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Snapshot

  • The High Court has adopted a ‘back to basics’ legal analysis of employment law in WorkPac Pty Ltd v Rossato [2021] HCA 23.
  • The classification of an employee’s employment is determined by the terms of the employee’s contract.
  • Certainty of contract trumps expectations and hopes, even in employment.

In the much anticipated decision of WorkPac Pty Ltd v Rossato [2021] HCA 23, the High Court has found that a casual employee is one who does not have a firm advance commitment to ongoing work. The Court focused on the terms of the employee’s contract to ascertain whether there was a firm advance commitment to ongoing work, not to the subsequent conduct of the parties. By adopting this approach, the Court has further entrenched the primacy of contract law in characterising work relationships, underpinned by enforceable promises rather than expectations or hopes.

Background

The High Court’s consideration of the issue followed legal manoeuvring around two decisions of the Full Court of the Federal Court. The first was the decision of WorkPac Pty Ltd v Skene [2018] FCAFC 131 (Skene’), which at the time was met with considerable publicity, and business angst.

In Skene the Full Court of the Federal Court found that a determination of whether or not an employee was a casual, required an assessment of the substance of the relationship, including post contractual conduct. Ultimately, despite the terms of the enterprise agreement and employment contracts, other factors were given greater weight and the relationship was held not to be casual employment. The effect was the characterisation of a type of employment which could change over time.

WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (‘Rossato’) was a vehicle that tested the Skene case.  A differently constituted Full Federal Court essentially upheld the principles in Skene. It is that decision that has now been overturned by the High Court.

The facts in Rossato

WorkPac Pty Ltd is a labour hire company which, amongst other things, supplies labour to mining companies in Queensland. Mr Robert Rossato was an experienced coal mine worker who had been engaged at various coal mine sites for a nearly unbroken period from July 2014 until his retirement in April 2018. He was a ‘drive in, drive out’ employee who stayed in accommodation provided by the mine operator whilst on site. Mr Rossato worked principally on a seven days on/seven days off roster which was set by the mine operator in January of each year, and notified to Mr Rossato at that time. He was employed under the terms of the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (‘2012 EA’). Relevantly, this Agreement provided for a 25% casual loading that was stated to be in lieu of all leave entitlements (other than long service leave). Unusually for such agreements, it specifically provided attributed components of the leave loading to entitlements foregone by virtue of casual employment (e.g. 11% of the leave loading was in lieu of annual leave and leave loading entitlements).

During the course of his employment with WorkPac, Mr Rossato was engaged under six separate contracts of employment, each of which described him as a casual employee. The first three contracts contained a schedule stating that included in the flat rate of pay that Mr Rossato received was a 25% loading that comprised each of the elements identified above. The three subsequent contracts did not contain such a schedule or any information regarding the composition of the 25% loading, nor did they contain any independent express term that the casual loading was to be paid in lieu of entitlements to leave or public holidays.

The employment arrangements also contemplated that Mr Rossato would not work for anyone else during the ‘assignments’ with WorkPac; and that WorkPac could recover from Mr Rossato any costs it incurred arising from Mr Rossato choosing not to complete an assignment. Throughout his employment, WorkPac paid Mr Rossato hourly rates above those required by the 2012 EA.

Some months after his retirement in April 2018 Mr Rossato wrote to WorkPac claiming that, in light of the decision of the Full Court in Skene, he was not a casual employee and as such he was entitled to payments in respect of annual leave, paid personal/carer’s leave, paid compassionate leave and public holiday payments under the Fair Work Act 2009 (Cth) (‘FW Act’) and under the 2012 Agreement.

The proceedings in Rossato

Two days after it received Mr Rossato’s claims, WorkPac initiated Federal Court proceedings seeking various forms of declaratory relief. The trial was conducted largely on the basis of a statement of agreed facts. The Minister for Industrial Relations, the CFMMEU and a representative of a law firm that had initiated a class action against WorkPac were granted leave to intervene in the proceedings. WorkPac’s principal contention was that Mr Rossato should properly be regarded as a casual employee, and that as such he was not entitled to the payments he claimed. Failing that, WorkPac argued that it could either recover the payments it had made to Mr Rossato by way of casual loading, or set them off against any sums owing in respect of annual leave, personal leave and compassionate leave.

The Full Court followed the reasoning of the earlier Court in Skene, and determined that Mr Rossato was not a casual employee by virtue of the fact that his employment arrangements were such that, in accordance with the common law understanding of casual employment, he had a ‘firm advance commitment’ to continuing employment with WorkPac. All three members of the Court also rejected WorkPac’s arguments in relation to set-off and restitution – albeit for differing reasons.

On appeal to the High Court, the principal focus of WorkPac’s arguments were again to the effect that Mr Rossato did not have a ‘firm advance commitment’ by reference to the express and implied terms of his contract of employment, and that it was not appropriate to refer to post-contractual conduct in this context. Accordingly, he was a casual employee who was not entitled to the payments he claimed. WorkPac also argued that if Mr Rossato were found to be a permanent employee, then it was entitled to set off the loadings that had already been paid to him against his entitlements as a permanent employee, or that it was entitled to claim restitution of those payments on the grounds that they were paid on the basis of a mistake.

The High Court’s decision

The Court unanimously determined that Mr Rossato was a casual employee, and consequently was not entitled to the various benefits he had claimed. As a consequence, and unfortunately in many respects, the Court did not express any view on WorkPac’s set off and restitution arguments.

The High Court accepted the parties’ common ground that the expression ‘casual employee’ in the FW Act refers to 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’. The outcome of the appeal turned on whether any such commitment existed in respect of Mr Rossato; a question which was determined solely by reference to the terms of the contract at the time the employee was engaged. Absent allegations of a sham contract, it was not permissible to look to the totality of the relationship or to ‘unenforceable expectations or understandings that might be said to reflect the manner in which the parties performed their agreement’ (at [57]).

In a statement of a reminder of the primacy of contract in the law of employment, the plurality of the Court observed:

‘To insist upon binding contractual promises as reliable indicators of the true character of the employment relationship is to recognise that it is the function of the courts to enforce legal obligations, not to act as an industrial arbiter whose function is to synthesise a new concord out of industrial differences… 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…’ (at [62]-[63]).

Applying these criteria to the interpretation of contracts, the Court was of the clear view that ‘the Full Court in Skene strayed from the orthodox path’, and to the extent that the Full Court in Rossato also looked to the conduct of the parties, it too was in error (at [66]).

It also follows that the question of whether there was a firm advance commitment is separate to the subsequent duration of the casual employment. The Court made clear that, in the scheme of the FW Act which expressly contemplates casual employment can be regular and long term, the existence of ‘a reasonable expectation of continuing employment … on a regular and systematic basis’ is not inconsistent with the nature of casual employment. The Court also observed that the ‘label’ used to describe the type of employment is not determinative, however, it can be a factor that influences the interpretation of rights and obligations.

Consequences of the decision

The decision has been overtaken, in some respects, by the changes which were made to the FW Act following the Full Federal Court judgments. Specifically, the amended Act now adopts a definition of ‘casual employee’ that provides a person is a casual employee if the person accepts an offer of employment from the employer made on the basis of no firm advance commitment to continuing and indefinite work according to an agreed pattern of work, and the person is an employee as result of that acceptance (s 15A(1)). That being the case, the significance of the decision lies in its focus on a strict legal analysis and the approach of prioritising the terms of the contract. This focus, irrespective of the apparent bargaining power of the parties to the contract, may lead to further legislative intervention, especially in the event of a change of Government.

The Court made clear its unwillingness to have categories within the employment relationship be subject to the same generalised ‘characterisation’ approach that has been adopted in relation to independent contractors. In this regard, the High Court presently has before it two cases (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) which will provide it with an opportunity to clarify a number of issues concerning the categorisation of work relationships.

The decision has caused the adjournment of proceedings relating to the gig economy, and may have a chilling effect on the class actions about the misclassification of casuals that were held in abeyance pending the High Court’s decision.



Jack de Flamingh
is a partner at Corrs Chambers Westgarth.