The High Court has unanimously overturned the Full Federal Court decision in Workpac Pty Ltd v Rossato (2020) 278 FCR 179, ruling that the primary consideration in determining how to characterise an employment relationship is by considering the express terms of a written employment contract (WorkPac Pty Ltd v Rossato [2021] HCA 23).
This is a significant decision, as it resets the view arising out of recent case law, which suggested that the conduct of the parties after entering into a contract was to take precedence over the written terms themselves.
Under the Fair Work Act 2009 (Cth) (FW Act) and most enterprise agreements and modern awards, casual employees are not entitled to annual leave, personal leave, notice of termination or redundancy pay. Instead they are entitled to a 25% pay loading, and have the added freedom and flexibility of being able to pick and choose when they work, as there is no firm advance commitment of ongoing work.
The decision of the Full Court built upon the almost identical case of Workpac Pty Ltd v Skene. It found that, notwithstanding the presence of a written contract of employment stipulating Mr Rossato to be a casual, the "conduct of the parties to the employment relationship and the real substance, practical reality" of the employment was what needed to be considered to ascertain the "true nature of that relationship".
After considering the nature of Mr Rossato's roster, and the organisation of the workforce he was a part of, it was ruled that he was not a casual employee and was therefore entitled to all the benefits enjoyed by an ongoing employee. The Full Court also held that Workpac could not offset any payments it was liable to pay Mr Rossato as a result of this decision from the leave loading it paid him based on the understanding he was a casual employee.
In overturning this decision, the High Court confirmed that the primary test for determining the "casualness" of an employee was whether there was a "firm advance commitment as to the duration of the employee's employment or the days (or hours) the employee will work". In analysing this, the Court noted the FW Act makes it clear that casual employment may be regular (see for example the period of employment requirement for casual employees to access the unfair dismissal jurisdiction).
The Court then rejected the approach taken by the Full Court in this case and in Skene of the primacy of post-contractual conduct, noting:
- while mutual undertakings may not always be express, where there are express terms of the contract between the parties, they must be given effect unless they are contrary to statute;
- if the mutual undertakings are said to be implied in what has been agreed, they cannot be inconsistent with the express terms of the contract; and
- if the mutual undertakings are to be inferred from conduct, then they may take effect as contractual variations.
Given all of this, it held:
"The contractual arrangements between WorkPac and Mr Rossato did not include a mutual commitment to an ongoing working relationship between them after the completion of each assignment. The express terms of the relationship between WorkPac and Mr Rossato were distinctly inconsistent with any such commitment. Mr Rossato's entitlement to remuneration was agreed on that basis.
That the performance of Mr Rossato's obligations was organised in accordance with Glencore's rosters and thereby exhibited features of regularity and consistency did not establish a commitment between the parties to an ongoing working relationship after each assignment was completed. In carrying out each assignment, Mr Rossato worked as a casual employee."
What this means for you
This strong decision by the High Court is important for both employers and employees as it resolves the uncertainty that arose out of Skene, which was further compounded by this decision at first instance, as it reinforces the supremacy of the terms of a written contract. This, combined with the recent inclusion of a definition of "casual employment" in the FW Act, should go a long way to resolving most of the issues arising out of these decisions.
Employers should be comforted by the fact that provided their casual employment contracts make it clear that their engagement is on this basis, and it is made clear that there is no firm advance commitment of ongoing employment, it is likely that such a classification will be supported in a Court or in the Fair Work Commission. For this reason, it is important that casual contract terms are carefully reviewed in light of this decision to ensure it makes this clear.
At the same time, employers may wish to review their policies and procedures to ensure that they do not create any unintended implied mutual obligations and are consistent with the contract.