The gig economy and the COVID-19 pandemic have converged to create the most turbulent time in the employment space since the introduction of the Work Choices Act in 2006 and the Fair Work Act in 2009 (‘FWA’), which introduced a safety net for employees, including:
- National Employment Standards;
- Modern Awards;
- National Minimum Wage;
- The Fair Work Ombudsmen; and
- The Fair Work Division in the Federal Court.
The last decade has seen the pendulum swing to a system where employees are afforded protections and flexibility. Unfortunately, the objectives and intentions of the system have, on occasion, led to misguided decisions and an inability for the system to adapt to new technologies and individual workplace flexibility.
Casual Employees – Is Casual Now Truly Casual?
A prime example of the shift in favour towards employees is the decision by the Full Court of the Federal Court of Australia (‘Federal Court’) in Workpac Pty Ltd v Rossato [2020] FCAFC 84 (‘Rossato’). In this case, the Federal Court found that whilst Workpac’s employee, Mr Rossato, was employed as a casual employee and paid causal loading, he could not be deemed a ‘casual employee’ and was entitled to accrue annual compassionate and personal (sick) leave. The Federal Court reasoned that Mr Rossato’s employment arrangements, including long-term and constant rosters, operated in a way that indicated a ‘firm advance commitment’ to continuing employment, and regard had to be had to the ‘entirety of the employment relationship’, rather than simply the casual capacity which was stipulated in his contract.[1]
This decision sent shock waves through employer groups, setting a precedent on the nature of casual employment that refuted the understood position that an employee, employed as a casual under a contract, award, or enterprise agreement was to be deemed a casual for all purposes.
In August 2021, the High Court of Australia (‘High Court’) unanimously overturned the Federal Court’s Rossato decision, determining that Mr Rossato was a casual employee and was not entitled to the claimed entitlements. The majority of the High Court found that the assessment as to whether there is a ‘firm advance commitment’ to ongoing work, and subsequently the characterisation of employment capacity, should be determined by the terms of applicable contracts in cases where parties have committed the terms of employment to a written contract.[2] In layman’s terms, the High Court found that employers and employees should rely on the agreement and the contract that they entered.
Interestingly, the Fair Work Commission (‘FWC’) Vice President commented that the High Court’s Rossato decision has thrown him “into some confusion over the state of the law, especially in the way that this affects the longstanding employment tests in sham contracting”. [3]
Contractors – What is a Sham and What is Reasonable?
As a result of the High Court Rossato decision, the FWC has delayed its highly anticipated ruling on whether Deliveroo riders are classified as employees or independent contractors.[4]
The High Court’s ruling in Rossato has created confusion around the longstanding test relied on when looking at sham contracting to determine whether a worker is classified as an employee or a contractor.
The current position of the High Court reflects significant shifts in the employment relationship and calls into question the fundamental principles of contracting and sham contracting outlined in the seminal judgment (now over 20 years old) of Hollis v Vabu Pty Ltd (2001) 207 CLR 21. In this case, the High Court emphasised the importance of looking to the totality of the employment relationship to determine employment status.
The upshot of the current decision is that proper weight is likely be given to the substance of the agreement between companies and their contractors, not only in the gig economy but also on broader footing by businesses at large. The High Court has sent out a warning that the casual employment and contractor spaces require certainty and clarity.
However, the previous criteria listed in this table from the Fair Work Ombudsman.[5], will still have bearing upon whether a contractor is truly independent.
Employers may take some comfort in the High Court’s recent decision in respect to the employment space. There has been a tendency by the Federal Court to depart from traditional legal reasoning, adopting a different interpretation to employment law disputes in an attempt to separate them from common law contractual principles.
This has created confusion, as the pendulum has swung in favour of the employee. What is required is for employers to be able to rely on a concrete, orthodox, common-law approach in negotiating and contracting with their employees. Implied terms and subjective legislative interpretations by the judiciary only confuse what should be a stable and transparent system, where both employees and employers can work within an accepted paradigm.
If the High Court intends to create a clearer and less litigious labour environment, the decision in Rossato can only be an improvement.
