Legislative Changes to the Definition of ‘Casual Employee’: What Every Business Needs to Know.

The changes were made by the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 (the Amendment Act), with changes coming into effect on Saturday 27 March 2021.

By way of summary, the changes made by the Amendment Act include:

• A new statutory definition of ‘casual employee’;
• An obligation placed on employers (excluding small business) to offer casual conversation in certain circumstances; and
• The allowance of casual loading offset in circumstances where casual employees have been misclassified.

Statutory definition of ‘casual employee’

Prior to the implementation of the Amendment Act, casual employment was not defined within the legislation. Accordingly, the common law established the principle behind determining the classification of employment. Established in WorkPac Pty Ltd v Skene[1] and confirmed in WorkPac Pty Ltd v Rossato[2], this principle required the court to assess how parties conducted themselves during the employment in order to determine whether it was casual in nature. This principle therefore assessed the substance and totality of the employment relationship. However, this categorisation of casual employment has proven vague and complex, with each new decision evolving the concept. Further, the common law definition failed to shed light on when an employee’s legal status, which started as casual, developed into a permanent role.

The new legislative definition moves focus away from the traditional ‘regular and consistent hours’ consideration, as well as the overall nature of the employment (which was determined by an unrestricted list of variables), and towards the initial intentions of the parties at the time the employment agreement was formalized.

Under the new definition, a person is a casual employee if they accept a job offer from an employer knowing that there is no firm advance commitment to ongoing work with an agreed pattern.[3] In determining whether the offer of employment makes no firm advance commitment of regular work, the following considerations exclusively will aid determination:

1. Whether the employee can elect to accept or reject work;
2. Whether the employee will work as required according to the needs of the employer;
3. Whether the employment is described as casual employment; and
4. Whether the employee will receive a casual loading.[4]

This new definition 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 the agreed pattern, assessment is based on the offer and subsequent acceptance of the employment (not the subsequent conduct of the parties).[5]

By putting heavy emphasis on the original agreed terms and the parties’ own characterisation of the employment relationship, the FWA will have the effect that employment offered on a casual basis will later be considered casual even if the subsequent conduct is characteristic of permanent employment. Subsequent conduct is irrelevant which means a person’s employment status cannot unintentionally change over time.

Once employed as a casual, an employee will continue to be a casual employee until they either:

1. Become a permanent employee through:
2. Casual conversion; or
3. Are offered and accepted the offer of full-time or part-time employment, or
4. Stop being employed by the employer.[6]

Further, the new definition is designed to have a retrospective effect; casuals who were employed prior to 27 March 2021, and whose initial employment offer meets the new definition, continue to be casual employees under the FWA. Therefore, the new definition applies to offers of employment given before the Amendment Act became law.

Obligation to offer casual conversion

In addition to redefining casual employment, the Amendment Act adds a new entitlement to the National Employment Standards (NES), giving casual employees a pathway to become a full-time or part-time (permanent) employee termed ‘casual conversion’.

An employer (other than a small business employer) is required to offer their casual employees an opportunity to convert to permanent when the employee:

1. Has worked for their employer for 12 months;
2. Has worked a regular pattern of hours for at least the last 6 of those months on an ongoing basis; and
3. Could continue working those hours as a permanent employee without significant changes. [7]

(the Conversation Requirements)

Some exceptions apply, including:

1. Small business employers (less than 15 employees)[8]; or
2. If an employer has ‘reasonable grounds’ not to make an offer to a casual employee for casual conversion.[9]

Reasonable grounds for an employer not to make an offer of casual conversion are limited and include:

1. Where the employer’s position will cease to exist within 12 months; or
2. There will be a significant change in the days on which, or times at which, the employee’s hours of work are to be performed which cannot be accommodated by the employee’s availability.[10]

(Reasonable Grounds)

Casual Conversion and Small Business

Although small businesses are exempt from the obligation to offer casual conversion to eligible employees, casual employees have a right to request to convert to permanent employment at any time they meet the Conversion Requirements. Employers must not refuse this request unless they do so on Reasonable Grounds.[11] This includes any existing eligible casual employees.

Casual conversion disputes

The Fair Work Ombudsman (FWO) has published guidance on how casual conversation disputes should be handled.[12] The focus of this guidance is to emphasise that workplace problems are best solved when a less adversarial approach is taken.

“If an award, registered agreement or a contract includes a dispute resolution process for dealing with disputes relating to the National Employment Standards, the employer and employee need to follow that process.”[13]

The Fair Work Commission (FWC) has also published separate advice on casual conversion disputes which says that every modern award and enterprise agreement has a dispute resolution clause and should be followed accordingly.[14]

However, if the dispute cannot be resolved in this manner, it can be referred to the FWC if specified by the relevant dispute resolution clause.[15]

If conciliation fails, the FWO says that a small claims application can be made to the Federal Circuit Court up to 6 years after the entitlement was due.[16]

Casual loading offset

When an employee is described as casual, but through court proceedings it is determined that they should have been converted to permanent, the Amendment Act also introduces a rule that requires the court to reduce any amounts that the employee could be entitled to by reference to casual loading amounts already paid by the employer to the employee to compensate for those entitlements.[17]

This change also has retrospective effect, applying to entitlements accrued before the commencement of the Amendment Act.

Other matters

The Amendment Act also amends the NES provision that refer to casual employment. Most significantly, it amends provisions relating to notice of termination and severance entitlements to provide clarification that casual employment engaged in prior casual conversion does not count towards an employee’s length of service.[18] This resolves an issue which has been of concern to employers since the Full Bench of the FWC held that prior casual service should be factored into redundancy entitlements in AMWU v Donau Pty Ltd[19]

Further, the Amendment Act’s transitional provisions require that within 6 months, the FWC review modern awards’ provisions defining, regulating the engagement of, and allowing for the ‘conversion’ of casual employment. This is to ensure harmony with new legislative provisions.

Recommendations to employers

These changes stand to have a big impact on Employers, big and small.

Accordingly, now is a better time than ever to review current casual employment agreements to ensure they address all relevant issues, including a clear indication that the casual rate paid is inclusive of casual loading to offset any potential entitlements, and attention to dispute resolution provisions. In relation to casual employees already on the books, employers will need to manage any employees eligible for casual conversion and set up a system which supports their compliance in this regard.

Further, small business employers will need to keep in mind that existing casuals can now make a casual conversion request at any time once they meet the Conversion Requirements. On the other hand, larger employers have a positive obligation to make a written conversion offer to eligible employees by 27 September 2021 or 21 days after their one-year anniversary, whichever comes later.

Employers also need to be mindful of the protections that come with these changes; they cannot reduce or change an employee’s hours of work, or terminate their employment, to avoid having to offer or accept a request for casual conversion. Further, casual employees are also protected against adverse action by an employer because they have a workplace right to convert to permanent employment.

In addition to the casual conversion obligations, employers are also required to provide all new casuals with a Casual Employer Information Statement, aiming to keep casual employees adequately informed regarding their legal rights. Small business employers will need to provide this document to all casual employees as soon as possible after March 27, while larger employers will have to give their existing casual staff a copy as soon as possible after 27 September 2021. Employers who fail to provide this document as required may be liable for breach of the FWA and could face legal action seeking civil penalties.

Prior to making decisions which will impact employees, it is always recommended that you seek appropriate legal advice.  Saines Legal is a full-service employment law firm and are here should you require advice.  Do not hesitate to contact us via info@saineslegal.com.au or (07) 3324 1055, to organise a consultation.

Disclaimer

The contents of this article are general in nature and is for information purposes only. The content of this article does not constitute legal advice and should not be used as such. Should you require assistance with a specific legal matter, it is recommended that you seek appropriate advice.

Authors Emma Marshall (Lawyer) and Nigel Saines (Principal)

[1] [2018] FCAFC 131

[2] [2020] FCAFC 84

[3] Fair Work Act 2009 (Cth) section 15A(1)

[4] Fair Work Act 2009 (Cth) section 15A(2).

[5] Fair Work Act 2009 (Cth) section 15A(4).

[6] Fair Work Act 2009 (Cth) section 15A(5).

[7] Fair Work Act 2009 (Cth) Section 66B.

[8] Fair Work Act 2009 (Cth) Section 66AA.

[9] Fair Work Act 2009 (Cth) Section 66C(1).

[10] Fair Work Act 2009 (Cth) Section 66C.

[11] Fair Work Act 2009 (Cth) Section 66H.

[12] ‘Changes to Casual Employment – Industrial Relations Reforms’, Fair Work Ombudsman (Web Page, 1 April 2021)<https://www.fairwork.gov.au/about-us/news-and-media-releases/website-news/reforms>.

[13] Ibid.

[14]‘Casual Conversion Disputes’, Fair Work Commission (Web Page 13 April 2021) <https://www.fwc.gov.au/disputes-at-work/casual-conversion-disputes>.

[15] Ibid.

[16] Above n12.

[17] Fair Work Act 2009 (Cth) Section 545A

[18] ‘National Employment Standards’, Fair Work Ombudsman (Web Page) <https://www.fairwork.gov.au/employee-entitlements/national-employment-standards>.

[19] [2016] FWCFB 3075.