Changes to casual employment – what employers should know 

26 March 2021

Federal Parliament has recently passed the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021 (Bill) which will become law after receiving royal assent.

While the scope of the Bill which was ultimately passed is much narrower than initially contemplated, the provisions relating to casual employment have been passed without major amendments. The changes to casual employment are significant and will affect every national system employer in Australia which has a casual workforce.

The provisions of the Bill which were not passed relate to working conditions for part-time employees, enterprise bargaining and the proposed criminalisation of underpayments.

What are the changes under the Bill?

In summary, the changes under the Bill include that:

There will be a new statutory definition of “casual employee”.

​This will focus on the terms on which employment is offered and accepted and not the subsequent conduct of either party. This change is significant because it overturns the common law principles established in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 under which courts are currently required to assess how parties have actually conducted themselves during employment in order to determine whether it is of a casual nature.

An employee will be classified as a casual if an offer of employment makes no firm advance commitment of regular work and the employee accepts the offer on that basis. In determining whether the offer of employment makes no firm advance commitment of regular work regard will only be had to the following considerations:

  • whether the employee can elect to accept or reject work;
  • whether the employee will work as required according to the needs of the employer;
  • whether the employment is described as casual employment; and
  • whether the employee will receive a casual loading.

The definition also makes it clear that a regular pattern of hours does not in itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern.

There will be an obligation for employers (other than small business employers) to offer casual employees conversion to permanency after 12 months of employment.

​The obligation to offer conversion will arise if an employee has been employed for at least 12 months, there has been a regular pattern of hours on an ongoing basis during at least the last 6 months of that period and the employee could continue to work those hours as a full-time or part time employee. However, there will be no obligation to convert an employee to permanency if there are reasonable business grounds not to do so. The obligation to offer conversion also does not apply to small business employers who have less than 15 employees at the relevant time.

​A casual employee will be able to make a request for conversion to permanency after 12 months of employment.

An entitlement to make a request will arise if the legislated criteria explained above are satisfied and in the 6 month period preceding the request:

  • the employee has not already refused a conversion offer from the employer; and
  • the employer has not already given the employee notice that it has decided not to make an offer or to refuse a request for conversion on reasonable business grounds.

An employer will not be able to refuse a conversion request unless they have consulted the employee, there are reasonable business grounds to refuse the request and those grounds are based on facts that are known, or are reasonably foreseeable, at the time of refusing the request.

Following conversion an employee will be taken to be a permanent employee for the purposes of any law of the Commonwealth, any relevant industrial instrument and the employee’s contract of employment.

This applies even if any applicable industrial instrument (such as an award or enterprise agreement) currently contains terms which suggest otherwise.

The Bill also requires the Fair Work Commission to review any modern awards which define casual employment in order to ensure that definition is consistent with the new laws.

Disputes in relation to the casual conversion will need to be dealt with in a certain way.

If there is no procedure for dealing with a dispute about casual conversion in a Fair Work instrument, employment contract or other written agreement, the parties will need to first attempt to resolve the dispute at the workplace level. If the dispute cannot be resolved, it can be referred to the Fair Work Commission.

Double dipping will be prohibited.

The Bill includes provisions which will allow courts to set off any casual loading paid to an employee who has been misclassified as a casual against subsequent claims for leave and other entitlements. However, setting off will only be permitted where:

  • the engagement of the employee is specifically described as being for casual employment; and
  • the employer has expressly stated that the casual loading is being paid to compensate the employee for not having one or more of those entitlements.

Importantly, the setting off provisions can be applied retrospectively. In other words, the Bill will allow courts to set off any casual loading paid to an employee before the Bill comes into operation against historical claims for leave and other entitlements, provided that the criteria above are met. This applies even if the employee’s employment is terminated before the Bill commences or the employee is no longer employed by the employer.

There will be a requirement to provide casual employees with a Casual Employment Information Statement.

This obligation is similar to the existing requirement for employers to provide a Fair Work Information Statement to employees upon commencement of employment.

The Casual Employment Information Statement will be prepared by the Fair Work Ombudsman and will need to be given to new casual employees before or as soon as practicable after the commencement of their employment.

There will be a prohibition against reducing or varying an employee’s hours of work, or terminating their employment, in order to avoid the rights and obligations described above.

What should businesses now do?

Employers should review their current work arrangements with casual employees to determine if they are likely to be entitled to convert to permanency.

Employers will also need to implement processes to ensure compliance with the new casual conversion obligations. This may include development of a dispute resolution procedure prescribing steps required to be taken before a matter can be referred to the Fair Work Commission.

It would also be prudent for employers to review their systems for engagement of casual employees (including template contracts) to ensure that the terms under which casual employees are engaged have been written in a way which strictly complies with the obligations set out above and achieves certainty that their casual status will be recognised. In most cases, this will require careful drafting of contract terms.

For employers who have existing enterprise agreements which contain conversion provisions, it may also be prudent to seek advice about the extent to which those provisions will continue to be recognised and whether it is necessary to make an application to the Fair Work Commission to resolve any potential ambiguity.

If your business requires guidance with reviewing its processes for engagement of casual employees, please contact us.

This article was written by Clare Raimondo, Partner and Michal Bergander-Florek, Associate.

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