The Rossato Decision – The High Court rules the terms of the contract are key!

Posted on August 04, 2021

In a world of stand-downs, lock-downs and industry shut-downs, the rights and entitlements of employees has come under particular focus. This is especially the case in industries with a high number of casual workers.

The High Court has handed down its decision in the eagerly anticipated case concerning the nature of casual employment: WorkPac Pty Ltd v Rossato & Ors [2021] HCA 23.

This case originated in the Federal Court, following an earlier decision of the Full Court of the Federal Court (WorkPac Pty Ltd v Skene (2018) 264 FCR 536) in which it was determined that Mr Skene, a mine worker employed by WorkPac, was not in fact a casual employee for the purposes of the Fair Work Act 2009 (the Act) and the relevant enterprise agreement that applied to Mr Skene’s employment.

Similarly, the Full Court of the Federal Court determined that Mr Rossato, who was also employed by WorkPac as a mine worker, was not a casual employee for the purposes of the Act and enterprise agreement.

The significance of this determination was that Mr Rossato was entitled to payment for annual leave that was untaken (and should have been accrued), payment for public holidays unworked, and payment for periods of personal and/or compassionate leave that was taken during his employment.

The Full Federal Court’s ruling in Rossato was appealed to the High Court.

The High Court unanimously allowed the appeal, and overturned the decision of the Full Federal Court. The High Court held that Mr Rossato worked as a casual employee for the purposes of the Act and the relevant enterprise agreement during his time with WorkPac. As such, he was not entitled to the payments for leave and other entitlements not available to casual employees.

The Court noted that after the filing of the application to appeal, but before the appeal hearing took place, the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (Amendment Act) passed the Federal Parliament and amended the Fair Work Act by, amongst other things, inserting a definition of “casual employee”. The Amendment Act also provided that compensation for permanent employee entitlements that becomes payable to an employee who was mistakenly treated as a casual, are to be offset by the casual loading amount paid to the employee.

The reasoning of the High Court in its Rossato decision is consistent with the definition of casual employment now contained the Act.

Importantly, the Court clarifies the significance of the written agreement between the parties, and the role the Court can play in determining the character of a legal relationship only by reference to legally enforceable terms. The Court cannot determine the legal relationship between parties by reference to “unenforceable expectations or understandings that might be said to reflect the manner in which the parties performed their agreement.

The Court noted that a “firm, advance commitment” is necessary for ongoing or permanent employment, and that something that is not binding cannot meaningfully be described in a court of law as a ‘commitment’ at all. The Court stated:

“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”

The High Court held that a "casual employee" is an employee who has no firm advance commitment from the employer as to the duration of the employee's employment or the days (or hours) the employee will work, and provides no reciprocal commitment to the employer.

Where parties commit the terms of their employment relationship to a written contract and thereafter adhere to those terms, the requisite firm advance commitment must be found in the binding contractual obligations of the parties. A mere expectation of continuing employment on a regular and systematic basis is not sufficient for the purposes of the Act.

The Court noted that Mr Rossato's employment was expressly on an "assignment-by-assignment basis". Mr Rossato was entitled to accept or reject any offer of an assignment, and at the completion of each assignment WorkPac was under no obligation to offer further assignments. That Mr Rossato was to work in accordance with an established shift structure that was fixed long in advance by rosters, did not establish a commitment to an ongoing employment relationship beyond the completion of each assignment. In carrying out each assignment, Mr Rossato worked as a casual employee for the purposes of the Act and the enterprise agreement.

The important lesson out of this decision is to make it clear in the written agreement what the legal relationship is and what the terms of the deal are. In this decision, the High Court has made it abundantly clear that the contract is key. It affirms that the label the individual parties attribute to their relationship is not of itself determinative, but that the character of the relationship is established by the rights and obligations which constitute the relationship. Those rights and obligations are found in the enforceable terms of the agreement.

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