High Court confirms casual employment changes – are you across it?

The High Court of Australia has handed down its much-anticipated decision in Workpac v Rossato [2021] HCA 23.  

This is the case which sparked recent amendments to the Fair Work Act 2009 (Cth) (Fair Work Act) to introduce a new definition for casual employment and remove risks of underpayments and double dipping for employers when it comes to the entitlements of casual workers.  

There was speculation about whether the decision would create inconsistencies with the new legislation and what it might mean for the employment situation of many casuals around the country. 

We fill you in on what happened below.  

Summary 

• Last week, the High Court provided greater certainty to employers who engage casual employees under contracts of employment which do not give rise to “a firm advance commitment to ongoing employment”. 
• Consistent with the new definition of “casual employment” in the Fair Work Act, the High Court found that expectations of continuing to work on a regular basis do not meet the standard of a firm commitment to ongoing work. 
• The decision is good news for employers as it confirms the approach taken by Federal Parliament in its recent Fair Work Act changes. However, all employers should still be checking their employment arrangements to “de-risk” their casual engagements and safeguard their businesses from claims of underpayment and/or wage theft.  

• This decision is a timely reminder for employers to ensure they are complying with their new obligations in the Fair Work Act to provide ‘Casual Employee Information Statements’ and convert casual employees to permanent ones where they are required to. 

Background 

Mr Rossato was engaged by WorkPac (a labour hire company) to work on a site assignment under six consecutive employment contracts over four years. The first three contracts had fixed terms, whilst the last three just specified that it was a ‘casual assignment’. At first instance, the Federal Court found that, despite the contract labelling the relationship as casual, Mr Rossato was “in substance” a permanent employee notwithstanding his employment contract stating otherwise. This was given, amongst other things, the regularity in his shifts (his roster was worked out 12 months in advance). This finding entitled Mr Rossato to back-pay of the entitlements he would have been owed as a permanent employee – namely, paid leave. 

Further, the Court found that the casual loading WorkPac had paid Mr Rossato throughout the course of his employment could not be offset against the amount he was owed in back-payment of his entitlements. This enlivened fears of ‘double dipping’ for many employers across the country.  

Understandably, following the Full court decision there was a heightened amount of confusion for employers regarding the status of their casual employees.  

The intervention from Parliament 

Following the Federal Court decision’s, WorkPac appealed to the High Court. However, before judgment was handed down, Federal Parliament amended the Fair Work Act to: 

• insert a new definition of casual employment which provided that an employee is casual if they accept the job offer knowing that they have no advanced commitment to an ongoing and an agreed upon pattern of work; and  

• make it clear that any casual loadings paid to a casual employee could be offset against any entitlements subsequently owed in the event a casual employee was found to be a permanent one.  

In response to concerns about the rights of casual employees in an increasingly casualised workforce, the Fair Work Act was also amended to include that a casual employee may “convert” to being a permanent employee through either an employer offering a permanent position, or an employee requesting a permanent position. To learn more about this, read our blog article on the changes to casual employment here. 

The High Court Appeal  

On 4 August 2021, in a much-anticipated decision, the High Court upheld Workpac’s appeal and found that Mr Rossato was a casual employee and not a permanent employee. 

It confirmed that the test for casual employment turns on whether the employee has a “firm advance commitment as to the duration of the employee’s employment or the day (or hours) the employee will work”. However, unlike the Federal Court in this case and others (like WorkPac Pty Ltd v Skene [2018] FCAFC 2018) which focussed on the conduct of the parties and the “real substance, practical reality and true nature of that relationship”, the High Court found that the main consideration in determining whether an employee has a firm advance commitment to ongoing work is what their employment contract says.  

WHAT CAN YOU DO FROM HERE? : The MUST-DOs for your business 

This decision is good news for employers – however, this case highlights the significant risks in some employment arrangements and you don’t want to be the next WorkPac. Accordingly, it is important you review all of your casual arrangements, and ensure they support the proper definition of casual employment and your new obligations under the Fair Work Act. 

The three must-dos for all employers are:  

1. Review your current casual employment contracts 

• Make sure you have written contracts for all staff and any contracts of casual employment are consistent with the new definition of casual employment in the Fair Work Act. This includes expressly writing in set-off clauses for the various loadings/entitlements casual workers receive.  

• You also want to make you don’t have clauses in your contracts which are inconsistent with a casual employment relationship (eg restraints of trade, etc). 

2. Get ‘match fit’ with casual conversion conversations 

• Casual conversion rights have been strengthened in most modern awards and are now provided for in the Fair Work Act .  
• You should have clear procedures for how and when casual employees will be offered conversion to permanent employment – including who is responsible for identifying if a casual conversation is triggered, how will they be identified and who will prepare the documentation? 

• Make sure your managers are trained and know when conversion can and should occur. 
• Record all discussions and decisions. 

  3. Review your work practices and check none ‘blur the line’ 

• Workpac’s decision to roster casuals 12 months in advance was a key factor in Mr Rossato’s case against it. A more common example in casual employment is for a casual to be rostered on for ‘their’ shift each week, e.g. the same start and finish times every Tuesday.  

• Critically examine whether such practices are operationally necessary or unduly risky. If the latter, try and have sufficient documentation to de-risk these practices (such as a clear contract or even ‘confirmation of casual employment’ after each 12-month block of work should the casual elect, as is common, to remain casual rather than convert to permanent). 

Where to get help 

As seen by this prolonged (and expensive!) court case, this area is complex and can get lots of publicity. We can expect to see more litigation as advocates attempt to test the boundaries of the new legislative changes in an increasingly casualised workforce. 

We can take the load off and help you manage your risks during this transition by reviewing and updating your casual contracts and employment arrangement – ensuring that you have the strongest legal protection and peace of mind in this space.  

Also, as casual information statements are due to be handed out by 27 September 2021, conversations about casual conversion will become more prevalent. We can train and support you to prepare and respond.  

Lastly, whether you have a particular arrangement that is ringing alarm bells or want to be proactive and update your existing contracts, we’re here to support! So don’t hesitate to reach out for advice for any questions this may raise!