Navigating the fall-out from the High Court's ruling in Rossato: Who is a casual employee?

The High Court has clarified  the common law 'test' for determining whether an employee is a casual employee under the Fair Work Act 2009 (Cth) (FW Act) and it is significant, because it departs from the established case law.  However, the decision's impact is limited because the common law test has been supplanted by a new, statutory definition that applies retrospectively.  

On 4 August 2021, the High Court of Australia handed down its much anticipated judgment in the matter of WorkPac Pty Ltd v Rossato¹  (Rossato).  

Background: The decision under appeal

The Rossato decision is the result of an appeal by labour hire company WorkPac, from the Full Court of the Federal Court of Australia (FCAFC) decision²  in 2020 that its employee, Mr Robert Rossato, was not a casual employee.  Some key take-aways from that decision were:

• the FCAFC re-affirmed³ that a 'true casual' employee does not have a firm advance commitment as to the duration of their employment, or the days or hours on which they will work;
• the majority of the court determined that the relevant time for determining whether the requisite 'firm advance commitment' existed was the time when an offer of employment was made and accepted, as well as matters ascertained from the employment relationship as a whole; and
• WorkPac was not entitled to 'set off' the casual loading that had been paid to Mr Rossato, to satisfy the debts owed to him for unpaid NES leave entitlements.  

What the High Court said

The High Court in Rossato agreed with the FCFCA that, for employment to be casual, there must be no 'firm advance commitment' from the employer or employee as to the duration of the employee's employment or the days (or hours) that the employee will work.  

However, the High Court held that this is to be established principally by the express and enforceable terms of the employment contract agreed between the employer and the employee.  

In other words, courts must look at the enforceable terms of the deal made by an employer and employee, at the time it was made, to determine whether the employee is a casual.  That means that if the parties expressly agreed that the employee would be employed on a casual basis, the employee will be a casual, even if the employee works for a significant period of time on a regular and systematic basis.

Intervening legislative changes in the FW Act

Between the FCAFC the High Court decisions, the Federal Government passed amendments to the FW Act to clarify casual employee entitlements.  Since 27 March 2021, the FW Act has expressly defined a ‘casual employee’ in new section 15A as someone who accepts an offer of employment made on the basis of no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.  In determining whether there is no such firm advance commitment, the Act permits a consideration of only whether:

• the employer can elect to offer work and whether the person can elect to accept or reject work;
• the employee will work only as required;
• the employment is described as casual employment; and
• the employee will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a Fair Work Act instrument.

The FW Act makes clear that these criteria can be considered only at the time of the offer and acceptance – i.e. when the contract is made (so, subsequent conduct may not be taken into account) and that the definition applies retrospectively to cover most employees unless a court has already ruled on whether or not they are casual.  

The FW Act also includes a new section 545A, which permits courts to apply a casual loading paid to an employee who has been misclassified as casual in satisfaction of certain non-casual entitlements, in certain circumstances.

So, what does this all mean?

The new section 15A definition applies instead of the common law definition for most employees.  

However, Rossato sheds some light on how employers should approach the characterisation of employees as casual or non-casual pursuant to the test set out in section 15A of the Act.  In particular, Rossato:

• reinforces the position under section 15A of the FW Act that the subsequent conduct of the parties after they enter into an employment contract (particularly where a casual employee is engaged for an extended period of time on a regular and systematic basis), will not prevent the employee from being considered to be a casual employee.  
  For example, offering casual employees shifts in accordance with a roster set even months in advance will not render the employment 'non-casual' under section 15A of the FW Act.
  (However, because of the casual conversion provisions in Division 4A of the National Employment Standards, casuals who have been engaged on that basis may need to be offered ongoing employment); and
• confirms that, if an employment contract provides that a casual employee will be engaged under the contract for a specified duration of employment (for example, several months), that factor will not render the employment 'non-casual', especially where the contract provides an express right for the employer to vary the engagement and to even terminate it early on short notice.

That said, Rossato clearly related to an employment relationship that was covered by written casual employment agreements and enterprise agreements throughout its life.  It remains open under section 15A of the FW Act for an employee to argue that they ceased being a casual, if a material change in the employment relationship has occurred (such as the original written casual employment contract expiring and not being replaced by another written contract).

Focus on the contract

In this sense, Rossato helps illustrate a point that has become more important since the enactment of

section 15A: that it is important to have a carefully drafted employment agreement for casual employees and to ensure that it is renewed regularly as the circumstances require.

In light of the very significant developments in the regulation of casual employment over the last few months, especially via the changes to the FW Act, employers must ensure they understand the new laws and how they impact on their people practices and employment obligations, and take steps to ensure they are complying with the new requirements.  This work extends to ensuring the National Employment Standards casual conversion requirements are being complied with, ensuring that casual contracts for existing and new employees are in writing and drafted correctly, and understanding the implications of an employee having been misclassified as 'casual' under the new section 15A definition of causal employee.

The High Court's reinforcement of the prominence of contracts may also have implications for independent contractors and gig economy workers.

Please contact a member of the Thomson Geer Employment & Safety team if you would like assistance with any of these issues.

¹ WorkPac vRossato & Ors [2021] HCA 23.

² WorkPac v Rossato [2020] FCAFC 84

³ Drawing on prior authority in Hamzy v Tricon International Restaurants (2001) 115 FCR 78 and WorkPac v Skene (2018) FCR 536.

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