Australia: a High Court decision on the nature of causal employment

On 4 August 2021, the Australian High Court unanimously allowed an appeal from a judgment of the Full Court of the Federal Court concerning the nature of casual employment, the so-called “Rossato case”.
Although the meaning of a ‘casual employee’ is now defined in legislation (the Fair Work Act) due to an amendment which came into effect in March this year, this decision still has legal and policy implications.
The High Court held that a "casual employee" is an employee who has no firm advanced commitment from the employer as to the duration of the employee's employment or the days (or hours) the employee will work, and provides no reciprocal commitment to the employer.
In determining whether a “firm advance commitment” exists, the focus must be on contractual obligations between the parties, because where there are express terms of the contract of employment (as varied from time to time), they must be given effect unless they are contrary to legislation.
Reliance on non-contractual aspects of the employment relationship (e.g. working in accordance with a roster) to assert there was a “firm advance commitment” was not accepted, as there were not express or implied terms of Mr Rossato’s contract. The Court unanimously determined that Mr Rossato was a casual employee, considering that his employment was expressly on an "assignment-by-assignment basis", he was entitled to accept or reject any offer of an assignment, and at the completion of each assignment the company was under no obligation to offer further assignments.

Around 20% of the Australian workforce are engaged as casuals, a figure that has remained relatively constant for over the past 20 years.

In our March 2021 issue, we reported that the Australian Parliament had recently adopted a Bill that introduces a definition of casual employee as someone who has been offered and has accepted work without a firm advance commitment to continuing and indefinite work.

While this settled the law with respect to the definition of casual employee, those with existing court cases about the classification of their employment, such as Mr Rossato, are still to be determined under the law at the time the proceedings were lodged. Mr Rossato had claimed that despite being employed as a casual employee, he was actually a permanent, full-time employee. He therefore claimed a number of entitlements including paid annual leave, paid personal/carer’s leave, and other entitlements that casual employees are not traditionally entitled to, given that they are instead paid a loading in lieu of these entitlements.

The High Court’s decision in Rossato, along with the changes to the Fair Work Act, give primacy to the contract of employment in determining the nature of employment.

As the High Court’s decision is in line with Fair Work amendments it has also removed the threat of a constitutional challenge to the legislation on the basis that the changes deprived workers of their legal entitlements.

Employers should continue to review their casual employment contracts to ensure that the arrangements are aligned to the new definition of “casual employee” in the Fair Work Act and are drafted in a way that means that even if a claim of permanency is successful, employers can utilise the casual loading to set off any underpayments as permitted in some circumstances set out in the Fair Work Act

Australian Chamber of Commerce and Industry (ACCI) acting Chief Executive Jenny Lambert said the decision reinstated “the long-standing common law and practice around casual employment”. She commented that “[i]t’s time for a rethink on the misinformation around ‘insecure work’, concentrate on facts, and be guided by the preferences of Australians for how they work and by what businesses need to stay in business and grow jobs.”

The Recruitment, Consulting and Staffing Association (RCSA) said that “[t]oday’s “[t]oday’s unanimous decision by the High Court, to respect and validate the decision of Australian workers to work as casual employees, is critically important to the long term security of our economy and our social evolution. Australian employers can, once again, employ casual workers with confidence and certainty. These are casual workers who are voting to stay as casual employees when given the opportunity to convert to permanent employment. It is pleasing to see that common sense has once again prevailed in our legal system and that casual employment has been upheld as a valid and legitimate form of employment for those that choose it”.