The High Court has the final say as to when a casual is really casual!

The High Court has this week confirmed that the employment contract is decisive in determining the question of whether a casual employee is genuinely a casual.  The issue is not determined by the actual conduct of the parties.

Prior to the High Court’s decision, the full Federal Court decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 determined that an employer who employs “casual employees” and pays them a casual loading but treats them, in all respects as a permanent employee is liable for leave and other employment entitlements enjoyed by permanent staff.

Background 

Through a series of judgments of the Federal Court involving labour hire company WorkPac, Australian employers were faced with the potential of significant backpay claims arising from the engagement of long term casual employees. In the first case, Mr Skene worked in two Queensland mines from 2010 to 2012 on a ‘fly in, fly out’ basis.

Mr Skene was employed under a ‘Notice of Offer of Casual Employment’ and was on engaged on an assignment-by-assignment basis, terminable with one hours’ notice, and paid a flat hourly rate.  However, Mr Skene’s roster was provided 12 months in advance.  He worked 12.5 hour days with the same crew as a dump-truck operator, in the same manner as permanent employees. Upon termination of his employment in April 2012, Mr Skene claimed annual leave entitlements from WorkPac on the basis that despite being called a casual employee by WorkPac, his working arrangements were akin to that of a permanent employee.

In WorkPac Pty Ltd v Skene [2018] FCAFC 131 the Full Court determined that despite being classified as a casual employee by WorkPac, Mr Skene’s work was regular, predictable, continuous and was not subject to significant fluctuation. On this basis, found that despite the contract of employment, he was not a casual employee at law and therefore was owed service-related entitlements such as annual leave.

In response to this decision, the Federal Government introduced the Fair Work Amendment (Casual Loading Offset) Regulations 2018 (Cth) (“Regulations”) such that employers were able to offset any future obligation to pay leave entitlements against other loadings such as the standard 25% casual loading.

However, in May of 2020, the Federal Court went further in its ruling in WorkPac Pty Ltd v Rossato [2020] FCAFC 84. Mr Rossato had worked on casual contracts with WorkPac, under six separate casual employment contracts, from July 2014 until April 2018. During this time, similar to Mr Skene, he worked a shift roster of seven days on, seven days off, set by rosters months in advance.

As was the case with Mr Skene, the Full Court found that, based on his regular, predictable, and continuous work, Mr Rossato was a permanent employee with the right to be paid leave entitlements. In this case, however, following the introduction of the Regulations, WorkPac argued that the 25% casual loading paid to Mr Rossato during the course of his employment was able to ‘set off’ his entitlements to paid leave. WorkPac’s argument was rejected. Part of the reasoning by rejecting the company’s argument was that the loading is not a substitute for taking actual time off. The Court found that an entitlement to paid time off is not just a monetary entitlement, but rather an entitlement to be absent from work without the loss of pay. In essence the court found that the employee was entitled to retain the loading and in addition had a claim for leave.

Essentially, the Rossato decision created a significant chasm for casual employees to ‘double dip’. In other words, enjoy the benefit of a higher hourly rate of pay by way of the casual loading, and the benefit of taking leave without the loss of pay. This decision caused employers to fear that claims for backpay from casual employees could collectively be between $18bn – $39bn.

The Rossato decision was challenged by WorkPac in the High Court.

The High Court Decision

In upholding WorkPac’s appeal against the Federal Court’s decision, the High Court, in WorkPac Pty Ltd v Rossato [2021] HCA 23, said categorically the “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”.

This important High Court decision clarifies the common law meaning of a casual employee and mirrors closely with the new definition under section 15A of the Fair Work Act 2009 (Cth) (“Act”). The Act was amended in March 2021, to specify address the confusion created by the Federal Court’s  decision in Rossato. Specifically, working a regular pattern of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work, and a casual employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer at the time it is made, not on the basis of any subsequent conduct of either party.

The decision is undoubtedly a win for employers who over the last 12 months lost some of the flexibility of being able to hire casual employees with peace of mind, and without fear of facing potentially crippling claims for backpayments. The High Court decision now makes clear that, akin to the newly introduced causal provisions in the Act, the true nature of a casual employment relationship is consummated at the time the offer is made, provided it comes in a formal written contract, and thereafter, the parties adhere to those terms.

To all employers who hire casuals, now is the time to ensure that your casual contracts comply with the new requirements in the Act and, contain the requisite acknowledgments that the casual employment offer is made absent any firm advance commitment to continuing and indefinite work according to an agreed pattern of work. If these requirements are expressly dealt with in the casual contract, and the parties commit to these terms thereafter, the risk of being subject to claims for underpayments in respect of service and other employment entitlements can now be significantly mitigated.

If you wish to discuss any aspect of this client alert or require specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.