Australia has reached a pinnacle moment in the development of the law of casual employment. This moment has been marked by the introduction of an Industrial Relations Omnibus Bill in late 2020 that provided Australia’s first statutory definition of casual employment. It has also been marked by the very recent High Court decision in Workpac Pty Ltd v Rossato & Ors [2020] FCAFC (the Workpac case) on Wednesday 4 August 2021.
The High Court has upheld the challenge by Workpac and overturned the original decision of the full Federal Court to find that Mr Rossato was a casual employee, who was not entitled to paid permanent entitlements.
The Original Decision
To recap the facts of the initial Workpac case, Mr Rossato had been employed under contract by the labour hire company Workpac Pty Ltd (Workpac) as a ‘casual’ employee. He was paid the 25 per cent casual loading on his wage and was engaged to work on six successive contracts across four years.
In 2018, Mr Rossato made a claim to the Federal Court of Australia seeking paid leave entitlements, which he had not received from Workpac on account of being considered a casual employee.
The Full Court considered the issue of characterising casual employment versus permanent employment. It was deemed relevant that Mr Rossato’s engagements equated to stable, regular and predicable employment, for which he received weekly rosters fixed for long periods of time. In addition, these rosters were often provided well in advance (up to seven months). This was viewed by the Court to indicate a “firm advance commitment” to employment, being akin to that ordinarily afforded to a permanent employee.
Accordingly, the Court was required to determine the pay implications in circumstances where Mr Rossato had been paid the 25 per cent casual loading during his employment. It clarified that paying an amount ‘in lieu’ of an entitlement is not the same as satisfying that entitlement. Therefore, even though Mr Rossato’s contracts contained an offset clause, the casual loading payments were not able to be regarded as a lawful discharge of Mr Rossato’s entitlements to paid leave.
The Full Court ordered Workpac to pay unpaid permanent leave entitlements to Mr Rossato for the term of his ‘casual’ employment, for which Workpac was not permitted to offset against casual loading already paid.
Original Decision Backlash
The original decision of the Full Federal Court in the Workpac case left employers of Australia’s casual workforce scratching their heads. In effect, the decision clarified that engaging someone as a casual employee, paying them a casual loading and calling them a casual under their contract of employment would not necessarily make them a genuine casual employee…
It’s no surprise then that employers have been questioning whether their purported casual employees were actually genuine casuals, and further grappling with the potential cost implications of back paying their casual employees permanent leave entitlements for the life of their ‘causal’ employment.
In fact, multiple class actions were instigated by employees pursing claims against their employers relying upon the Federal Court’s Workpac decision. The Federal Government even announced that it expected a shocking total cost of between 18 billion and 39 billion resulting from the Workpac case.
High Court Appeal
To the relief of many, on 26 November 2020, the High Court of Australia granted special leave to Workpac to appeal the original Full Court decision. The High Court considered the central issue of whether Workpac demonstrated a firm advance commitment to Mr Rossato’s employment.
The full court clarified that where parties commit the terms of their employment relationship to a written contract and those terms are adhered to, a firm advance commitment will be found and will be binding upon the parties. In this case, the court held that the contractual arrangements between Workpac and Rossato:
“did not include a mutual commitment to an ongoing working relationship [after] the completion of each assignment.”
In fact, the full court found that the terms of Mr Rossato’s contracts were inconsistent with the finding of a commitment to ongoing work. It further stated that the expectation of continuing employment ct assignments, and Workpac held no obligation to offer another assignment after the last.
As for the matter of the fixed shift structure determined long in advance, the High Court found that this did not establish the requisite commitment to a continuing employment relationship when considering the above factors.
Therefore, the High Court overturned the original decision of the Federal Court, finding that Mr Rossato was a genuine casual employee and is not entitled to the permanent employment entitlements that were recognised by the original decision.
Expected Effects
With the final avenue of appeal now exhausted, employers and employees alike can rely upon this final decision as binding authority.
In the first instance, it means that employers won’t need to fork out billions of dollars to compensate their ‘casual’ permanent employees.
Further to this effect, employers are reminded of the new Omnibus legislation, which will enable the offsetting of permanent employment entitlements against casual loadings already paid to ’casual’ workers where their characterisation is disputed. The new Bill also clarifies that a casual worker will be defined according to their job offer, rather than subsequent conduct.
While the High Court decision would appear to clarify the factors of ‘casual’ employment that will be indicative of genuine permanent employment, the question of whether employee expects their employment to be continuing seems to apply both at the time a job offer is made and in subsequent conduct. Therefore, there may be a fragment of unresolved ambiguity left yet.
Accordingly, it stands to be clarified whether the class actions challenging the misclassification of casual employees will be challenged before the High Court on the question of retrospective application of the law. There is also the prospect of a challenge to the constitutionality of the new offset provisions of the Omnibus Bill. This will no doubt remain a hot topic in the law for some time to come.
If you have any questions relating to your casual workforce or the effects of the Workpac case on your employees, please don’t hesitate to contact a member of Coleman Greig’s Employment Law team, who would be more than happy to assist you today.
