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High Court landmark decision concerning ‘casual v permanent’ characterisation – the Rossato decision

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Authors: Chao Ni & Herbert Fischbacher, Principals

On 4 August 2021, the High Court unanimously allowed an appeal by WorkPac in the case of WorkPac Pty Ltd v Rossato [2021] HCA 23.

This decision overturned an earlier Full Federal Court decision (WorkPac Pty Ltd v Rossato 278 (2020) FCR 179) and also made findings that the Full Federal Court had erred in an earlier ‘related’ decision involving similar facts (WorkPac v Skene (2018) 264 FCR 536).

In both the Skene and Rossato decisions, the Federal Court had found that:

  1. the workers had worked a regular pattern of hours pursuant to a roster system which had been prepared a year earlier;

  2. the workers had a reasonable expectation of continuing regular work pursuant to the roster system; and

  3. for those reasons, the workers were considered permanent employees at law for the entire duration of their employment; despite the fact that they were at all times characterised by the employer as casual employees, and paid a casual loading.

These Federal Court decisions stood as the authority that conduct after the commencement of employment could determine whether a worker was a casual or a permanent employee, as opposed to what was agreed at the commencement of the employment.

The Full Federal Court in Rossato further decided that casual loading paid to Mr Rossato could not be used to satisfy other permanent employee entitlements that were owed to him.  This effectively meant that Mr Rossato was allowed to keep the casual loading paid to him and be paid additional permanent employee related entitlements (such as annual leave) from his employer (WorkPac).

On appeal of the Rossato decision, the High Court stated the following:

  • A court can determine the character of a legal relationship between the 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. To the extent that [the Full Federal Court] expressed support for the notion that the characterisation exercise should have regard to the entirety of the employment relationship, [the Full Federal Court] had erred.

  • 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.  It has rightly been said that it is not a legitimate role for a court to force upon the words of the parties’ bargain “a meaning which they cannot fairly bear [to] substitute for the bargain actually made one which the court believes could better have been made”

  • Three additional points may be made here. First, while mutual undertakings may not always be express, where there are express terms of the contract between the parties, they must be given effect unless they are contrary to statute. Secondly, if the mutual undertakings are said to be implied in what has been agreed, they cannot be inconsistent with the express terms of the contract. Thirdly, if the mutual undertakings are to be inferred from conduct, then they may take effect as contractual variations. It is because contracts, whether as originally agreed or as varied, create binding obligations that they constitute “firm advance commitments”.

  • Mr Rossato was described as a casual employee by the Notice of Offer of Casual Employment (‘NOCE’). It is true, of course, that whether employment is casual or not for the purposes of the Fair Work Act is not determined by the “label” which the parties choose to attach to their relationship. The character of the relationship between the parties is established by the rights and obligations which constitute the relationship. Nevertheless, use by the parties in their contract of the label “casual” might be a factor which influences the interpretation of their rights and obligations. That said, Mr Rossato was paid a casual loading … The circumstance that, as in this case, the parties expressly agreed that the employee would be paid a loading in lieu of entitlements whose rationale presupposes an ongoing working relationship extending beyond the duration of a particular assignment (such as, for example, an entitlement to paid annual leave) is a compelling indication by the parties that their relationship did not include such a commitment.

What we can now definitively take away from the High Court’s decision is that employers can enjoy certainty when engaging casual employees without fear of a Court later ruling the employee to be a permanent employee, so long as the employer can show that there was ‘no advance commitment to ongoing work’ as part of the bargain struck with the casual employee.

MST Lawyers can assist employers with updating template casual employment agreements and advising on all employment law issues concerning casual employment (including the new casual conversion obligations under the Fair Work Act 2009).

If you have any questions or concerns relating to the contents of this article, please contact MST Lawyers’  Employment Law team at  EmploymentLaw@mst.com.au or by phone +61 3 8540 0200.