High Court upholds freedom to contract casually

Robert Rossato was employed by WorkPac, a labour-hire company pursuant to a series of six contracts, or “assignments” between 28 July 2014 and 9 April 2018, when he retired. During that time, WorkPac provided his services to Glencore at one or other of the Collinsville and Newlands mines. Each contract was entitled “Notice of Offer of Casual Employment – Flat Rate” except for the third contract, which was entitled “Notice of Offer of Casual Employment”. At all relevant times, WorkPac treated Mr Rossato as a casual employee.

Most of the time, Rossato worked according to either a “7/7 roster” (seven days on, seven days off) or a “5/5/4 roster” (five days on, five days off, four days on, five days off, five days on, four days off). The only exceptions to these arrangements were when he undertook additional training or inductions, and during mine shutdowns. Rossato was never asked by WorkPac or Glencore whether he intended to attend work on a day he was rostered; nor did Rossato ever enquire whether he would be required to attend work on a day he was rostered.

On 2 October 2018, in reliance on the decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131, Rossato wrote to WorkPac claiming that he had not worked for it as a casual employee, and claiming that he was entitled to be paid for untaken annual leave, public holidays, and periods of personal leave and compassionate leave taken by him during his employment. These entitlements were said to be due under the Fair Work Act 2009 and the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012, which governed Rossato’s employment.

WorkPac denied Rossato’s claims, and promptly filed an originating application in the Federal Court of Australia seeking declarations that throughout his employment Rossato had been a casual employee for the purposes of the Act and the Enterprise Agreement. WorkPac also sought declarations that, by reason of that status, Rossato was not entitled to paid annual, personal/carer’s or compassionate leave, or payment for public holidays; and that he had been paid at a rate which incorporated a 25 per cent casual loading in lieu of those entitlements. In the alternative, if Rossato were found to have been other than a casual employee, WorkPac sought declarations that it was entitled to set off, against the entitlements claimed by Rossato, payments it had made to Rossato in compensation for, or in lieu of, those entitlements; or that it was entitled to restitution in respect of the amounts it had paid to Rossato in excess of his entitlement to remuneration as a permanent employee.

In Commonwealth Bank of Australia v Barker [2014] HCA 32, French CJ, Bell and Keane JJ said:

“The employment relationship, in Australia, operates within a legal framework defined by statute and by common law principles, informing the construction and content of the contract of employment.”

Division 6, Subdivision A of Div 7 and Subdivision C of Div 7 of Pt 2‑2 of the Fair Work Act 2009 (Cth) provide for annual leave, paid personal/carer’s leave and compassionate leave under the National Employment Standards. However, those provisions do not apply to casual employees.

In Hamzy v Tricon International Restaurants [2001] FCA 1589, the Full Federal Court held that:

“The essence of casualness is the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work.”

The Full Federal Court in WorkPac Pty Ltd v Skene [2018] FCAFC 131 considered that the expression “casual employee” takes its meaning, at least in part, by comparing it against other types of employment such as full-time and part-time employment. The Full Court elaborated on the characteristics of casual employment in the following passage:

“[A] casual employee has no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work. Nor does a casual employee provide a reciprocal commitment to the employer. … In our view, what is referred to in Hamzy as the ‘essence of casualness’, captures well what typifies casual employment and distinguishes it from either full‑time or part-time employment.

The indicia of casual employment referred to in the authorities – irregular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability – are the usual manifestations of an absence of a firm advance commitment of the kind just discussed. An irregular pattern of work may not always be apparent but will not necessarily mean that the underlying cause of the usual features of casual employment, what Hamzy identified as the ‘essence of casualness’, will be absent.”

Bromberg J and White J held that Mr Rossato was not a casual employee because the requisite firm advance commitment was evident in this case from the terms of the contracts, or “assignments” which provided that Rossato was to work regular, constant, predictable hours fixed long in advance. Employment of this type was, “by its very nature”, employment that involved a firm advance commitment.

Bromberg J also found that because an employment relationship is dynamic, the character of the relationship may be discerned from the course of dealing between the parties and their conduct, not only in the written terms of the contract which created the relationship.

White J went on to say:

“In the present context, it is the existence and nature of the underlying mutual undertakings in the second tier which are in question. The undertakings of that kind are commonly not express. They may be implicit in the contract or be inferred from other matters which are express. In an informal contract, they may, like any other term, be inferred from the parties’ conduct.
This counts against WorkPac’s submission that the firm advance commitment must be express. It may, however, suggest that the requisite commitment involves something more than an expectation.”

WorkPac appealed, and the High Court accepted its argument that what matters is the terms of the employment contract.

Kiefel CJ, Keane, Gordon, Edelman, Steward And Gleeson JJ rejected the Federal Court’s reasoning:

“Some amorphous, innominate hope or expectation falling short of a binding promise enforceable by the courts is not sufficient to deprive an agreement for casual employment of that character.

To insist upon binding contractual promises as reliable indicators of the true character of the employment relationship is to recognise that it is the function of the courts to enforce legal obligations, not to act as an industrial arbiter whose function is to synthesise a new concord out of industrial differences. That it is no part of the judicial function to reshape or recast a contractual relationship in order to reflect a quasi‑legislative judgment as to the just settlement of an industrial dispute has been emphatically the case in Australia at the federal level since the Boilermakers Case

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”

Turning to the terms of the employment agreement, their Honours held that:

“The provisions which are critical to the assessment of the existence or otherwise of a firm advance commitment to ongoing work are cll 5.1, 5.3 and 5.5 of the General Conditions. These clauses expressly provided that Mr Rossato’s employment was on an “assignment-by-assignment basis”, with Mr Rossato entitled to accept or reject an offer of an assignment and WorkPac under no obligation to offer any further assignments. On the plain and ordinary meaning of these provisions, the parties deliberately avoided a firm commitment to ongoing employment once a given assignment had been completed. Once it is accepted, as it must be, that these clauses bound the parties according to their ordinary meaning, it must also be accepted that on a straightforward application of the test which the parties accepted to be the hallmark of casual employment, Mr Rossato was a casual employee.”

Kiefel CJ, Keane, Gordon, Edelman, Steward And Gleeson JJ also held that while labels are not decisive, they are an important factor in correctly characterising the nature of the employment relationship:

“It is true, of course, that whether employment is casual or not for the purposes of the Act is not determined by the “label” which the parties choose to attach to their relationship[111]. 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 pursuant to cll 6.4.5 and 6.4.6 of the Enterprise Agreement, which clauses were incorporated into each of the NOCEs. 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.”

Gageler J declined to determine whether a firm advance commitment had to be legally enforceable in order to exclude a person’s employment from being casual in nature. Nevertheless, Gageler J found that each contract of employment contained nothing to oblige WorkPac to continue each contract of employment beyond completion of the assignment to which each contract related, and therefore Rosato was at all times a casual employee.

The High Court of Australia has upheld freedom to contract in casual workplace agreements. The significance of this decision has diminished with the recent passing of section 15A of the Fair Work Act 2009 (Cth), which now provides a statutory definition of the term ‘casual employee’. This case arose because such a statutory definition did not exist at the time, and the judiciary was therefore asked to define it.

Nevertheless, the High Court has overruled some judicial activism from the Federal Court, which would have construed employment relationships contrary to their express terms. Such decisions would have resulted in many workers essentially ‘double dipping’ by receiving their entitlements and also their casual loadings. The High Court has essentially restored some common sense to industrial relations.

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