Facts of the Case
Robert Rossato was an experienced production worker in the open-cut black coal mining industry. WorkPac Pty Ltd’s (WorkPac) is a business which provides the services of its employees to mining firms that mine black coal.
In July 2014, Mr Rossato was expressly hired as a casual employee by WorkPac. He was engaged to work for WorkPac’s various firm clients over six consecutive fixed-term contracts. Three of Mr Rossato’s employment contracts referred to the payment of a 25% casual loading. One contract expressly precluded the payment of leave entitlements because he was being paid the casual loading. Mr Rossato was also covered by an enterprise agreement which stated that he was a casual employee and that the casual loading would be paid in place of any leave entitlements.
However, Mr Rossato also worked regular hours akin to full-time employment and was provided weekly work rosters, sometimes seven months in advance. He retired in April 2018.
Mr Rossato subsequently sued WorkPac for backpay of leave entitlements (e.g. annual leave) which he contended he was owed because he was in fact as a full-time employee despite being engaged as a casual worker.
The 2020 Federal Court Decision
In 2020, the full Federal Court of Australia handed down its decision for the case of WorkPac Pty Ltd v Rossato [2020] FCAFC 84.
The Federal Court decision confirmed that Mr Rossato was a permanent employee. WorkPac had engaged Mr Rossato in regular and systematic employment with a mutual firm commitment to an ongoing relationship. This was evidenced by the fact he had worked for full-time hours on his work rosters akin to a permanent employee. The Court held that these work arrangements were inconsistent with casual employment.
In finding that Mr Rossato was not in fact a casual employee, the Court also held that the leave entitlements he was owed as a permanent employee could not be offset by the 25% casual loading he was paid. In effect, Mr Rossato could keep his casual loading payments on top of the leave entitlements he was now owed.
Fair Work Act Amendments
In response to the Federal Court’s decision, the Australian government amended the Fair Work Act 2009 (Cth) by passing the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Cth). Among other reforms, the new laws:
- introduced a definition for “casual employee”;
- regarding casual employees who have been employed by the same employer for 12 months or more, and have worked regularly and systematically for the previous 6 months:
- compels the employer to make an offer to convert the employee to permanent employment; and
- allows the employee to request the employer to convert them to permanent employment;
- allow employers to off-set any entitlements an employee may be owed if they can prove that the employee has been paid a separately identifiable casual loading to compensate them for not having one or more relevant entitlements during the period.
The 2021 High Court Decision
WorkPac appealed to the High Court of Australia following the Federal Court’s decision. The High Court unanimously upheld WorkPac’s appeal in WorkPac Pty Ltd v Rossato [2021] HCA 23 (4 August 2021).
The High Court held that the fact that Mr Rossato’s rostered hours were akin to full-time employment hours, and that they were scheduled up to seven months in advance was immaterial. The Court held that this type of arrangement could still be consistent with the nature of casual employment as described in the Fair Work Act.
Instead, the Court held that the fact Mr Rossato was engaged on consecutive fixed-term contracts showed that his employment was still on an “assignment by assignment basis”. The terms of Mr Rossato’s contracts were also held to be inconsistent with permanent employment, with Mr Rossato’s entitlement to remuneration with a casual loading agreed on the basis that he was a casual worker. Furthermore, the terms of the contract did not indicate a commitment between the parties of an ongoing relationship after Mr Rossato had completed the term of each contract.
Implications of the Decision and Fair Work Act Amendments
The High Court’s decision and the amendments to the Fair Work Act have multiple implications on employment law and industrial relations in the country.
The High Court’s decision indicates it is taking a literalist approach to employment contracts – that is, if the terms of an employee’s contract states that the employee is a casual employee, then they will be legally deemed a casual employee. The reality of a person’s work arrangements becomes less important in determining their status as a casual or permanent employee.
This may cause a reduction of sham contracting claims. Sham contracting claims describe claims whereby an employee who is contracted as a casual worker alleges that they are in fact a permanent employee due to their work arrangements, but are not being afforded the entitlements associated with permanent employment. In effect, the employer is “hiding” behind the terms of the employment contract to avoid the obligations they would owe to the employee if they were a permanent employee. The possible reduction of such claims may be attributed to casual employees feeling less confident about their chances of success with a prospective claim given the High Court’s literalist approach to employment contracts.
A reduction of sham contracting claims may have an effect on how employers structure their businesses and draft their employment contracts. In effect, it would reduce the level of accountability of some employers to their long-term casual employees as the prospects of a successful claim against them has dwindled. This may in turn cause some employers to hire more employees on a casual basis or as independent contractors, but with the work arrangements of permanent employees without the obligations connected to hiring a permanent employee.
In saying this, casual employees now also have the options afforded them by the Fair Work Act. They must be offered, or can request an offer of, casual conversion if they meet legislative requirements. This provides employees with options, and a sense of security knowing that they will at least be afforded an opportunity of permanent employment if they have been working in work arrangements akin to a permanent employee.
Paul Horvath Solicitor understands these developments may be confusing for employers. If you would like to discuss your business’ rights in light of these new laws, we are here to help. Call our office on (03) 9642 0435 or email admin@phsolicitor.com.au for a confidential discussion with our team.
