The High Court of Australia has overturned the Full Federal Court’s controversial decision in WorkPac v Rossato which found in May 2020 that Mr Rossato, a casually employed mine worker, was actually a permanent employee and entitled to back-paid leave entitlements.

A summary of the high court decision and implications for resources and energy employers, along with commentary from legal experts can be found below.

Judgement – High Court decision

In their judgement of 4 August 2021, the High Court found Mr Rossato’s employment was on an “assignment by assignment” basis and there was no “firm advance commitment to ongoing work”.

This advance commitment, along with other factors including a reciprocal commitment from the employee, and advance notice of days or hours of ongoing work, was deemed by the High Court as the critical test for casual employment. This brings the Court’s interpretation of casual employment in-line with that legislated by the Morrison Government in March this year.

The High Court also reinforced longstanding commonly understood principles of employment law which were seemingly set aside in the earlier Federal Court decision, including that the express terms of an employment contract are binding for characterising the relationship between an employer and employee.

“…while mutual undertakings may not always be express, where there are express terms of the contract between the parties, they must be given effect unless they are contrary to statute…. If the mutual undertakings are said to be implied in what has been agreed, they cannot be inconsistent with the express terms of the contract,” the High Court stated in its judgement.”

For this reason, the High Court noted that the Full Federal Court’s approach fell into error in the other matter at the centre of this controversy, WorkPac v Skene.

“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. To the extent that Bromberg J expressed support for the notion that the characterisation exercise should have regard to the entirety of the employment relationship, his Honour erred.”

In a press statement, AREEA Chief Executive Steve Knott AM, said “common sense had finally prevailed”.

“The damage these decisions have had on business confidence in just about every sector of the economy has been enormous. The view from the employer community has always been that the Federal Court was applying a highly novel interpretation that was out-of-step with how casual employment arrangements have worked in practice for many decades,” Mr Knott said.

“While it is disappointing WorkPac had to take the Rossato matter all the way to the High Court, employers strongly welcome the confirmation that the Federal Court had erred in its interpretations.”

The ‘Double Dipping’ issue

Given the High Court ruled Mr Rossato to be a casual employee, it did not find it relevant to address other matters raised in WorkPac’s appeal, including that if Mr Rossato was found to be a permanent employee, the company could offset any entitlements owed to him with casual loading already paid.

This “casual loading offsetting” mechanism was an important feature of the Federal Government’s casual employment reforms in March. The High Court not offering any view on this matter has made it even more important that the Government dealt with it earlier in the year.

The legislation effectively fended off a number of class action litigators, many internationally funded, seeking to profit off the huge historic liabilities that would have been imposed on small, medium and large businesses across the Australian economy.

Read AREEA’s summary of the March 2021 casual employment amendments here.

Labour hire in the mining industry

While this decision affects all Australian industries, AREEA notes the Rossato test case comes from the use of labour hire casual employees in the coal mining industry.

Over recent weeks the Senate Committee Inquiry into Job Security has heard evidence from multiple industry stakeholders about the small, but very important role labour hire and casual employment plays in the resources sector.

Evidence included that labour hire employees in the coal mining industry typically earn around $120,000p.a. on average and that very few – as little as 1% of the total workforce of some employers – have requested conversion to permanency under casual conversion terms enshrined in enterprise agreements.

AREEA told the committee non-permanent forms of work are particularly relevant where the workforce is highly mobile, moving between projects and operating sites at various stages throughout the life of the operation.

However, it is not a dominant feature of the industry – which at 10.3% now has a casual employment portion well under half of the all-industries average of 25%.

Read AREEA’s opening statement to the Senate Committee here.

Fallout and legal commentary

The decision prompted widespread analysis from various legal commentators, most of which noted the High Court had reinforced the fundamental concept that “contract is king”.

Alice DeBoos, the managing partner at workplace law specialists Kingston Reid, said:

“I think it is more accurate (than characterising this decision as “pro-employer”) to say that the High Court considers that employment law should really be considered properly through the traditional prism of contract law and subject to all the orthodox contractual principles,” DeBoos told the Australian Financial Review.

Legal Editor at the Australian Financial Review Michael Pelly said “the High Court has put the contract back on its throne when it comes to employment law”.

“The judgment said “the express terms of the relationship between WorkPac and Mr Rossato were distinctly inconsistent”, with a mutual commitment and that his pay also reflected that,” he said.

Corrs Chambers Westgarth partner and former Fair Work vice-president, Graeme Watson, said the decision “very strongly reinforced the primacy of contract” and “this was really the reason why the original decision sent shockwaves through employer ranks”.

“If you say, look at all the circumstances, and that includes post-contractual conduct … then the status or classification of an employee may change from time to time. That whole uncertainty was a nightmare for employers and led to widespread concerns,” he said.

Minister for Industrial Relations Michaelia Cash said the case highlighted the “confusion and uncertainty around casual employment that has been present for too long” and which the Coalition’s amendments had addressed, including a potential $39 billion liability for business.

The decision will also have a significant impact on class action litigation.

“The decision of the High Court will nonetheless be of considerable significance to employers who have been grappling with historic claims associated with casual employment,” law firm Corrs Chambers Westgarth said in its summary insights.

“This includes a spate of misclassification class actions commenced in the retail and hospitality industries, and the suite of actions against Australian labour hire firms (including WorkPac) currently operating in the black coal mining industry.”

“Many of these class actions have been in abeyance, pending the outcome of the High Court appeal. The High Court’s determination may very well prove to be fatal to these actions. In the face of such a clear indication from the Court as to how it will approach the question of employee classification, it may be that the continued prosecution of such claims may increase the prospect of adverse cost consequences, which may prove an unattractive prospect for the funders and firms supporting these actions.”