The question of whether a worker is a permanent or casual employee is a perennial issue in Australian employment law.  The longstanding law has been that an employee may not be merely labelled a casual employee; they must in fact have the attributes of casual employment. Despite this, the belief that an employee is a casual if they are given that label has proven to be very persistent in Australian workplaces.

Historically, casual employment has been considered a form of employment which is short-term in nature for which the employee is engaged ‘as and when required’.  A good example is the ‘Christmas casual’ who is engaged in retail or hospitality to meet the peak in consumer demand in the late and early parts of the year.

For many years, it has been recognised that casual employees who are covered by an award are entitled to receive a casual loading (currently 25%) in lieu of employee entitlements they do not have (e.g. paid annual leave, paid personal/carer’s leave and redundancy pay).    However, as there are three different sources of employment law (contract, legislation and Awards/Enterprise Agreements), a common source of misunderstanding on the part of some employers and their advisers is that an employee who is a casual employee for one purpose must be a casual for all purposes.   Some employers have wrongly assumed that if an employee is paid a casual loading, they must be a casual for all purposes.

It has been argued that a key source of the incorrect assumption is the historical absence of a definition of a ‘casual employee’ in workplace legislation, including the Fair Work Act 2009 (‘FWA’). In the absence of that definition, the common law meaning of a casual employee has been applied by both the Fair Work Commission and the Courts.

Prior to March 2021 the Fair Work Act 2009 (Act) did not contain a definition of casual employment.  In March 2021 the then (LNP) Australian Government introduced a definition of ‘casual employee’ into the Act and replaced the definition of ‘long term casual’ with a ‘regular casual’ (2021 definition).  The definition introduced in 2021 focused on whether the terms of the offer meant that there was no firm advance commitment to continuing and indefinite work according to an agreed pattern of work and, if this was the case, whether the employee accepted the offer on that basis and the person was an employee as a result of that acceptance.  When determining whether or not there was a firm advance commitment to continuing indefinite work, consideration could only be had to whether the employer could elect to offer work and the employee could elect to accept or reject the offer, whether the employee would work as required according to the needs of the employer, whether the employment is described as casual employment and whether the employee is entitled to a casual loading or specific rate of pay for casual employees in a fair work instrument (e.g. a modern award).  A regular pattern of work would not of itself indicate a firm advance commitment of work and the conduct of the parties after the offer of the employment was made was not relevant.

The 2021 definition was introduced into the Act as a consequence of what was seen by some as a controversial decision of the Full Court of the Federal Circuit Court (as it then was) in the matter of WorkPac v Skene [2018] FCAFC 131 (Skene).  In that matter, Mr Skene was successful in his claim that he was entitled to payment for accrued annual leave even though part way through his employment he received a contract with the title ‘Notice of Offer of Casual Employment’.  The primary judge found that Mr Skene’s employment was ‘other than casual’ in nature as his work was regular and predictable, his shifts were set 12 months in advance, his employment was continuous, the arrangement did not allow him to elect not to work and there was an expectation that his employment would be ongoing; this decision was upheld by the Full Court on appeal.  However, by the time that the 2021 definition had taken effect, the High Court of Australia (High Court) had handed down its decision in the matter of WorkPac v Rossato & Ors [2021] HCA 23 (4 August 2021) (Rossato).  In that matter, the High Court overturned a decision of the Full Federal Court (Full FC) which had found that Mr Rossato was not a casual employee for the purposes of the Act and an enterprise agreement.  Mr Rossato was employed on a episodic basis and signed a series of documents which referred to his employment as casual in nature.  However, his shifts were set well in advance.  As a consequence of the decision in Skene, Mr Rossato made a claim for accrued annual leave, public holidays, personal leave and compassionate leave; the alleged source of these entitlements was an enterprise agreement.  WorkPac denied Mr Rossato’s claims and then commenced proceedings in the Federal Court seeking declarations that Mr Rossato had been a casual employee throughout his employment and was not entitled to the payments he had claimed.  Mr Rossato did not make a cross-claim.  Both before the Full FC and the High Court, the parties agreed that a casual employee in the Act refers to an employee who has no ‘firm advance commitment as to duration of the employee’s employment or the days (or hours) the employee will work’. WorkPac argued that the question of whether there was a firm advance commitment of work was determined at the time of entry into the employment contract and, in the case of a contract wholly in writing, by reference only to the express terms of the contract.  While the Full FC did not agree with WorkPac, the High Court did.

The decision of the High Court was emphatic that the role of the Court was to enforce legal obligations ‘not to act as an industrial arbiter whose function is to reshape or recast a contractual relationship in order to reflect a quasi-legislative judgment as to the just settlement of an industrial dispute’.  The High Court concluded that the decision in Skene had ‘strayed from the orthodox path’ when the Full Court had regard to ‘(t)he conduct of the parties to the employment relationship and the real substance, practical reality and true nature of the relationship’.  In concluding that Mr Rossato was a casual employee, they paid particular regard to the fact that the express provisions of various contracts stated that the employment was on an ‘assignment-by-assignment’ basis, allowed Mr Rossato to accept or reject an offer of an assignment and WorkPac was under no obligation to offer future assignments.  The High Court found that the ‘plain and ordinary’ meaning of these express provisions meant that the parties had avoided a firm commitment to ongoing employment and that ‘on a straightforward application of the test which the parties accepted to be the hallmark of casual employment, Mr Rossato was a casual employee’.

In response to the decision in Rossato, the current (Labor) Australian Government included an expanded definition of casual employment in their Closing Loopholes reforms.  This new definition in section 15AA of the Act took effect on 26 August 2024; it requires the Fair Work Commission and Courts to give consideration to: the real substance, practical reality and true nature of the employment relationship; and, the firm advance commitment can be in the form of a contract or, in addition to the terms of a contract, in the form of a mutual understanding or expectation between the employer and employee.  When determining whether there is a firm advance commitment, considerations include: whether the employee is able to elect to accept or elect not to accept an offer of casual employment; whether, having regard to the nature of the enterprise, it is reasonably likely that there will be future availability of work of the kind usually performed by the employee; and, whether there is a regular pattern of work for the employee (however a regular pattern of work – which can include fluctuations and variations – does not of itself indicate a firm advance commitment of work).  None of these considerations are determinative and not all need to be satisfied for an employee to be considered other than a casual employee.

The common law definition of casual employee applies to casual employment prior to March 2021, the definition of casual employment introduced into the Act in March 2021 applies to casual employment between March 2021 and 25 August 2024 and the new definition applies to casual employment on and since 26 August 2024.