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Rossato’s case: the journey to a clear definition of “casual employment” – are we there yet? [NO!]

Rossato’s case: the journey to a clear definition of “casual employment” – are we there yet? [NO!]

Published on August 31, 2020 by Wing Ho | 何宛穎律師 and Peter PunchWing Ho | 何宛穎律師 and Peter Punch

(WorkPac Pty Ltd v Rossato – May 2020)[1]

Key Learnings
  1. At present, the accepted approach (sometimes called a “test”) for identifying the existence of a casual employment relationship is the “absence of firm advance commitment”.
  2. Courts may have regard to all the facts and circumstances of the employment relationship (including post-contractual conduct) to determine whether the relationship is casual or not, even if the parties have entered into a written contract that purports to be for casual employment.
  3. Where employers wish to “set-off” payments made to employees to satisfy entitlements that are ordinarily paid to permanent employees, existing common law principles continue to apply.
  4. In the event that employers mistakenly categorise employees as casuals, they may not be entitled to restitution on the basis of mistake or failure of consideration.

Introduction

The incidence of insecure forms of work has become a prominent part of industrial relations and political debate in Australia, particularly over the last twenty years. Inevitably, our courts have been swept up into the debate, as they have been increasingly required to rule on whether a particular working relationship is or is not “casual employment” for various purposes.

The legal debate about what is a “casual” employee is not new: the High Court was struggling with it as long ago as 1936 – see Doyle v Sydney Steel Company Ltd.[2]  The definition remains elusive, but fixing the problem has now become vital, because the statistics suggest that almost 25% of all employees are now categorised as “casual” (and many of those so-called “casuals” are women).[3]

Into this highly contested arena came what we will describe as the “WorkPac Litigation”, arising from which the latest and probably the most important decision is that of the Full Court of the Federal Court in WorkPac Pty Ltd v Rossato (‘Rossato’), handed down on 20 May 2020.

The following is a case note (albeit somewhat extended in length) on Rossato.  To consider comprehensively the three judgments handed down by the Judges constituting the Full Court (Bromberg J presiding, together with White and Wheelahan JJ) would require an article of substantial proportions (the judgments together spanning 1,025 paragraphs).  However, such an article would be premature given that WorkPac has applied to the High Court of Australia for special leave to appeal from the decision in Rossato, in which application the Commonwealth Attorney General and Minister for Jobs and Industrial Relations, Christian Porter has sought leave to intervene.  So, the prospects are that the WorkPac Litigation has at least one more episode left.

Indeed, examining the decision in Rossato, one might well suspect that the case was set up for the very purpose of getting the issue onto the High Court’s hearing list (as will be mentioned below).

The critical issue and its significance

While there were a number of issues for the Full Court to determine in Rossato (as detailed in the link) the critical issue was in our view the following one. Click here to find out.

Background

Mr Rossato was engaged as an employee for WorkPac, a labour hire company which specialises in providing labour to companies involved in the mining, construction, engineering and oil and gas industries.  Mr Rossato had signed a generic document which outlined the conditions governing all the assignments given to him by WorkPac (‘General Conditions’).  He had also signed six successive contracts (titled ‘Notice of Offer of Casual Employment’) whereby he was assigned to work at various mine sites between July 2014 and April 2018.  Each of the contracts described Mr Rossato as a casual employee, and purported to incorporate terms of the relevant enterprise agreement.  The flat hourly rates in each of the contracts were in excess of those set in the enterprise agreement. Click here to read the full Background.

Unusual features of Rossato – setting up a High Court ruling?

Unusual features of Rossato include the following:

  1. The matter was expedited for hearing before a Full Court in the first instance.
  2. There were no pleadings filed in the matter. Instead, evidence was largely led by way of a Statement of Agreed Facts and an Addendum to the Statement of Agreed Facts.
  3. WorkPac, the employer, was the applicant seeking relief and therefore bore the onus of proof. It would be more commonplace to find an employer defending an application brought by an aggrieved employee.
  4. The Federal Minister for Jobs and Industrial Relations, the CFMMEU and Mr Rossato (who was involved in a separate class action against WorkPac) were granted leave to intervene in the proceedings.
  5. Mr Rossato had not filed any cross-claim against WorkPac claiming payment of the entitlements which were the subject of the present proceedings.
  6. WorkPac agreed to pay Mr Rossato’s legal costs.

These unusual circumstances suggest that a concerted attempt was being made to obtain an authoritative ruling – hopefully from the High Court.

Significance of the decision

Subject to the outcome of the High Court appeal, Rossato provides important guidance on the issues of:

  1. How to determine whether an employee is a casual or not for the purposes of Fair Work Act 2009 (Cth) (‘the Fair Work Act’). Rossato provides a more detailed analysis of the concept of “firm advance commitment”, which is now accepted as a benchmark to determine whether an employment relationship is to be classified as casual or not. 
  2. If an employer has paid an employee as a casual but that employee is later found not to be a casual as a matter of law, can the employer “set-off” the payments made to the employee against its liability in respect of leave entitlements.
  3. Principles relating to restitution and when employers are entitled to seek restitution.

This decision has wide-ranging implications for employers in Australia, who now face the risk of being liable to pay statutory leave entitlements in respect of employees who had been classified as casual but in fact are not.  Later on in this article, we will discuss the key issues that employers will face going forward.

 The relief sought by WorkPac

WorkPac asked the Court to make declarations to the following effect:

  1. That Mr Rossato was a casual employee under each of the six contracts of employment, and therefore not eligible for leave entitlements either under the Fair Work Act or the relevant enterprise agreement.
  2. Alternatively, that Mr Rossato’s pay incorporated a 25% casual loading in lieu of all his leave entitlements, and that WorkPac is entitled to “set-off” the casual loading component of its payments to discharge its liability in relation to leave entitlements that should have been paid to him.
  3. Alternatively, that if Mr Rossato was found to be a permanent employee, that WorkPac was entitled to restitution of the casual loading on either of the following bases:
    – Mistake, because WorkPac had incorrectly categorised Mr Rossato as a casual employee, or
    – Failure of consideration for the payment of casual loading.

Summary of the Court’s conclusions

Although each of the three Judges hearing the case provided their own reasons, their Honours were in broad agreement about the findings to be made.  These findings are:

  1. Mr Rossato was not a casual employee in each of the contracts of employment. (On this issue the main judgment was delivered by White J, with whom Bromberg and Wheelahan JJ agreed, although the former delivered a number of his own remarks and observations on the point in his concurring judgment).
  2. Mr Rossato was also not a “casual FTM” under the applicable enterprise agreement, the WorkPac Pty Ltd Mining (Coal) industry Enterprise Agreement 2012 (per White J, with whom Bromberg and Wheelahan JJ agreed).
  3. WorkPac was not entitled to “set-off” the payments it made to Mr Rossato in order to discharge its liability with respect to the leave entitlements it owed to him, either by reference to common law principles (in respect of which all three judges gave their own similar reasons) or Regulation 2.03A of the Fair Work Regulations 2009 (Cth) (per Wheelahan J, with whom Bromberg J agreed, White J giving separate reasons)
  4. WorkPac was not entitled to restitution on either of the two bases it argued for, i.e. whether by reason of their mistake or for failure of consideration (per Wheelahan J, with whom Bromberg J agreed, White J giving his own reasons on the point).

Issue 1: was Mr Rossato a casual employee?
Read more

    Issue 2: was WorkPac entitled to “set-off” the casual loading in order to discharge its liability in respect of leave entitlements that it owed to Mr Rossato
    Read more

      Issue 3: was WorkPac entitled to restitution?
      Read more

      Concluding observations

      The WorkPac Litigation has attracted considerable attention from the industrial relations community throughout Australia, as well as both sides of Federal politics.

      Employee advocates have hailed these decisions as victories against the seemingly inexorable march towards total casualisation of the sub-professional/managerial workforce.

      Employer organisations have on the other hand railed against what they claim to be an unexpected change in the law by judicial fiat, resulting in massive injustices.  That is, the injustices of (i) employers being exposed retrospectively to penalties and crippling backpay claims for unpaid leave entitlements they thought they had ‘bought out’ with the casual loading, and (ii) employees “double dipping”, i.e. getting the casual loading for unavailability of leave entitlements, and then getting those entitlements anyway.  Employers also contend that in many cases, employees want to be treated and paid as casuals, as it suits them for various reasons (e.g. higher hourly pay rate, and increased flexibility).

      The foregoing discussion drives us back to the High Court’s possible contribution to this seemingly unending debate.  However, it is inconceivable that the Court’s decision will close off the debate completely, whatever it decides.  It must be remembered it is a court grounded in the common law tradition exercising purely “judicial power”, so it will only decide those precise questions that are posed to it in order to dispose of the litigation.

      So whatever the Court decides, there will remain broader policy questions to be addressed – for example, should there be a statutory definition of a casual in the Fair Work Act; should there be a new category of “regular casual” (with a definition); should employees be required to elect at the start of employment whether they are paid as casuals or not; or should any employee who is a casual for a certain number of shifts in a year be thereafter automatically converted to a regular employee, without other option?  No doubt there are other questions…

      Finally, it is noted that arising from the COVID-19 pandemic crisis, the Federal Government has convened five separate working groups of employers, unions and others to provide recommendations to the Government on major industrial relations issues.  One of these groups is considering the issues around casual employment.  Hopefully a consensus can be reached within such a group, leading to a real resolution of the legal, industrial and social problems attending the casualisation of the workforce.  However, experience tells us that is being overly optimistic.

      What should employers do now?

      There appears to be some time to go before employers have clear guidance or direction from either the High Court or Federal Parliament on the issues identified by or arising from the WorkPac Litigation.  It is possible that such clear guidance or direction may never come.

      However, there are steps that employers can take in the meantime:

      Firstly, employers should review their contracts and determine whether any of their casual employees may be eligible for conversion to permanent employment under the applicable Award or enterprise agreement.  Some Awards or enterprise agreements may require employers to notify a casual employee of their right to request a conversion to full-time or part-time employment within a prescribed period (for example, within the first 12 months of employment).  If notice has not already been given, this should be done as soon as possible.

      Secondly, employers should refrain from entering into arrangements that would not meet the test of “absence of firm advance commitment” propounded in Rossato, at least until the legal position is fully clarified.

      Finally, if an employer does engage casuals to any significant extent it should seek specialist professional advice on its particular circumstances, so it can make an informed decision as to how it can deal with its own situation.


      [1] WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (‘Rossato’).

      [2] (1936) 56 CLR 545; [1936] HCA 66.

      [3] Australian Bureau of Statistics, 2018, Employee Earnings and Hours, Australia, May 2018, viewed 31 July 2020, https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/6306.0Main+Features1May%202018?OpenDocument

      [4] The concept of “firm advance commitment” was endorsed by the Full Court in WorkPac Pty Ltd v Skene [2018] FCAFC 131, [172] and [182] (‘Skene’), following a line of authorities commencing with Hamzy v Tricon International Restaurants [2001] FCA 1589.

      [5] Skene.

      [6] Rossato, [576].

      [7] Skene.

      [8] Skene, [172].

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