Background

In 2018, the Full Court of the Federal Court of Australia handed down its judgment in WorkPac Pty Ltd v Skene (2018) 264 FCR 536 (Skene), which found that an employee, Mr Skene, was not a casual employee despite his employment contract labelling him as such. It was held that a casual employee was one who had 'no firm advance commitment as to the duration of the employee's employment or the days (or hours) the employee will work'. The Full Court looked past the contract between WorkPac and Mr Skene and focused on the 'totality' of the circumstances surrounding his employment. Based on those circumstances, the Court was satisfied that Mr Skene did have a firm advance commitment, and that he was entitled to the same accrued amounts of annual leave as any full time employee.

Separately, Mr Rossato had been employed by WorkPac as a production employee on various mine sites between July 2014 and April 2018. He had signed a number of consecutive employment contracts with WorkPac in that time, and each contract labelled him as a casual employee and provided for a flat rate of pay. Some, but not all, of the contracts stated that the flat rate of pay included a casual loading which was paid in lieu of various entitlements owed to non-casual employees (annual leave, annual leave loading, personal leave, termination pay, redundancy pay).

Following the decision in Skene, Mr Rossato wrote to WorkPac seeking payment of accrued leave for the duration of his employment. In response, WorkPac sought a declaration from the Federal Court that Mr Rossato was a casual employee, or, in the alternative, that it was entitled to set off the 25% casual loading paid to Mr Rossato against his claim for unpaid leave entitlements.

At all times, Mr Rossato was a drive in/drive out worker who resided at the relevant mine's camp for each swing. It was accepted that he knew what his shifts would be well in advance – in some instances the roster was published at the start of each year. While some of the more recent contracts stated that, as a casual employee, Mr Rossato had the ability to refuse and cancel his shifts, in practice, Mr Rossato was never asked whether he intended to work a particular shift and he did not enquire as to whether he would be required to attend a shift. The contracts also provided that once an assignment to a particular mine was accepted, Mr Rossato was bound to complete it. However, the contracts expressly stated there was no guarantee of further assignments once the particular assignment was completed.

Decision at first instance

The Full Court of the Federal Court of Australia held that Mr Rossato was not a casual employee for the purposes of the Fair Work Act 2009 (Cth) (FW Act). While Bromberg J preferred the 'totality' of circumstances approach in Skene, White and Wheelahan JJ took an approach that focused on the contract itself. However, their Honours accepted that Mr Rossato's contract was not wholly in writing and they took into account factors external to the contract (including the provision of the rosters) to find that Mr Rossato's employment lacked the informality, irregularity and uncertainty that is a hallmark of casual employment.

The Court also held that WorkPac could not set-off the amounts paid to Mr Rossato that were in excess of his minimum entitlements (i.e. the 25% casual loading), against his claim for leave.

With special leave, WorkPac appealed the decision to the High Court of Australia.

High Court decision

The High Court allowed the appeal. In their joint judgment, Kiefel CJ, Keane, Gordon, Edelman, Steward and Gleeson JJ:

• emphasised the need for predictability and that employers and employees should know at the commencement of their relationship (subject to subsequent variation) what an employee's entitlements are going to be;
• comprehensively rejected the 'totality' of circumstances approach taken in Skene;
• approved the 'firm advance commitment' approach (ie a casual employee is an employee who does not have a firm advance commitment of employment) but noted that only a firm advance commitment to ongoing employment will suffice at common law;
• confirmed that whether or not an employee has a 'firm advance commitment' of ongoing employment is determined at the time the employment contract is entered into and, where a contract is wholly in writing, by reference to the terms of the written contract only;
• noted that a person can still have a reasonable expectation of continuing employment on a regular and systematic basis and be a casual employee; and
• found that the Full Court erred in looking to matters external to the contract in assessing whether a firm advance commitment existed at the formation of the contract. For example, the provision of rosters in advance fell well short of being a contractual promise that Mr Rossato would be entitled or required to work all the shifts listed.

The Court found that the express terms of the contractual arrangement were distinctly inconsistent with the existence of a firm advance commitment of ongoing employment. The Court otherwise did not have to deal with the set off questions decided by the Full Court.

What should employers do now?

Much of the uncertainty and difficulty caused by Skene was addressed by the Government's introduction of a statutory definition of casual employment (now contained in s 15A of the FW Act).

The transitional provisions that introduced that definition contained an exception for cases that had been decided prior to its introduction (like Mr Rossato's). They also included a statutory offset mechanism to avoid the risk of employees incorrectly classified as casual employees by their employers 'double dipping' and being entitled to both their casual loading and leave entitlements.

The statutory definition will otherwise apply retrospectively to the overwhelming majority of employees.

It will therefore be important that employers review their casual employment contracts to ensure that the elements of the definition are satisfied. In that regard, taking into account the legislative tests, a true casual employment contracts should state that:

• they are made on the basis that the employer does not make any firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person, and that the person accepts employment on that basis;
• employees will be paid a casual loading - it is best practice to expressly state what the employee's base rate of pay and loading will be (rather than providing for a flat loaded rate);
• the casual loading will be paid in lieu of all entitlements that would otherwise apply if the employee were not a casual;
• the contract is wholly in writing and represents the full bargain between the parties.

In addition, if it is intended that employees will have the right to accept or reject work at their discretion, then this should also be included in the contract.

The Courts will still be able to review particular circumstances to determine whether the written contract in fact reflects the agreement between the parties, or whether it is a 'sham'.

In light of the certainty in relation to casual status provided by Rossato in combination with the introduction of the statutory definition, the focus of employees and unions will now turn to the conversion right in the new legislation.

The 27 September deadline for employers to offer conversion to qualifying casual employees under recent amendments to the NES is fast approaching, with civil penalties for those who fail to comply. Clear business decisions and rules will need to be implemented as to conversion criteria and advice sought where that criteria is unclear.

There has been suggestions in public commentary that the issues decided in Rossato may have a bearing on the assessment of whether a person is engaged as an employee or independent contractor at law. The principles that currently apply in respect of that issue are very different and nothing said by the High Court in Rossato cuts across the 'totality of circumstances' approach that is currently applied to deciding whether a person is an independent contractor.

However those questions will be revisited separately by the High Court later this year when it hears appeals from judgments of the Full Federal Court in Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119 and CFMEU v Personnel Contracting Pty Ltd [2020] FCAFC 122.

These cases will be decided by reference to different principles to those which were the focus of Rossato. However the High Court in Rossato and previously in Mondelez v AWMU (2020 381 ALR 601 has made a clear statement that the need for certainty is to be given significant weight when dealing with issues affecting the relationship between employers and workers. It can be expected that this will again be an important factor in how it deals with these matters and also decisions in relation to the character of engagements in the gig economy.

If you would like to discuss any elements of the decision and what this might mean for you, please contact us.