High Court’s decisive ruling on casual employment and the importance of the contract

On 5 August 2021, the High Court of Australia delivered its decision in Workpac v Rossato providing clarity and relief to many employers about entitlements for casual employees, especially with longer term engagements.

Background – the ‘double dipping’ casual

In 2018 in WorkPac v Skene, the Full Court of the Federal Court considered what casual employment really means. Mr Skene claimed that he was really a permanent employee, even though he was hired and paid as a casual. The case sought to challenge the longstanding consensus that the essence of casual employment is a lack of a firm advance commitment as to the duration of employment or as to the days (or hours) of employment.

In Skene, the Federal Court said casual employment depends on the contract terms and how the parties behave during the employment relationship. The Federal Court found that Mr Skene’s and WorkPac’s actions showed a “firm advance commitment” to the employment – for example, Mr Skene’s shifts were programmed many months in advance. This and other indicators led the Court to uphold Mr Skene’s claim with a finding that, despite being hired and paid as a casual, Mr Skene was entitled to paid annual leave and personal leave like a permanent employee; those leave entitlements needed to be calculated based on his casual rate of pay (with the 25% casual loading).

That result was at odds with the prior understanding by employers that casual loading compensated a casual for not receiving paid leave entitlements. Mr Skene was described as “double dipping” because he received both the payment and the leave at his casual rate of pay.

High Court said the analysis starts and ends with the employment contract

WorkPac brought Mr Rossato’s case to the Federal Court and the facts were very similar to the Skene Case but with different legal arguments. Unsurprisingly, the Federal Court upheld its decision in Skene. WorkPac then appealed to the High Court.

The High Court overruled the full Federal Court’s finding. The High Court’s starting point in the Rossato appeal was the same as in Skene and the earlier Rossato case, namely: casual employment relationships lack a firm advance commitment to ongoing employment. The High Court, though, said a “firm advance commitment” must be a legal commitment, not a commitment that one divines from how the parties conduct themselves after the written contract is put in place. Mr Rossato, as a long term regular casual, may have had a “reasonable expectation” of continuing employment, but that is not a legal commitment to ongoing employment.

The High Court’s decision provides clarity that if an employee is hired on a casual basis (that is, signs a written casual employment contract that reflects the casual nature of that engagement) and is paid a casual loading, they do not become permanent just by how the parties behave. Planning out shifts in advance is not enough to make a casual employee permanent. For a casual employment relationship to become permanent, there needs to be a legally enforceable commitment to ongoing employment; put another way, the parties need to amend the employment contract. An expectation/feeling is not enough to attract the legal entitlements of permanent employment.

The decision is significant because it limits an employer’s liability to pay other leave entitlements to casual employees notwithstanding that they received a casual loading.

However, a note of caution that where the contract is only partly in writing, there may be more uncertainty about the nature of the relationship. Other factors, such as way the employer and employee engage with each other, may be relevant in determining the nature of the employment relationship. The Rossato judgment aligns with the new statutory definition of casual employment that the Federal Government introduced in March 2021, which amended the Fair Work Act 2009 (FW Act). Some employers are not covered by the FW Act and guidance from the High Court decision will be particularly important for them.

While the High Court did not rule on the set off argument before it, the FW Act was amended earlier this year to provide a mechanism for a court set off casual loading payments against other entitlements such as leave payable to permanent employees. Click here for Moores’ article on the amendments to the FW Act.

Key Take Away: Casual contracts make casual employees

Employers now have certainty that when they engage a casual employee on a written contract of employment that expressly describes the relationship as a casual one without a firm advance commitment of further work, the relationship is a casual one. As set out in the (now amended) FW Act, it is also helpful to set out in the employment contract that a casual loading is payable, that the employee can elect to accept or reject work and that future work is not guaranteed.

It is timely for employers to review their casual employment arrangements to ensure that written contracts are in place. It may also be timely for employers to review their casual employment contract template to check that it contains the key components that would validate the casual relationship.

How we can help

As well as the recent High Court decision, there have been other changes in this area this year such as the requirement to issue the Casual Employees Information Statement to casual employees and the right to conversion now available to some casual employees.

For more information and advice about the implication of these changes for your organisation and its management of casual employees, Moores can help so please get in touch.

Note: This article contains general information only. It is not legal advice and should not be relied upon as such. You should always obtain legal advice based on your needs and circumstances before taking action on the matters referred to in this article.