Keeping it casual
Image via: CastleAndThingsThe High Court recently handed down a long-awaited and landmark decision to classify “casual employees”.
What does this mean for Australian business owners? Firstly, you should be aware of the key differences between an employee and a contractor. Knowing what classifies each and the different responsibilities owed is important as employers have further obligations to each. We explain these differences and the recent High Court decision below.
Employee or Contractor?
An employee is someone who works in your business, is part of the business and has an expectation of ongoing work. A contractor effectively works for themselves and agrees to do specific work for a company but is not part of the company.
Some other key factors that differentiate employees and contractors include:
Basis/method of payment: Employees are paid in regular periods and are provided certain entitlements. Contractors are paid at the completion of a specific job based on the quote they provide and cannot claim entitlements such as paid leave.
Supply of equipment and tools: Employees are provided with all equipment needed to perform their work, or an allowance/reimbursement. Contractors are responsible for supplying their own equipment to complete the specific work.
Commercial risks: Employers generally are held responsible for the actions of their employees performed under their contract. Contractors however are legally responsible and liable for their work and must rectify any defects in their work. For this reason, contractors usually take out their own insurance policies.
Control over work: Subject to any terms of the contract or agreement, Contractors have the freedom to choose how the work is done. Employees can be subject to employers’ directions when undertaking work.
WorkPac v Rossato [2022]
The High Court recently handed down its decision in the case of WorkPac v Rossato that overturned the initial decision of the Full Court of the Federal Court of Australia in 2020 a precedent set in the 2018 case of Skene v WorkPac Pty Ltd.
These decisions have shifted the way employees are classified, reaffirming the importance of providing clear clauses in contracts of employment. They notably rejected the principle that an employee designated as a casual under an award or enterprise agreement is a casual for all purposes. Additionally, the decisions sparked the Fair Work Amendment Act which inserted a definition of “casual employee”. Click here to read more about casual employees.
Background
Robert Rossato was employed at WorkPac as a production worker. During his time at WorkPac, he was employed on six consecutive contracts of employment.
Mr Rossato was regarded as a casual employee, reflected in his pay and coverage for certain awards. Importantly, he could not claim statutory leave entitlements.
After ending his employment, Mr Rossato claimed that his consistent and regular employment entitled him to outstanding unpaid entitlements as a permanent employee. WorkPac rejected these claims and sought a declaration that Mr Rossato was a casual employee while he worked at WorkPac.
The Full Court of the Federal Court found Rossato was not a casual employee for the purposes of the Fair Work Act Entitlements or his relevant Enterprise Agreement. The court granted Rossato accrued annual paid leave, personal/carer’s leave, compassionate leave and public holiday entitlements.
WorkPac subsequently appealed the decision, taking the case to the High Court.
Decision
The High Court upheld the principle that casual employment occurs where there is no “firm advance commitment as to the duration of the employee’s employment or the day the employee will work“ (at [32]).
The court found this is determined by the terms in the written contract, as opposed to any post-contractual conduct.
The court held Mr Rossato was a casual employee, as the terms in the employment contracts did not include a mutual commitment to ongoing work.
Takeaways
Employers who hire casual employees should review current employment contract and seek advice to ensure the terms of casual employees align with the classification of casual employees and not contractors.
At Hewlett Legal we’ve worked with all kinds of businesses and can help you with just about any commercial and business legal issue. Contact our team for advice on your specific needs.
