High Court rules on casual employment in Rossato No 2 and foreshadows a new direction in the judicial consideration of work relationships
On 4 August 2021, the High Court of Australia delivered its decision in WorkPac Pty Ltd v Rossato & Ors  HCA 23 (Rossato No 2).
The decision provides greater clarity for employers around the concept of when an employee will be deemed “casual” and also how to prove and disprove a “firm advance commitment to ongoing work”.
At one level, the decision is of limited ongoing practical significance, given the recent introduction into the Fair Work Act of a statutory definition of “casual employee”.
More broadly, however, the High Court’s rationale for reversing the original decision in Rossato may signify something of a brave new world in employment contract theory, whereby the form of the parties’ contract in the express words they use will be the primary determinant of the character of their relationship.
Will promoters operating in the gig economy now have a more solid ground to argue — based on their paperwork — that their contracted workers are contractors rather than employees?
A casual or permanent employee? Rossato and Skene
In our August 2020 publication, we re-visited WorkPac Pty Ltd v Rossato  FCAFC 84 (Rossato No 1), which affirmed the approach of the Full Court of the Federal Court in WorkPac Pty Ltd v Skene  FCAFC 13 (Skene).
In Rossato No 1, the Full Federal Court held that a casual employee was an employee who had “no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work”, and found that because Mr Rossato had such a commitment from the employer, he was not a casual employee. WorkPac had not appealed to the High Court in Skene but did so in Rossato.
Casual employee reform
In our April 2021 publication we summarised the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 which amended the Fair Work Act 2009 (Cth) (FW Act), largely coming into effect on 27 March 2021. The amendments were generally intended to reverse the effect, or at least address uncertainties that arose from the decisions in Skene and Rossato No 1.
The recent FW Act amendments:
The High Court unanimously allowed WorkPac’s appeal in Rossato, finding that Mr Rossato was indeed a casual employee and clarified what is a “casual employee” (under the pre-amended provisions).
What is a casual employee?
The pre-2021 caselaw holds that a casual employee is an employee who does not have a firm advance commitment from their employer about how long they will be employed for, or when they will work, and correspondingly a casual employee does not give their employer the same commitment. The new section 15A definition reflects that understanding. Where the High Court differed from the Federal Court was in applying those principles to the facts of the case.
Justice Gageler gave a separate judgment stating the central question in the appeal was the meaning of undefined references to “casual employee” in the FW Act which defined “employee” by reference to the ordinary meaning of the term, with this question being of national importance at the time special leave to appeal was granted. However, the importance of the question diminished with the subsequent insertion into the Act of a definition of “casual employee” which operates comprehensively for the future, and operates retrospectively subject to very limited exceptions.
Mr Rossato worked at WorkPac’s Central Queensland coal mines under six separate employment contracts between July 2014 and April 2018. WorkPac had always believed it had engaged Mr Rossato as a casual employee and paid 25% casual loading, but not paid leave entitlements or public holidays.
In addition to these contracts, Mr Rossato was covered by an enterprise agreement classifying him as a casual worker.
The High Court (including Gageler J) found that in carrying out these six employment contracts Mr Rossato was a casual employee pursuant to the FW Act and also WorkPac’s enterprise agreement.
Key points include:
The heart of the High Court’s reasoning is the principle that “a court can determine the character of a legal relationship between parties only by reference to the legal rights and obligations which constitute that relationship. 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.” .
The joint reasons emphasised that, while employment law has evolved so that employment can no longer be understood in purely contractual terms, the Federal Court’s approach — which permitted reference not only to the terms of engagement but also to non-binding practices and behaviours that evolved during the relationship — would violate principles of freedom of contract and make it impossible for employers and casual employees to ascertain their rights and liabilities before they accrued , . On that basis, the Court held that not only Rossato No 1 but also Skene had been wrongly decided.
But the decision has direct significance only for Mr Rossato and WorkPac’s employment relationship, and even that had ended for other reasons before the Federal Court case. For everyone else, the Federal Court’s approach has been squarely abrogated by the new section 15A and related amendments to the FW Act.
The greater significance of the High Court’s decision is its striking retreat to laissez-faire considerations of freedom of contract and a narrowing of the role of the courts: “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”.
That said, some of the subsequent commentary overstates the significance of the decision. For example, the decision has been portrayed as overturning Hollis v Vabu Pty Ltd (2001) 207 CLR 21. However, as the Court itself pointed out , Vabu concerned not the question of when employment is casual or permanent, but the question of whether a person was an employee at all, as opposed to an independent contractor. The Court will further consider that distinct question in CFMMEU v Personnel Contracting and ZQ Operations Australia Pty Ltd v Jamsek in the near future. It may be that, after Rossato, the Court will be inclined to give greater weight to the contractual intention of the parties expressed at the outset. But not necessarily. There are good reasons supporting a multifactorial analysis in answering the employee/contractor question that are not relevant to the casual/permanent question, and the Court itself identifies some of those . So, if Uber and Deliveroo really are celebrating after Rossato, their celebration might yet prove to be premature.
The decision directly affects only the employment relationship between Mr Rossato and WorkPac. For just about every other employment relationship, the new statutory definition of "casual employee" and related amendments in the FW Act are now the source, and they provide more certainty and comfort to employers who engage casual employees than any court decision for 20 years. There are still, however, practical issues to consider including:
Should you require any further information or clarification, or assistance with casual contract templates, please contact our Workplace and Employment team.