Contract is king: casual employment
The High Court has provided business much needed certainty when determining the nature of its relationship with its employees in a critical decision explaining the meaning of casual employment.
So how does a business know if its employee is actually a casual or permanent employee? The High Court has upheld the primacy of the contractual terms of a bargain between the parties as to their rights and obligations, explicitly rejecting the characterisation of casual employment by a ‘vibe’ of unspoken undertakings, contemplations and expectations. In the words of the High Court:
Nothing in the [Fair Work Act] within which the employment relationship in the present case has been established relevantly inhibits the freedom of parties to enter into a contract for casual employment. So far as casual employment is concerned, the Act leaves the making of such an arrangement to be agreed between employer and employee.
Contract is king (well almost)! In this bulletin, we explore what is important to know when it comes to the employment status of your ‘casual’ employee.
WorkPac is a labour hire company. Mr Rossato was engaged by WorkPac from 28 July 2014 to 9 April 2018. However, during this period Mr Rossato was employed by WorkPac under six discrete but consecutive contracts of employment. WorkPac treated each employment as a casual employment. Mr Rossato argued that he was not a casual employee and relied on the decision of WorkPac Pty Ltd v Skene (2018) 264 FCR 536. Skene held that a similar employee was a permanent employee and therefore entitled to leave entitlements (despite being engaged and paid as a casual).
The Full Federal Court confirmed that an employee who was engaged on a regular and systematic basis, having regard to the totality of the relationship, meant he was not a casual employee and therefore was entitled to the paid leave entitlement of a permanent employee. The Full Court gave little weight to the contract when the relationship itself appeared to be ongoing.
WorkPac appealed the Full Federal Court’s decision to the High Court. The High Court allowed the appeal: WorkPac Pty Ltd v Rossato  HCA 23 (4 August 2021).
A firm advance commitment
It was the accepted position before the High Court that the expression "casual employee" in the Fair Work Act 2009 refers to an employee who has no "firm advance commitment as to the duration of the employee's employment or the days (or hours) the employee will work". As such, the central issue was what a “firm advance commitment” meant.
The High Court made clear that the Fair Work Act envisages that casuals, called long-term casuals, may have regular and systemic engagements and a reasonable expectation of ongoing work. In that context, the High Court said “a mere expectation of continuing employment, however reasonable, is not a basis for distinguishing the employment of other employees from that of a casual employee”.
The Full Federal Court said you determine the nature of the relationship by looking at the entirety of the relationship. This approach was rejected:
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. To the extent that Bromberg J expressed support for the notion that the characterisation exercise should have regard to the entirety of the employment relationship, his Honour erred.
The High Court looked at Mr Rossato’s contract to determine the nature of the relationship:
1. How did the parties describe the relationship?
Labels are not decisive. The relationship is “established by the rights and obligations which constitute the relationship". Labelling employment as casual in the contract may be of some influence but other contractual terms indicative of the relationship are more informative.
2. How is the employee paid under the contract?
The High Court found the payment clause in the contract and or enterprise agreement describing the payment of a casual loading explicitly in lieu of permanent entitlements to be “a compelling indication by the parties that their relationship did not include [a firm advancement] commitment”.
3. Is there an obligation under the contract to work on an ongoing basis?
Mr Rossato’s contract provided no promise of work beyond each assignment. Mr Rossato was free to accept or not accept, an assignment. Workpac did not need to offer further assignments. The High Court usefully said:
Something that is not binding cannot meaningfully be described in a court of law as a “commitment” at all. Some amorphous, innominate hope or expectation falling short of a binding promise enforceable by the courts is not sufficient to deprive an agreement for casual employment of that character.
In accepting an assignment, and therefore issuing a roster, did not itself create a firm advance commitment. Mr Rossato had no ongoing employment beyond his discrete assignment. “Inasmuch as the rosters imbued Mr Rossato's employment with the qualities of regularity and systematic organisation during the period of each assignment, those qualities have been demonstrated to be entirely compatible with the notion of "casual employment" in the Act. What was absent was a firm advance commitment to continuing work beyond the completion of the particular assignment”, the High Court concluded.
And so, Mr Rossato was – and always was – a casual employee:
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.
Employers should take the following immediate steps:
Review and update employment contracts to reflect the features of casual employment and promise no firm advance commitment to work.
Ensure practices are consistent to avoid arguments that the contract is a sham.
Whether the decision has implication for other cases, like contractor relationships, is unknown at this time. The High Court has demonstrated the primacy of the contract but the wealth of authority in the employee / contractor field prefers the ‘totality of the relationship’ test. This will not likely change but the contract may have more importance in closer cases.
And remember, the Fair Work Act was recently amended to add a new definition of casual employment, new rules relating to conversion and a new fair work casual employment information statement.