In late 2020, the Federal Government released the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill (the Bill). The Bill set out the most significant industrial relations reforms since the Fair Work Act 2009 (Cth) (FW Act) and the first attempt at workplace reform by the Coalition since the Howard Government’s Work Choices legislation in 2006.
Despite a lengthy consultative process with trade unions and employer representatives, the Federal Government abandoned most of the contentious elements of the Bill. The result is that only changes to the FW Act relating to casual employment were passed by Parliament and became law on 27 March 2021 (Commencement Date).
In this insight, we provide an overview of the changes to casuals and the protection they provide for employers from casuals claiming to be permanent employees.
Casual employment reform: Key take-aways:
- New definition of “casual employee” inserted in the FW Act which makes the terms of the offer of employment and their acceptance the focus when determining whether an employee is a casual.
- The new definition means that assessing the risk of casuals claiming to be permanent employees has changed. As a result, we recommend employers:
- audit their offers of employment to past and current casual employees to assess whether the employer is liable to such claims;
- based on the outcome of the audit, review whether existing casuals should be offered permanent employment where they do not meet the new definition; and
- review their employment contracts for new casual employees to include (to the extent possible) the factors discussed below as indicators of casual employment.
- A statutory set-off provision which requires a court (in respect of claims by casuals claiming to be permanent employees) to reduce amounts payable for statutory leave and other entitlements by the casual loading.
- The conversion of casuals to permanent employment. If, based on grounds set out in the FW Act, employers intend not offering permanent employment to casuals (or rejecting a casual’s request for permanent employment), we recommend that records are kept of the known or reasonably foreseeable facts upon which the employer’s decision is based. Employers have a 6 month transition period (from the Commencement Date) to comply with the new conversion provisions in respect of their offers of employment to casuals.
- Employers must provide casual employees with the “Casual Employment Information Statement” prepared by the Fair Work Ombudsman (FWO) which sets out details of the new casual provisions of the FW Act. The information statement must be provided to each casual before, or as soon as practicable after, they commence casual employment.
- Small business employers must provide their existing casuals (ie those employed prior to the Commencement Date) with a copy of the statement as soon as practicable after the Commencement Date. All other employers must provide their casuals with a copy of the information statement as soon as practicable after the end of the transition period (ie after 27 September 2021).
Casual Employees
The amendments to the FW Act attempt to address the key concerns for employers (outlined in our previous article - When is a Casual not a Casual?) arising from the WorkPac Pty Ltd v Skene [2018] FCAFC 131 and WorkPac Pty Ltd v Rossato [2020] FCAFC 84 decisions of the Full Federal Court, namely:
- the risk that a person initially engaged as a casual employee may be held to be a permanent employee based on their subsequent employment; and
- for those casuals held to be permanent employees, the inability for employers to set-off the casual loading paid to those employees against statutory entitlements.
What is the definition of a ‘casual employee’ in Australia?
Until these amendments, the FW Act did not define what is a 'casual employee'. The definition was supplied by the courts.
The FW Act now defines a casual employee as a person who is offered and accepts employment on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work. To assess whether an employer makes no such firm advance commitment in its offer, only the following factors are taken into account under the FW Act:
- whether the employer can elect to offer work;
- the ability of the employee to accept or decline work;
- whether the employee will work only as required according to their employer’s needs;
- whether the employment is described as casual employment; and
- whether the employee is entitled to receive casual loadings or a specific rate of pay.
Conduct by the parties after the employee accepts the employer’s offer is not taken into account when assessing whether the person is a casual employee. This removes the risk that an employee may start employment as a genuine casual but subsequently be considered a permanent employee by the conduct of their employment. However, the fact that an employee has a regular pattern of hours does not indicate a firm advance commitment of work and so does not automatically lead to the conclusion that the employee is employed on a permanent basis.
This means that the employer’s offer to the new employee (and the content of their employment contract) will be key in working out whether or not an employee meets the definition of a casual employee. There is no requirement that the offer and the acceptance must be in writing for the definition of casual employee to be met.
We recommend that each of the factors above are addressed (to the extent possible) in a written employment contract for each new casual employee.
The new definition of casual employee does not just apply to casuals who commence employment on or after the Commencement Date. The definition:
- also applies to current employees who were offered employment prior to the Commencement Date, as well as offers made on or after the Commencement Date; and
- does not apply to employees (and former employees) offered employment prior to the Commencement Date (i) where a court has, prior to the Commencement Date, held them not to be a casual employee; or (ii) who converted from casual to permanent employment.
As a result, employers should examine the basis on which past offers of employment were made to and accepted by casuals. If the past offer meets the new definition of a casual employee, any risk of claims for entitlements in respect of permanent employment is extinguished by the amendments.
Set-off of casual loadings
In the Rossato case, the Federal Court did not allow the employer to set-off a 25% casual loading rate paid to Mr Rossato against the accrued leave entitlements to which he was entitled as a permanent employee, notwithstanding the set-off clause in his employment contract.
The FW Act now provides that a casual loading may be set-off against claims by a casual for various leave entitlements (including annual leave and personal leave) and redundancy pay under the National Employment Standards (NES), an industrial instrument or an employment contract.
The set-off provisions apply in respect of an employee:
- who is employed subject to what is described by the parties (for example, in the employment contract) as casual employment;
- paid an identifiable casual loading in respect of one or more of the entitlements above;
- who is not a casual employee during a period of employment; and
- who makes a claim in respect of one or more of the entitlements in respect of the period.
A court must reduce any amount payable to the employee (by the amount of the casual loading) in respect of the employee’s claim. The court has a discretion to apportion the casual loading between the various entitlements in some circumstances.
The set-off provisions apply to claims by current and former casual employees including in respect of entitlements which accrued (or were paid) before the Commencement Date.
Casual Conversion
The NES have been amended to include an obligation for employers to offer permanent employment to some casuals and a right for some casuals to request permanent employment from their employer.
Some casuals may already have rights under a modern award or enterprise agreement relating to conversion to permanent employment. The modern award or enterprise agreement has no effect to the extent to which it excludes the new casual conversion rights under the NES.
Offer by the employer
If a casual employee (as defined above) meets the following conditions (Offer Conditions):
- has been employed for a period of 12 months (Qualifying Period); and
- for at least the last 6 months, worked a regular pattern of work on an ongoing basis (the “6 month condition”); and
- could continue working the same pattern (without significant adjustment) on a full-time or part-time basis,
the employer must, within 21 days of the end of the Qualifying Period, make the casual a written offer (Employer Offer) of either full-time or part-time employment (depending on their hours worked during at least the past 6 months). This does not apply to small business employers.
The casual has 21 days to accept or reject the Employer Offer. If accepted, during the following 21 days:
- the employer must discuss with the casual their conversion date, post conversion hours of work and whether their conversion is to full or part-time employment; and
- provide written notice to the casual of these matters. The conversion date is the employee’s first full pay period after the notice is given unless another date is agreed.
No offer made by the employer
An employer is not required to make an Employer Offer where reasonable grounds (Refusal Grounds) exist (based on known or reasonably foreseeable facts) not to make an offer including where:
- the position will cease to exist within 12 months;
- the hours of work the casual would perform will reduce significantly within the 12 months; or
- the days and/or times that the casual is required to work will change significantly.
In addition, the employer is not required to make an Employer Offer if the 6 month condition is not met.
The employer must provide written notice to a casual if no offer of permanent employment will be made (Refusal Notice). The notice must include the grounds for not making the offer.
The Refusal Notice must be given by the employer within 3 weeks of the end of the 12 month period.
Request for conversion by a casual
A casual employed for at least 12 months may request (Employee Request) full-time or part-time employment provided that:
- for the last 6 months, ending when the request is made, the casual worked a regular pattern of work on an ongoing basis;
- the employee could continue working the same pattern (without significant adjustment) on a full-time or part-time basis; and
- during the 6 months, the casual has not rejected an Employer Offer and their employer has not issued a Refusal Notice, amongst other conditions.
Casuals of small business employers may request permanent employment.
The employer has 21 days to respond in writing to an Employee Request.
An employer may refuse the Employee Request on the Refusal Grounds provided that the employer has first consulted with the casual.
If the employer accepts the Employee Request, during the following 21 days:
- the employer must discuss with the casual their conversion date, post conversion hours of work and whether their conversion is to full or part-time employment; and
- provide written notice to the casual of these matters. The conversion date is the employee’s first full pay period after the notice is given unless another date is agreed.
Conversion of casuals employed prior to Commencement Date
The conversion provisions are subject to a 6 month transition period (from the Commencement Date) for existing casuals (Existing Casuals) even if the casual did not meet the new definition of a casual employee (ie an employee designated as a casual will be covered by the transitional provisions).
During the transitional period:
- an employer must assess whether their Existing Casuals have met the Offer Conditions;
- any Employer Offer must be made within 21 days after the employer makes the assessment; and
- any Refusal Notice must be given within 21 days after the assessment but no later than the end of the transition period.
An Employee Request cannot be made during the transition period.
Casual Employment Information Statement
The FWO has now published the information statement which contains the information following information:
- the new definition of casual employee;
- an Employer Offer for casual conversion must generally be made to certain casual employees within 21 days after the employee has completed 12 months of employment;
- an employer can decide not to make an offer for casual conversion if there are reasonable grounds to do so, but the employer must notify the employee of these grounds;
- certain casual employees will also have a residual right to request casual conversion;
- casual conversion entitlements of casual employees employed by small business employers; and
- the FWC may deal with disputes about the operation of that Division.
The information statement must be provided by employers to each casual before, or as soon as practicable after, they commence casual employment.
Small business employers must provide their existing casuals (ie those employed prior to the Commencement Date) with a copy of the statement as soon as practicable after the Commencement Date. All other employers must provide their casuals with a copy of the information statement as soon as practicable after the end of the transition period (ie after 27 September 2021).
You can download the Statement from the FWO’s website.
If you have any questions about the reforms to casual employment, please contact our dedicated team of Employment lawyers.
Visit Smart Counsel