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High Court Says Contract is King
In a decision crystalising the importance of the terms of employment contracts, the High Court of Australia (“HCA”) has determined that the Full Federal Court of Australia (the “FCA”) wrongly decided the cases of Workpac and Skene and Workpac and Rossato because the decisions should have looked to the terms of the written contract to determine the character of the employment relationship, rather than looking at the conduct of the parties to the employment relationship. When it comes to determining whether or not an employee is a casual or permanent employee, the contract is king.
From the outset, it is important to note that the recent amendments to the Fair Work Act 2009 (Cth) (the “FW Act”) to include a definition of a “casual employee” did not apply to Mr Rossatto due to an exception related to Mr Rossatto’s previous FCA decision.
To summarise the facts of the matter:
- Mr Rossato was employed by WorkPac pursuant to six (6) consecutive “casual” employment contracts (or “assignments”) over a period of about three and a half years;
- towards the end of each year, Mr Rossato was provided with a roster setting out shift arrangements for the whole of the following year;
- there were only limited exceptions where Mr Rossato deviated from his rostered assignments;
- Mr Rosato worked at a mine on a “drive-in, drive-out” basis and stayed in accommodation arranged by WorkPac in advance; and
- after the decision of WorkPac v Skene (which was a favourable decision for an employee in similar circumstances to Mr Rossato), Mr Rossato claimed that he had not worked for WorkPac as a casual employee and claimed that he was therefore entitled to be paid for untaken annual leave, public holidays, and periods of personal leave and compassionate leave taken by him during his employment.
For further details on the facts of the matter and Mr Rossato’s claims, please see our blog about the FCA decision here.
An expectation is not a firm advance commitment
The parties agreed that “[t]he 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 HCA drew attention to the fact that there are provisions of the FW Act that apply to a “casual employee” with a “reasonable expectation” of continuing employment by the employer on a regular and systematic basis (see sections 65(2), 67(2) and 384(2)(a)).
While the non-contractual rosters may have given Mr Rossato a “reasonable expectation” of regular and systematic employment, the HCA found that “expectation” falls short of the “firm advance commitment to continuing employment” that distinguishes permanent employment from casual employment.
The HCA determined that 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.
The contract is king
While Mr Rossato might fairly be said to have had, over time, a reasonable expectation of continuing employment on a regular and systematic basis, the HCA found the express terms of his contracts were inconsistent with the making of a firm advanced commitment to continuing employment beyond each assignment.
In general, the contractual 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. The HCA found that on the plain and ordinary meaning of these contractual provisions, the parties deliberately avoided a firm commitment to ongoing employment once a given assignment had been completed.
In determining that the contract is king, the HCA found that the contractual clauses bound the parties and Mr Rossato was a casual employee. The FCA erred by characterising the legal relationship by focussing too much on the entirety of the employment relationship.
Key take aways
If your organisation hasn’t recently updated its casual employment agreements, now is the time to do so. Consistent with the new definition of casual employment under the FW Act, it is the terms of the contract, not the subsequent conduct of the parties, that will determine whether a person is a casual employee or not.
A properly drafted casual employment agreement may also allow the employer to offset the casual loading amount against the amount a misclassified employee claims for employee entitlements owing to non-casual employees.
The impact of this decision isn’t limited to casual employment. PCS recommends employers use comprehensive employment agreements for casuals and permanent employees to establish a clear framework for the legal entitlements of the parties.
PCS can assist your organisation with updating its employment contracts.
See the full decision here.
2 November 2014