WorkPac Ltd v Rossato & Ors

INSIGHT | In a reprieve for all employers, the High Court of Australia has firmly closed the door on casual workers’ attempts to obtain paid leave whilst also retaining the benefit from receipt of casual loading payments: WorkPac Pty Ltd v Rossato [2021] HCA 23

Introduction

1. Since its inception, the Fair Work Act 2009 (Cth) (FW Act) has provided that ‘casual employees’ are excluded from certain paid entitlements which are available to parttime and fulltime employees.[1] Those entitlements include:

• annual leave;[2]

• personal leave;[3]

• redundancy;[4]

2. On 4 August 2021, in a significant win for employers in WorkPac Pty Ltd v Rossato [2021] HCA 23 (Workpac), the High Court of Australia unanimously overturned two decisions of the Full Court of the Federal Court of Australia. Until that decision of the High Court, Australian business owners were facing the potential exposure of “double dipping”[5] claims estimated by the Federal Government to cost $39 billion. 

3. The effect of those decisions (WorkPac Pty Ltd v Rossato [2020] FCAFC 84 and WorkPac Pty Ltd v Skene (2018) 264 FCR 536) included that stability, regularity, and predictability of a worker’s roster and shifts could be used to conclude that the worker had a “firm advance commitment to employment”, and, on that basis, entitled to paid entitlements under the FW Act, even in circumstances where contracts of employment designated the employment as ‘casual’, and the worker received a casual loading.

4. The High Court’s decision is significant for employers because it provides the most authoritative guidance available as to ‘casual employment’ at common law, and notwithstanding that the FW Act was amended by the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth) (Amendment Act) in ways designed to limit/reverse the Full Court’s subsequently overturned decisions.

5. As the effect of the Amendment Act could itself be limited/reversed by a later Parliament, it remains critical for employers to ensure that staff members who are intended to be casually employed are employed under contracts in writing that expressly create a relationship of ‘casual employment’. 

The issues the High Court had to decide 

6. Mr Rossato was employed as a production worker by Workpac, a labour hire company, under six (6) consecutive contracts for fixed periods that, when read together, spanned three and a half (3.5) years.[6]

7. Each of the contracts were expressly on an ‘assignment-by-assignment basis’,[7] and every contract specified that Mr Rossato was paid additional loadings in lieu of annual leave, personal leave and other entitlements of permanent employees,[8] and that he was a ‘casual employee’.

8. Until the Amendment Act, the FW Act did not define ‘casual employment’, and, until Workpac, neither had the High Court provided an authoritative definition.

9. Accordingly, the parties to the appeal in the High Court agreed that a ‘casual employee’ was an employee who has no “firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work”.[9]

10. In an attempt to avoid the exclusions in ss 87, 96, and 119 of the FW Act, Mr Rossato submitted that, in substance, his employment was not casual, and that it was, in effect, identical in all material respects to a permanent employee.[10] The grounds for that submission were that:

• his employment was regular, ongoing and predictable;

• he worked alongside many permanent employees (non-labour hire);

• he had a yearly roster that determined his shifts well in advance;

• each of these factors demonstrated a “firm advance commitment” by Workpac.

• Mr Rossato further submitted, and accepted by the Full Court, “that the proper approach to determining the existence of a firm advance commitment should be a process of “characterisation” having regard to “[t]he conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship”.”[11]

11. It was against this background that the issues largely distilled to:

• firstly, whether Mr Rossato had such a commitment; and

• secondly, what evidence he could rely on to that effect, and in particular, whether he was limited to his contracts of employment, or could be shown by additional evidence, such as rostering documentation.

The High Court’s decision

12. The High Court dismissed Mr Rossato’s appeal, and held that Mr Rossato’s arguments, largely predicated on longevity and consistency of work over time, did not defeat the exclusions in ss 87, 96, and 119 of the FW Act.

Did Workpac make a “firm advance commitment” to Mr Rossato?

13. In the High Court the focus was on whether Mr Rossato’s employment, which was stable, regular and predictable and according to a roster that determined Mr Rossato’s shifts well in advance, could be considered as indicative of a ‘firm advance commitment.’

14. The High Court emphatically rejected the argument that Workpac made a “firm advance commitment” to Mr Rossato on the basis accepted in the Full Court.

15. In doing so, the High Court emphasised that Mr Rossato’s circumstances of work (i.e., long term, non-permanent, employment) was expressly contemplated by the FW Act, and that ‘casual employees’ could have a reasonable expectation of continuing employment on a regular and systematic basis’ without being transmogrified into permanent staff.[12] Those provisions relate to:

• Requests for flexible working arrangements: ss 65(2)(b), 66A and;

• Length of service requirements for casual employees to be entitled to leave (other than unpaid pre-adoption leave or unpaid no safe job leave): s 67(2)(b);

• Requirements for expectation of continuing employment on a regular and systematic basis for casual employees to be entitled to protections against unfair dismissal: s 384(2)(a).

16. It followed that, because the FW Act provided that casual employees could be employed on a regular systematic basis but remain ‘casual’, the factors to which Mr Rossato pointed were, on a proper construction of the FW Act, “strong indications that a mere expectation of continuing employment, however reasonable, is not a basis for distinguishing the employment of other employees from that of a casual employee”.[13]

What evidence can be taken into account in determining whether an employer makes an employee a “firm advance commitment”?

17. In determining what factors and evidence could be considered to ascertain a ‘firm advance commitment’, the High Court held that:

[57] “The search for the existence or otherwise of a “firm advance commitment” must be for enforceable terms, and not unenforceable expectations or understandings that might be said to reflect the manner in which the parties performed their agreement”.[14]

18. The High Court explicitly rejected the assertion that the expectations of the parties, insofar as they are outside of the written contractual agreement between the parties are to be taken into account, and cautioned such an approach may extend beyond the court’s judicial functions.[15]

[61] “…Some amorphous, innominate hope or expectation falling short of a binding promise enforceable by the courts is not sufficient to deprive an agreement for casual employment of that character.”

[63] “To insist that nothing less than binding contractual terms are apt to characterise the legal relationship between employer and employee is also necessary in order to avoid the descent into the obscurantism that would accompany acceptance of an invitation to enforce “something more than an expectation” but less than a contractual obligation. It is no part of the judicial function in relation to the construction of contracts to strain language and legal concepts in order to moderate a perceived unfairness resulting from a disparity in bargaining power between the parties so as to adjust their bargain. It has rightly been said that it is not a legitimate role for a court to force upon the words of the parties’ bargain ‘a meaning which they cannot fairly bear [to] substitute for the bargain actually made one which the court believes could better have been made’.”

19. The High Court observed that, if anything less was to be legally binding upon the parties:

[99] “… the parties could not know what their respective obligations were at the outset of their relationship and would not know until a court pronounced upon the question. That outcome does not accord with elementary notions of freedom of contract.”

20. In adopting that position, the High Court made the following three points:

[65] “… while mutual undertakings may not always be express, where there are express terms of the contract between the parties, they must be given effect unless they are contrary to statute. Secondly, if the mutual undertakings are said to be implied in what has been agreed, they cannot be inconsistent with the express terms of the contract [89]. Thirdly, if the mutual undertakings are to be inferred from conduct, then they may take effect as contractual variations. It is because contracts, whether as originally agreed or as varied, create binding obligations that they constitute “firm advance commitments”.”

Conclusion

21. The High Court ultimately held that Mr Rossato was a ‘casual employee’, and could not avoid ss 87, 96, and 119 of the FW Act.

• The contract was specifically worded to be on an ‘assignment by assignment’ basis, Mr Rossato was entitled to accept or reject each assignment, both parties had the ability to provide one hours’ notice, and the employer had no obligation to offer future assignments.

• The Full Court placed inordinate emphasis on the significance of the roster system,[16] which established shift structure fixed long in advance by roster was strongly indicative of a firm advance commitment.[17]

• The provision of the rostering arrangements fell short of a contractual promise, and when read alongside the contract, did not impact either party’s ability to provide notice, to accept or reject work.

22. The test of ‘casual employment’ adopted by the High Court is extremely similar to the definition supplied by the Amendment Act (extracted below). On one view, that test has substantially the same effect, and takes into account the same factors, as the High Court’s enunciation of the principle.

23. Nevertheless, while the law may be settled, the legislation and the High Court decision makes clear that the written employment contract is of paramount consideration. It is therefore imperative that employment contracts be properly drafted to avoid ambiguities and unnecessary disputations over the characterisation of a worker’s employment.

The current definition of ‘casual employment’ 

24. Section 15A of the FW Act (as amended by the Amendment Act) defines casual employment as follows:

• A person is a casual employee of an employer if:

• an offer of employment made by the employer to the person is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and

• the person accepts the offer on that basis; and

• the person is an employee as a result of that acceptance.

25. The FW Act further prescribes that:

• … in determining whether the employer’s offer makes no firm advance commitment to continuing and indefinite work to an agreed pattern of work for the person, regard must be had only to the following:

• whether the employer can elect to offer work and whether the person can elect to accept or reject work;

• whether the person will work as required according to the needs of the employer;

• whether the employment is described as casual employment;

• whether the person 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 instrument.

[1] Fair Work Act 2009 (Cth) ss 86, 95, 123.

[2] Fair Work Act 2009 (Cth) s 87.

[3] Fair Work Act 2009 (Cth) s 96.

[4] Fair Work Act 2009 (Cth) s 119.

[5] Claiming casual loading payments together with paid leave entitlements.

[6] [13].

[7] [70].

[8] [13].

[9] [32].

[10] [39].

[11] [40].

[12] Fair Work Act 2009 (Cth) ss 65(2)(b), 66A, 67(2), 384(2)(a).

[13] [53].

[14] [57].

[15] [62], [63], [99].

[16] [93].

[17] [94].