This year, Christmas came early for Australian employers and their lobbying associations, law firms, and political representatives. On August 4, the High Court of Australia handed down its decision in the Rossato case (WorkPac Pty Ltd v Rossato  HCA 23). Although the media has barely reported on the case, the outcome is one of the most devastating for workers’ rights in decades. It will entrench casualization by setting a precedent that denies long-term casual employees who work regular hours the right to convert to permanent positions. But worse than this, it strikes at the heart of Australian workers’ rights by prioritizing the written terms of employment contracts over the real-life realities of work.
The Rossato Case
The Rossato case has its origins in 2016, when the Federal Court found that mine driver Paul Skene — employed by the labor hire company WorkPac — was not a casual employee. Accordingly, Skene was therefore entitled to benefits such as paid leave. The court found that despite Skene’s contract giving him the status of a casual employee, the fact that he worked regular and predictable hours over an extended period meant that he was in reality a permanent worker.
Subsequently in 2018, another WorkPac mine worker, Robert Rossato, wrote to his employer to make a case for a similar recategorization. Although Rossato’s contract said that he was a casual, he argued that his regular and predictable shifts over four years demonstrated that he was not. Consequently, he argued that he should receive the same leave and other entitlements that accrue to comparable workers under the national employment standards, set by the Fair Work Commission.
WorkPac applied to the Federal Court seeking a declaration that Rossato was in fact a casual employee and therefore not eligible for any entitlements above the standard 25 percent casual loading. To WorkPac’s surprise, and the dismay of employers’ lobby groups and the Coalition government, the three-judge Federal Court found in Rossato’s favor.
The court reasoned that casual employment is defined by an absence of “advance commitment” from the employer to the employee. Whether advance commitment exists must be determined by reference to the employment contract and the facts on the ground. That is, the Federal Court found that the actual reality of the employment relationship can override how it is defined in a contract. Because Rossato worked regular and predictable shifts for four years, the court ruled that an advance commitment of employment existed and that he should be entitled to the same rights as a permanent worker.
The Bosses Strike Back
The ramifications of the Federal Court’s ruling were not lost on either side. Unions began to prepare class actions to claim unpaid entitlements for thousands of workers who bosses had paid as casuals despite working regular and predictable hours. Meanwhile, the employers embarked on a two-pronged strategy to deal with the court’s decision. They appealed the decision in the High Court while lobbying for their political representatives to legislate it away.
The legislative path yielded fruit for the employers first. In March this year, the federal government passed legislation, purportedly to stop “double-dipping.” Supposedly, this is to prevent casual workers who are meant to be paid at a higher rate — but often aren’t — from also claiming the additional entitlements owed to permanent workers.
To counteract the Federal Court’s decision, the government also legislated to ensure that employment contracts and not “any subsequent conduct of the parties” define whether someone is a casual worker. Pauline Hanson’s One Nation, a far-right party, and the so-called Centre Alliance backed these laws, ensuring their passage. At the same time, the Scott Morrison government also dropped provisions protecting workers against wage theft.
Unions and their peak body, the Australian Council of Trade Unions (ACTU), widely and rightly condemned the legislation. However, most of the unions’ criticism focused on the injustice done to improperly categorized casual workers and on the way that the legislation would further entrench insecure work. Few critics directed attention to the fact that these new laws give primacy to the written terms of an employment contract over industrial realities.
The High Court, however, does not appear to have missed the federal government’s signal. Following the Coalition’s legislative changes, it found that Rossato was a casual, as defined by his employment contract, despite the clearly ongoing reality of his work arrangements. This decision is another devastating blow to insecurely employed workers everywhere. It will have major ramifications for cases to do with the employment relationship between gig economy workers like Uber drivers or food delivery riders and the platforms that provide them with all their work. Indeed, the ramifications of the decision go well beyond that. It represents a fundamental change in industrial relations in Australia and sets back laws protecting workers’ rights by almost a century.
Masters and Servants
To understand why, it’s necessary to recall how Australia’s industrial relations laws developed over the course of the twentieth century to combat the power imbalances between bosses and workers. To some extent, this meant treating labor as different from other commodities. Although workers sell their labor power as a commodity in return for wages, they are not simply motivated by a desire to make money but by a desire to survive as humans.
Prior to the 1900s, employer/employee relations were governed by laws like the Masters and Servants Acts of the eighteenth and nineteenth centuries. It was a highly restrictive framework that bound workers to employment contracts by threatening sanctions such as imprisonment for those who quit outside of very limited circumstances. These acts were also designed to prevent “combination,” that is, the self-organization of workers into unions to advance their interests.
Over the course of the late nineteenth century and throughout the twentieth century, union organization and struggle forced successive governments to replace the Masters and Servants Acts with regulatory frameworks that recognized workers’ rights. As a result, workplace law came to differ from laws governing other contractual relationships. Certainly, the employment contract remained very important — although the extent of its importance varied in different jurisdictions. However, the law also took account of the day-to-day realities of work as well as the rise of collective bargaining. In short, it acknowledged the power imbalance between bosses and individual employees by empowering workers to collectively have a say over their conditions at work.
In 1911, Justice Henry Bournes Higgins gave a rationale for this shift away from the Master and Servants Act that remains prescient today:
The power of the employer to withhold bread is a much more effective weapon than the power of the employee to refuse labour. Freedom of contract under such circumstances is surely misnamed; it should rather be called despotism in contract. . . . The worker is in the same position as . . . a traveler, when he had to give up his money to a highway man for the privilege of life.
Rolling Back Progress
The High Court’s Rossato decision has, in principle, undermined much of this progress. The court’s ruling, which quashed the Federal Court’s original decision in the Rossato case, contains the following justification:
To insist upon binding contractual promises as reliable indicators of the true character of the employment relationship is to recognize that it is the function of the courts to enforce legal obligations, not to act as an industrial arbiter whose function is to synthesize a new concord out of industrial differences.
Further, the court said that it is not its function, when examining contracts, “to strain language and legal concepts in order to moderate a perceived unfairness resulting from a disparity in bargaining power between the parties so as to adjust their bargain.”
Stripped of legalese, the High Court is claiming that the employment contract alone determines the nature of employment and not what happens on the ground. If your contract says you are casual, you are casual, no matter whether in reality you work regular, predictable hours, on a full-time basis.
Further, the court was explicit in saying that it sees no role for the legal system to intervene in contracts between employers and employees to ameliorate the power imbalance or make the contract fair. In short, the relationship between boss and worker is a matter of parties contracting with each other, in the way that businesses might contract with each other for goods and services.
This is why bosses are celebrating. Workers are at their most vulnerable when signing individual employment contracts. If they don’t sign, they will have no job. And as individuals, workers have almost no power to object to a condition in the contract and to ask for it to be changed.
Further, proving a breach of contract typically requires that one party demonstrate that the other hasn’t delivered what they promised. If your contract says you are a casual, even if you don’t work casually, provided your employer pays you the casual rate, there is no breach of contract.
If You Don’t Fight, You Lose
Remarkably, the court’s judgement has largely reversed a line of precedents established in previous High Court rulings, which looked to the pattern of actual employment rather than the terms of the contract. In this sense, it is a highly political judgement, belonging in the nineteenth century, not the twenty-first.
This comes after decades of campaigning by the bosses and their parties to restrict workers’ rights. Unable to achieve their goal in head-on confrontations — especially after the unions united to defeat John Howard’s WorkChoices laws — they have opted instead for gradual strangulation. The High Court’s decision, and Scott Morrison’s laws that prompted it, are less brutally explicit than the prohibition against “combination” of the Masters and Servants Act. The result, however, is similar: to enshrine contract law as the ultimate arbiter of workers’ rights.
The point here isn’t just to highlight injustices that these developments will inflict on casual workers. More importantly, they reveal the agenda of the High Court and Scott Morrison and the ramifications it will have for all workers.
There is, however, a crucial blind spot in any industrial relations system that insists on defining the employer/employee relationship in purely contractual terms. At the end of the day, unlike other commodities, workers can exert real power over their conditions of work. But they can only do so by organizing on the ground. And for this to garner long-term victories, it must be linked with a political strategy that achieves legislative change.
In the short term, unions will need to put greater emphasis on winning collective agreements that limit the use of casual labor. In the long term, this will require a broad-ranging campaign to abolish the restrictions on right of entry into workplaces for union officials, to allow unions to levy bargaining fees, and to eliminate restrictions on industrial action. It will also require a political strategy. In addition to undoing the legislative changes triggered by the Rossato case, the union movement will need to push governments to rewrite employment laws that allow employers to undermine collective bargaining. This requires the kind of cross-movement strategy development that used to take place in winning big campaigns like compulsory superannuation or health and safety laws.
Ultimately, to avoid declining power, unions may need to follow through on the threat ACTU secretary Sally McManus issued in 2017: if the law is unjust, it deserves to be broken.