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Legislative changes to casual employment

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Written by Victoria-Jane Otavski, Principal and Antonia Xu, Graduate.

On 26 March 2021, the Fair Work Act 2009 (the FW Act) was amended by the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 and changed workplace rights and obligations in relation to casual employees.

The explanatory memoranda relating to the legislative reform identifies that the intent of the changes is part of the Federal Government’s plan to drive job growth and Australia’s economic recovery from the COVID-19 pandemic and to create certainty and flexibility for employers and employees.

The changes comprise the introduction of:

  • a new statutory definition of “Casual Employee”;
  • a safeguard to prevent “double-dipping” by casual employees who are subsequently deemed to be permanent employees;
  • changes concerning the conversion from casual employment to permanent.

1. Introduction of a statutory definition

The FW now includes a definition for ‘casual employee’, which did not previously exist. Casual employment rests on the following factors:

  • an offer of employment where the employer makes no firm advance commitment to continuing and indefinite work based on an agreed pattern or roster;
  • the person accepts the offer of employment on that basis; and
  • the person is an employee as a result of that acceptance.

The FW Act lists the following exhaustive factors in determining whether an employer makes no firm advance commitment:

  • whether the employer can elect to offer work and whether the person can elect to accept or reject work;
  • whether the person will work as required according to the needs of the employer;
  • whether the employment is described as casual employment;
  • whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument.

To avoid doubt, the FW Act also specifies that:

  • a regular patter of hours does not of itself indicate a firm advance commitment to continuing and indefinite work according to an agreed pattern of work; and
  • the question of whether a person is a causal employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of any subsequent conduct of either party.

This means that whilst the description of the basis of employment as ‘casual’, will be a factor in assessing whether the employee is a ‘casual employee’, it will not be determinative.

1.1. What this means for employers

Employees employed on a ‘casual’ basis may now be classified as permanent employees under the new definition.

Employers should refer to any records, including emails and conversations at the time employees were offered employment to determine whether any employment has been mischaracterised as ‘casual’. If employers have any doubts, they should consider obtaining legal advice on ways to minimise the risk of legal action from employees claiming unpaid leave and other entitlements.

2. Casual conversion

With the exception of casual employees of small business employers, all casual employees will have the right to convert to permanent employment after 12 months’ employment if, during the past 6 months, the employee had a regular patter of working hours on an ongoing basis.

A conversion offer is not required in cases where there are reasonable grounds (both known at the time or reasonably foreseeable) for not offering a conversion. Reasonable grounds can be a belief that the employee’s position will change significantly in the future or if the position will cease to exist. However, in such instances, the employer must provide written notice to the employee within 21 days if it decides not to make the conversion offer, and the reasons for not doing so.

Where an employer does not offer casual employees an option to convert, the employee retains the right to request conversion themselves and employers must respond to such requests within 21 days.

2.1 What this means for employers

As a matter of best practice, all employers should consider the hours worked by their casual employees and proactively offer conversions where casual employees qualify for such conversion offers. This can assist employees by initiating discussions about permanent conversion and to bring certainty to employment arrangements for staff. Where appropriate, early conversions may benefit employers by securing permanent staff and a stable workforce to enable ongoing business needs.

The obligation to offer casual conversion does not apply to small business employers.

Employers are encouraged to seek legal advice to ensure that offers of conversion comply with all legal requirements, and the appropriate communication of such changes.

3. No ‘double-dipping’ for entitlements for permanent employment

The Act now provides a clear statutory right for employers to request a Court offset any casual loading or other allowances paid to a casual employee against any liability for accrued statutory entitlements sought to be back-paid by reason of the employee being deemed to have been a permanent employee. This amendment thereby provides a safeguard against ‘double-dipping’ and the circumstances arising from the Full Federal Court decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 and WorkPac Pty Ltd v Skene (2018) 264 FCR 536.

Importantly for employers, the new provisions have a retrospective effect and thereby apply to periods of employment before the enactment of the changes.

The Attorney General’s Department estimates that the potential liability for Australian employers to back pay statutory entitlements to employees whose employment does not meet the new statutory definition could be between $18 to $39 billion. It is estimated that there are approximately 2 million casual employees across Australia.

4. Other

Employers should also ensure that all new casual employees are provided with the Casual Employment Information Statement which is published by the Fair Work Ombudsman as soon as practicable after 27 March 2021 and ensure that any existing casual employees (with the exception of small business employers) are provided with the statement as soon as practicable from 27 September 2021. A copy can be downloaded here Casual Employment Information Statement

5. Next steps for employers

In view of the changes to the FW Act, and if not already done so, employers should review the contractual terms governing the employment of casual employees and determine whether they satisfy the criteria set out in the new statutory definition of casual employee and where required, make appropriate conversion offers where any employee employed on a casual basis is entitled to such offer.

6. How can Automic help?

Automic Legal will be pleased to assist employers in understanding their obligations, implementing any changes and upon communications with casual employees. Please contact Victoria-Jane Otavski, Principal of Automic Legal, on (02) 8072 1463 or victoria.jane@automicgroup.com.au for any guidance.