a claim for non-payment of entitlements (e.g. paid annual leave) that claim is to be reduced by the value of casual benefits received.
  • A casual employee who has worked for an employer for at least 12 months and has, during at least the last 6 months of that time, worked a regular pattern of hours on an ongoing basis may be entitled to be offered, or request, conversion to full-time employment or part-time employment.

The definition of casual employee and the manner of assessing whether a person falls within it, is substantially the same as the outcomes reached by the High Court in Rossato.

The permanent conversion entitlement which the amendments added to the Fair Work Act is new and does not overlap with any issue that arose in the Rossato litigation.  As such the conversion entitlement remains in full force and effect.

The saga that developed around the Skene and Rossato litigation over the past 4 years has no doubt created a deal of confusion for employers.  Whilst the decision of the High Court has created clarity, employers need to make sure that they understand the provisions in the Fair Work Act regulating casual employment and, in particular, the processes around assessing employees’ eligibility for conversion and the issuing of offers to convert.  For employees engaged before the amendments took effect (27 March 2021) those processes must be completed by 27 September 2021.  We are happy to provide further information and assistance.  Please refer to the contact details above.