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03
Dec

What makes an employee a casual employee?

by: White Knight Lawyers

Background – casual employee

On 4 August 2021, the High Court (HCA) gave its judgment in the case of WorkPac v Rossato & Ors [2021] HCA 23 (WorkPac v Rossato) regarding casual employees. The HCA affirmed the commonly understood definition of casual employment and gave primacy to the terms of the employment contract.

In 2018, the Full Court of the Federal Court of Australia (FCAFC) in WorkPac v Skene (2018) 264 FCR 536 (WorkPac v Skene) found that an employee was not a casual employee despite his employment contract classifying him as one. The FCAFC held that a casual employee was someone who had “no firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work.” The FCAFC then looked beyond the terms of the contract between parties. The FACAFC focused on the totality of the circumstances surrounding the employment and held that the employee was not a casual employee.

In WorkPac v Rossato, WorkPac (Appellant), a labour hire company, employed Mr Rossato (Respondent) as a mining truck driver between 2014 and 2018. Throughout his employment, the Respondent worked under six consecutive contracts each characterising him as a casual employee. Some of the Respondent’s six contracts stipulated that the Respondent’s pay included a casual loading. The Appellant paid that loading in lieu of various non-casual employee entitlements.

After terminating employment with the Appellant, and following the decision in WorkPac v Skene, the Respondent asserted that he was not a casual employee but a permanent employee. In particular, the Respondent relied on his regular and ongoing employment. The Respondent claimed outstanding unpaid entitlements as a permanent employee.

The main issues in dispute included:

  • whether the Respondent was a casual employee; and
  • if the Respondent was not a casual employee, whether the Appellant could set-off the amounts paid to the Respondent against his claim for permanent employee entitlements.

FCAFC decision

The FCAFC held that the Respondent was not a casual employee. The FCAFC further held that the Appellant could not set off any casual loading paid to the Respondent against its liability for unpaid accrued entitlements. Justice Bromberg favoured the approach of examining the totality of circumstances surrounding the employment relationship rather limiting the inquiry to the terms of the contract.

In holding that the Respondent had not met the test of casual employment, the FCAFC’s reasons included the following:

  • The Respondent’s work involved a standard work week in the performance of regular, constant, and predictable work.
  • Arrangements that would be required to enable the Respondent to elect to accept or decline shifts had not been contemplated by the terms of the contract.

Further, the FCAFC held that the Appellant could not rely on the casual loading paid to the Respondent to set off its liability owed for unpaid entitlements. The FCAFC’s reasons included the following:

  • a casual loading made in lieu of an entitlement is not the same as satisfying that entitlement; and
  • a casual loading is paid at a time when the liability to provide leave has not arisen.

HCA decision

The HCA unanimously allowed the Appeal in favour of the Appellant. While the HCA upheld the test of casual employment stated in WorkPac v Skene, the HCA rejected the FCAFC’s approach of examining the totality of circumstances. Instead, as the HCA held at paragraph [57], finding for the primacy of the employment contract in determining the employment relationship as opposed to the totality of circumstances:

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.

In finding that the Respondent was a casual employee, the HCA’s consideration included the following:

  • The contractual terms advanced the notion that the Respondent was a casual employee:
    • the employment was on an “assignment-by-assignment” basis;
    • the Respondent was entitled to accept or reject an offer of an assignment; and
    • the Appellant was under no obligation to offer any further assignments.
  • The fact that the Respondent worked pursuant to an established shift structure did not mean that the Appellant committed to an ongoing employment relationship beyond each assignment.
  • The fact that the Appellant paid casual loading in lieu of entitlements is a compelling indication of casual employment.

Takeaway

In congruence with the later decisions of ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 and Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1, the HCA finds that primacy should be given to the terms of the employment agreement as opposed to the totality of the circumstances surrounding the employment.

These decisions signify the paramount primacy of the terms of the contract in determining the rights and obligations under the contract and the character of the employment relationship. Regardless of the totality of the circumstances and the expectations of the parties, the employment relationship is determined by the employment contract.

Accordingly, employers should review their casual employment contracts to ensure that they do not contain terms that give rise to “a firm advance commitment to ongoing employment”. Casual employment contracts might* benefit from expressly including some or all the following terms:

  • the employer does not make any firm advance commitment to ongoing employment;
  • the employees can elect to accept or decline work;
  • casual loading is paid in lieu of entitlements; and
  • an entire agreement clause and a variation in writing signed by the parties clause (the written employment contract constitutes the whole of the terms between the parties and cannot be varied without signed written agreement).

*The above is general commentary and not legal advice and should not be relied upon as a substitute for legal advice or legal services. It does not consider your unique facts and circumstances or the terms of your employment contract.